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LEARNING OBJECTIVES

After studying this chapter, you should be able to:

  1. 1 Identify items considered cash.
  2. 2 Indicate how to report cash and related items.
  3. 3 Define receivables and identify the different types of receivables.
  4. 4 Explain accounting issues related to recognition of accounts receivable.
  5. 5 Explain accounting issues related to valuation of accounts receivable.
  6. 6 Explain accounting issues related to recognition of notes receivable.
  7. 7 Explain accounting issues related to valuation of notes receivable.
  8. 8 Understand special topics related to receivables.
  9. 9 Describe how to report and analyze receivables.

No-Tell Nortel

Nortel Networks (CAN) filed for bankruptcy in early 2009. Nortel's demise represents one of the biggest financial failures in Canadian history. At one time, it accounted for one-third of all equity traded on the Toronto Stock Exchange; in 2000, its shares were as high as $124.50. In 2009, however, those shares were worth just 1.2 cents. What happened to Nortel? First, competition was intense, and some bad business decisions were made. As a result, the company was hit very hard by the technology share price decline in the early 2000s. Second, it became involved in accounting scandals for which three of its executives eventually faced criminal charges.

In one loan accounting scheme, Nortel managed its bad debt allowance to ensure that executives received additional ...

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