Discussion 2 ACCT 311

Description

Consider the following scenario:

Sunburst Electricals Inc. is a company that manufactures and sells electrical components to various industrial customers. Most customers pay cash upon delivery but some customers cannot. The company extends credit terms to those customers, allowing them to pay for their purchases within 30 days.

As of December 31, 2023, Sunburst’s general ledger accounts related to cash included the following:

– Petty Cash Fund: $5,000
– Cash in Checking Accounts: $600,000
– Money Market Funds: $180,000
– Restricted Cash for PPE: $120,000
– Short-term Investments: $50,000

As of December 31, 2023, Sunburst’s general ledger accounts related to accounts receivable included the following:

• Total accounts receivable balance: $2,500,000
• Estimated uncollectible accounts: $75,000
• Anticipated sales returns and allowances: $45,000

Consider the following prompts:

1. Discuss the accounts that should be included in the “Cash and Cash Equivalents” section of the balance sheet. How should excluded accounts be recorded and presented in the financial statements?

2. Discuss the appropriate methods for estimating and recording the allowance for uncollectible accounts. How should this amount be recorded and presented in the financial statements?

3. Discuss the appropriate accounting treatment for the anticipated sales returns and allowances. How should this amount be recorded and presented in the financial statements?