a
Long-Term Investment: Referred to it as Investments, normally consist of one of four types:
1- Investments in Securities: such as bonds, common stock, or Long-Term notes
2- Investments in Tangible fixed assets: Those are currently used in operation, such as
Land held for speculation.
3- Investments set aside in special funds: Such as sinking fund, pension fund, or plant
Expansion fund.
4- Investments: In non consolidated subsidiaries or affiliated companies.
Balance Sheet
Presentation of Long-Term
Investment
Investments
Investment in Alco Health Services corporation $ 62,255,000
Other investments 37,533,000
Long-term receivable 22,191,000



121,979,000 Total investments

. Property, Plant, and Equipment: Are properties of durable nature used in regular operations of the
Business, these assets consists of physical property such as land, buildings, machinery,
Furniture, Tools, with exception of land, most assets are depreciable.
Balance Sheet
Presentation of Property, Plant, and
Equipment
Property,Plant,and equipment


Land $ 5,812,000
Buildings 46,490,000
Machinery and equipment 72,513,000
Capitalized leases 39,425,000
Leasehold improvements 19,068,000

183,308,000
Less: Accumulated depreciation 55,496,000

127,812,000
Tools, dies and molds, less amortization 37,035,000


Property, Plant, and equipment, net 164,865,000


. Intangible Assets: It is characterize by:
A- Lack o physical.
B- Usually have high degree of uncertainty concerning their future benefits.
. They include patents, copy rights, franchises, good will, trade marks, and trade names.
. Current liabilities: Are the obligations that are reasonably expected to be liquidated either through the use
Of current assets or the creation of other current liabilities, this concept include :
1- Payables resulting from the acquisition of goods and services: accounts payable, wages payable, taxes payable and so on.
2- Collections received in advance for delivery of goods or performance of services such as unearned rent revenue or unearned subscriptions revenue.
3- Other liabilities whose liquidation will take place within the operating cycle such as short-term obligations arising from purchase.






Balance Sheet
Presentation of Current
Liabilities
Current liabilities


Short-term debt $ 22,500,000
Accounts payable-public 240,400,000
Accounts payable to unconsolidated titillates 18,200,000
Advances from customers on contracts 161,100,000
Accrued compensation and benefits 169,400,000
Accrued warranty costs 34,100,000
Accrued taxes other than income taxes 21,900,000
Accrued interest 28,300,000
Other accrued liabilities 151,000,000
Income taxes payable 112,200,000
Current portion of long term debt 12,400,000


Total current liabilities 971,500,000


. Long – Term liabilities: Are obligations that are not reasonably expected to be liquidated within the
Normal operating cycle.
.Long – term liabilities are of three types:
1- Obligation arising from specific financing situations such as the issuance of bonds.
2- Obligations arising from the ordinary operations of the enterprise, such as pension obligation and deferred income tax liabilities.
3- Obligation that are dependent upon the occurrence of one or more future events to confirm the amount payable such as service or product warranties and other contingencies.
Balance Sheet
Presentation of
Long-Term Debt
Total current liabilities $ 978,109,000
Long-term debt (See note) 254,312,000
Obligations under capital leases 252,618,000
Deferred income taxes 57,167,000
Other non-current liabilities 127,321,000


Note: Indebtedness. Debt consists of:
9.5% Senior notes, due in annual installments of $10,000,000 $ 40,000,000
Mortgages and other notes due through 2011 (average interest rate
Of 9.9%) 107,604,000
Bank borrowings at 9.7% 67,225,000
Commercial paper at 9.4% 100,102,000


314,931,000
Less: Current portion (60,619,000)


Total long-term debt $ 254,312,000



. Account receivables:
. Uncollectible Accounts:
.To illustrate, assume that World Famous Toy Company Co. begins business on January 1,1997, and makes most of its sales on account. At January 31, accounts receivable amount to $ 250,000.
. On this date, the credit manager reviews the accounts receivable and estimates that approximately $ 10,000 of these accounts will prove to be uncollectible. The following adjusting entry should be made at January31:


Uncollectible accounts Expense 10,000
Allowance for doubtful accounts 10,000
To record the portion of total accounts receivable estimated to be uncollectible.




Writing off an uncollectible account Receivable:
To illustrate, assume that early in February World Famous Toy Co. learns that Discount Stores has gone out of business and that the $4,000 account receivable from this customer is now worthless. The entry to write off this uncollectible account receivable is:


Accounts for doubtful Accounts 4,000
Accounts Receivable (Discount Stores) 4,000
To write off receivable from Discount stores as uncollectible.


.Hint: If the amounts written off as uncollectible turn out to be less than the estimated amount, the allowance for Doubtful accounts will continue to show a credit balance. If the amounts written off as uncollectible are greater than the estimated amount, the allowance For Doubtful Accounts will acquire a temporary debit balance , which will be eliminated by the adjustment at the end of the period.


. Direct write-off Method: Uncollectible accounts expense is recorded in the period in which individual accounts receivable are determined to be worthless rather than in the period in which the sales were made.
When a particular customer's account is determined to be uncollectible, it is written off directly to uncollectible accounts expense, as follows:


Uncollectible Accounts Expense 250
Accounts Receivable 250






















DEMONSTRATION PROBLEM

Shown below are selected transactions of Gulf corp. during the month of Dec. Dec. 5 Sold 2,000 shares of AT&T capital stock at $53 per share, less a brokerage commission of $200. These marketable securities had been acquired nine month earlier at a total cost of $112,000
Dec. 8 an account receivable from S. Willis in the amount of $700 is determined to be uncollectible and is written off against the allowance for doubtful Accounts.
Dec.15 unexpectedly received $200 from F. Hill in full payment of her account. The $200 account receivable from Hill had previously been written of as uncollectible.
Dec.20 Sold 1,000 shares of IBM capital stock at price of $60 per share, less a brokerage commission of $150. These investment shares had been acquired at a total cost of $52,000
Dec.31 Wrote a check for $76 replenish the petty cash fund. Petty cash vouchers indicated office supplies expense, $44 miscellaneous expense, $32
Dec.31 The month –end bank reconciliation includes the following items: outstanding checks, $12,320, deposit in transit, $3,150; check from customer T. Jones returned "NSF" $358; bank service charges, $10; bank collected $20,000 in maturing U.S. Treasury bills (a cash equivalent) on the company's behalf. (These Treasury bills had cost $19,760, so the amount collected includes $330 interest revenue).
DATA FOR ADJUSTING 1- An aging of account receivable indicates probable uncollectible accounts ENTRIES totaling $90,000. Prior to the month-end adjustment, the allowance for Doubtful Accounts has a credit balance of $5,210.

2- Prior to any year-end adjustment, the balance in the Marketable Securities account was $213,800. At a year-end, marketable securities owned had a cost of $198,000 and a market value of$210,000.

INSTRUCTION a- Prepare entries in general journal entry from for the Dec. transaction. In adjusting the accounting records from the bank reconciliation, make one entry to record any increases the Cash account and separate entry to record any decreases.
b- Prepare the month-end adjustments indicated by the tow numbered paragraphs.
c- What is the adjusted balance in the Unrealized Gain (or loss) on Investments account at Dec. 31? Where in the financial statement does this account appear?






Sowtion to Demonstration Problem


a- GENERAL JOURNAL




112,000 105,800
6,200 Cash
Loss on sale of investments
Marketing Securities
Sold 2,000 shares of AT&T capital stock at a price below cost. Dec. 5


700 700 Allowance for Doubtful Accounts
Accounts Receivable (s.Willis)
To write off receivable from S. Willis as uncollectible. Dec. 8


200 200 Accounts Receivable (F. Willis)
Allowance for Doubtful Accounts
To reinstate account receivable previously written off as uncollectible. Dec. 15


200 200 Cash
Accounts Receivable(F. Hill)
To record collection of account receivable. Dec. 15


52,000
7,850 59,850 Cash
Marketable Securities
Gain on sale of investments
Sold 1,000 shares of IBM at a price above cost. Dec. 20




76 44
32 Office Supplies Expense
Miscellaneous Expense
Cash
To replenish petty cash fund Dec. 31


19,670
330 20,000 Cash
Cash Equivalents
Interest Revenue
To record collection of maturing T-Bills by bank Dec. 31




368 358
10 Accounts Receivable (T-Jones)
Bank Service Charges
Cash
To record bank service charge and to reclassify NSF checks from T-Jones as an account receivable. Dec. 31












b- Adjusting Entries


3,790 3,790 Uncollectible Accounts Expense
Allowance for Doubtful Accounts
To increase Allowance for Doubtful Accounts to $9,000 ($9,000 - $5,210 = $3,790). Dec. 31


3,800 3,800 Unrealized Gain (or loss) on investments
Marketable Securities
To reduce the balance in the Marketable Securities account to a market value of $210,000 Dec. 31


c- The Unrealized Gain (or loss) on Investments account will have a $12,000 credit balance, representing the unrealized gain on securities owned as of Dec. 31. (The unrealized gain is equal to the $210,000 market value of these securities, less their $198,000 cost.) The account appears in the stockholder's equity section of Gulf Corp.'s balance sheet.


1- A deposit of $410.90 made after banking hours on July 31 does not appear in the bank statement.
2- Four checks issued in July have not yet been paid by the bank. These checks are:
Check no Date Amount
801 July 15 $100, 00
888 July 24 10, 00
890 July 27 402, 50
891 July 30 205, 00


3- Tow credit memoranda were included in the bank statement:
Date Amount Explanation
July 22 $ 500, 00 Proceeds from collection of a non-interest bearing note receivable from J. David. Parkview Company had left their note with the bank's collection department.
July 31 24, 74 Interest earned on average account balance during July.


4- Three debit memoranda accompanied the bank statement:
Date Amount Explanation
July 22 $ 5.00 free charged by bank for handling collection of note receivable.
July 30 50.25 Check from customer J.B. Ball deposited by Parkview Company charged back as NSF.
July 31 12.00 Service charge by bank for the month of July.






5- Check no. 875 was issued July 20 in the amount of $85 but was erroneously recorded in the cash payments journal as $58. The check, in payment of telephone expense, was paid by the bank and correctly listed at $85 in the bank statement. In Parkview's ledger, the cash account is overstated by $27 because of this error ($85 - $58 = $27).




PARKVIEW COMPANY
Bank Reconciliation
July 31, 1997


Balance per bank statement, July 31, 1996……………………………………… …………………$5,000,17
Add: Deposit of July 31 not recorded by bank……………………………………… ………………..410,90


$ 5,411.07
Deduct: Outstanding checks:

No. 801……………………………………… …………….. $100.00
No. 888............................................... ........................................ 10.25
No. 890............................................... ........................................ 402.50
No. 891............................................... ........................................ 205.00 717.75


Adjusted cash balance........................................... .................................................. .......................... $4,693.32


Balance per depositor's records, July 31, 1997……………………………………… …………. $4,262.83
Add: Note receivable collected for us by bank………………………………. $500.00
Interest earned during July………………………………………. 24.74 524.74


$4,787.57
Deduct: collection fee……………………………………… ……………… $ 5.00
NSF check of J.B. Ball……………………………………… .. 50.25
Service charge…………………………………… ………….. 12.00
Error on check stub no. 875…………………………………….. 27.00 94.25


Adjusted cash balance (as above)…………………………………… ………………… $ 4,693.32






In this illustration and in our assignment material, we will follow a policy of making one journal entry to record the unrecorded cash receipts, and another to record the unrecorded cash reductions. (Acceptable alternatives would be to make separate journal entries for each item or to make one compound entry for all items.) Based on our recording policy, the entries to update the accounting records of Parkview Company are:


Per bank credit memoranda… Cash………………………… 524.74
Notes Receivable………… 500.00
Interest Revenue…………. 24.74
To record collection of note receivable from J. David collected by bank and interest earned on bank account in July.
Per bank debit Bank Service Charges………… 17.00
Memoranda (and Accounts Receivable (J.B. Ball)… 50.25
Correction of an error) Telephone Expense……………. 27.00
Cash…………. 94.25
To record bank charges (service charge, $12; collection fee, $5), to reclassify NSF check from customer J.B. Ball as an account receivable, and to correct understatement of cash payment for telephone expense.