Question 1

In calculating a company's accounts receivable turnover, which of the following sets of factors would be used?

Accepted Answer

A)  Net income and average accounts receivable 
B)  Average accounts receivable and average total assets 
C)  Average accounts receivable and net credit sales 
D)  Net credit sales and average stockholders' equity 
A)  Net income and average accounts receivable 
B)  Average accounts receivable and average total assets 
C)  Average accounts receivable and net credit sales 
D)  Net credit sales and average stockholders' equity

Question 2

A firm factors $40,000 of accounts receivable without recourse. The factor agrees to provide financing based on these receivables, but imposes a 10% fee. In addition, the transferor and transferee agree that $3,000 of sales returns and allowances can be expected from these accounts. What is the loss or expense to recorded by the transferor?

Accepted Answer

A)  $7,000 
B)  $4,000 
C)  $3,000 
D)  $0 
A)  $7,000 
B)  $4,000 
C)  $3,000 
D)  $0

Question 3

A discount given to a customer for purchasing a large volume of merchandise is typically referred to as a

Accepted Answer

A)  quantity discount. 
B)  cash discount. 
C)  trade discount. 
D)  size discount. 
A)  quantity discount. 
B)  cash discount. 
C)  trade discount. 
D)  size discount.

Question 4

Assume the following facts for Kurt Company: The month-end bank statement shows a balance of $40,000; outstanding checks total $2,000; a deposit of $8,000 is in transit at month-end; and a check for $400 was erroneously charged against the account by the bank. What is the correct cash balance at the end of the month?

Accepted Answer

A)  $33,600 
B)  $34,400 
C)  $45,600 
D)  $46,400 
A)  $33,600 
B)  $34,400 
C)  $45,600 
D)  $46,400

Question 5

Based on the aging of its accounts receivable at December 31, Pribob Company determined that the net realizable value of the receivables at that date is $760,000. Additional information is as follows:
 
Pribob's doubtful accounts expense for the year ended December 31 is

Accepted Answer

A)  $80,000. 
B)  $96,000. 
C)  $120,000. 
D)  $160,000. 
A)  $80,000. 
B)  $96,000. 
C)  $120,000. 
D)  $160,000.

Question 6

The following information was abstracted from the 2011 financial statements of Jennings Company:
   
Prepare the adjusting entry for doubtful accounts expense under each of the following assumptions:

Accepted Answer

The answer of The following information was abstracted from the...

Question 7

Based on its past collection experience, Ace Company provides for bad debts at the rate of 2 percent of net credit sales. On January 1, 2011, the allowance for doubtful accounts credit balance was $10,000. During 2011, Ace wrote off $18,000 of uncollectible receivables and recovered $5,000 on accounts written off in prior years. If net credit sales for 2011 totaled $1,000,000, the doubtful accounts expense for 2011 should be

Accepted Answer

A)  $17,000. 
B)  $20,000. 
C)  $23,000. 
D)  $35,000. 
A)  $17,000. 
B)  $20,000. 
C)  $23,000. 
D)  $35,000.

Question 8

The August 31 bank statement of Kelvin Inc. showed a balance of $113,000. Deducted in arriving at this amount was a customer's NSF check for $2,400 that had been returned. Kelvin had received no prior notice concerning this check. In addition to the bank statement, other records showed there were deposits in transit totaling $17,200 and that outstanding checks totaled $10,800. What is the cash balance per books at August 31 (prior to adjustments)?

Accepted Answer

A)  $121,800 
B)  $119,400 
C)  $117,000 
D)  $115,400 
A)  $121,800 
B)  $119,400 
C)  $117,000 
D)  $115,400

Question 9

Which of the following factors are used to compute the number of days' sales in accounts receivable?

Accepted Answer

A)  Inventory turnover and 365 days 
B)  Net sales and average inventory 
C)  Accounts receivable turnover and 365 days 
D)  Average accounts receivable and cost of goods sold 
A)  Inventory turnover and 365 days 
B)  Net sales and average inventory 
C)  Accounts receivable turnover and 365 days 
D)  Average accounts receivable and cost of goods sold

Question 10

Arthur Company borrows $20,000 for one year a 9% interest, but must maintain a $1,600 compensating balance. The effective rate of interest on this loan is

Accepted Answer

A)  9.0%. 
B)  17.0%. 
C)  9.8%. 
D)  8.0%. 
A)  9.0%. 
B)  17.0%. 
C)  9.8%. 
D)  8.0%.

Question 11

The books of Steve's Service, Inc. disclosed a cash balance of $68,757 on June 30. The bank statement as of June 30 showed a balance of $54,780. Additional information that might be useful in reconciling the two balances follows:
   
Prepare a bank reconciliation statement, using the form reconciling bank and book balances to the correct cash balance.

Accepted Answer

The answer of The books of Steve's Service, Inc. disclosed...

Question 12

Which of the following is one of the two steps of the 2-step test for derecognition of receivables stated in IAS 39, International Accounting Standard 39, "Financial Instruments: Recognition and Measurement"?

Accepted Answer

A)  The transferred assets have been isolated from the transferor such that the transferor and its creditors cannot access the assets. 
B)  The transferee has the right to pledge or exchange the transferred assets. 
C)  If the receivable transfer does not involve the transfer of substantially all the risks and rewards of ownership, then test to determine if the transferor maintains effective control over the assets through either an agreement to repurchase the assets before their maturity, or by the ability to cause the transferee to return specific assets. 
D)  Determine whether the receivable transfer involves a transfer of substantially all the risks and rewards of ownership of the receivable and, if so, account for the transfer as a sale of the receivable. 
A)  The transferred assets have been isolated from the transferor such that the transferor and its creditors cannot access the assets. 
B)  The transferee has the right to pledge or exchange the transferred assets. 
C)  If the receivable transfer does not involve the transfer of substantially all the risks and rewards of ownership, then test to determine if the transferor maintains effective control over the assets through either an agreement to repurchase the assets before their maturity, or by the ability to cause the transferee to return specific assets. 
D)  Determine whether the receivable transfer involves a transfer of substantially all the risks and rewards of ownership of the receivable and, if so, account for the transfer as a sale of the receivable.

Question 13

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

Accepted Answer

A)  direct write-off. 
B)  aging the trade receivable accounts. 
C)  credit sales. 
D)  specific accounts determined to be uncollectible. 
A)  direct write-off. 
B)  aging the trade receivable accounts. 
C)  credit sales. 
D)  specific accounts determined to be uncollectible.

Question 14

The accountant for the Goshen Company assembled the following data:

Prepare a 4-column bank reconciliation as of July 31, using the form that reconciles both the book and bank balances to a correct cash amount.

Accepted Answer

The answer of The accountant for the Goshen Company assembled...

Question 15

Western Company sells products covered by a 3-year warranty. Based on past experience of other entities in the industry, Western expects to incur warranty costs equal to 1% of sales. Western's sales were $40,000 in 2010 and $50,000 in 2011. In 2011, the company spent $200 to repair goods sold in 2010 and $300 to repair goods sold in 2011. Western received no warranty servicing demands from its customers in 2010, the company's first year of operations.
What is the balance in the warranty liability account on January 1, 2012?

Accepted Answer

A)  $400 
B)  $500 
C)  $300 
D)  $0 
A)  $400 
B)  $500 
C)  $300 
D)  $0

Question 16

Which of the following would be considered part of the category "trade receivables"?

Accepted Answer

A)  Advances to employees 
B)  Income tax refunds receivable 
C)  Dividends receivable 
D)  Amounts due from customers 
A)  Advances to employees 
B)  Income tax refunds receivable 
C)  Dividends receivable 
D)  Amounts due from customers

Question 17

Maple Company provides for doubtful accounts expense at the rate of 3 percent of credit sales. The following data are available for last year:
 
The allowance for doubtful accounts balance at December 31, after adjusting entries, should be

Accepted Answer

A)  $45,000. 
B)  $84,000. 
C)  $90,000. 
D)  $99,000. 
A)  $45,000. 
B)  $84,000. 
C)  $90,000. 
D)  $99,000.

Question 18

You are the auditor of Plastico, Inc., a manufacturer of plastic products. In reviewing the balance sheet of the company, you notice several receivables from the officers of the company. You report your findings to the president of the company and inform him that these receivables will be considered related party transactions for purposes of financial accounting and reporting. The president seems somewhat annoyed by your comments and asks you to explain what you mean by "related party" transactions and how the financial statements will be affected by these transactions. Prepare a brief response to the president's question.
Related party transactions occur when an enterprise engages in transactions in which one of the parties to the transaction has the ability to influence significantly the policies of the other, or in which one party to the transaction has the ability to influence the policies of the two transacting parties. The following are examples of related party transactions:

Accepted Answer

Transactions between related parties may

Question 19

Accounts receivable usually are factored

Accepted Answer

A)  with recourse on a notification basis. 
B)  without recourse on a notification basis. 
C)  with recourse on a nonotification basis. 
D)  without recourse on a nonotification basis. 
A)  with recourse on a notification basis. 
B)  without recourse on a notification basis. 
C)  with recourse on a nonotification basis. 
D)  without recourse on a nonotification basis.

Question 20

Which one of the following statements is incorrect?

Accepted Answer

A)  The accounting function should be separated from the custodianship of a company's assets. 
B)  Certain clerical personnel in a company should be rotated among various jobs. 
C)  The responsibility of receiving merchandise and paying for it usually should be given to one person. 
D)  A company's personnel should be given well-defined responsibilities. 
A)  The accounting function should be separated from the custodianship of a company's assets. 
B)  Certain clerical personnel in a company should be rotated among various jobs. 
C)  The responsibility of receiving merchandise and paying for it usually should be given to one person. 
D)  A company's personnel should be given well-defined responsibilities.

In calculating a company's accounts receivable turnover, which of the following sets of factors would be used?

A discount given to a customer for purchasing a large volume of merchandise is typically referred to as a

Based on the aging of its accounts receivable at December 31, Pribob Company determined that the net realizable value of the receivables at that date is $760,000. Additional information is as follows: Pribob's doubtful accounts expense for the year ended December 31 is

The following information was abstracted from the 2011 financial statements of Jennings Company: Prepare the adjusting entry for doubtful accounts expense under each of the following assumptions:

Which of the following factors are used to compute the number of days' sales in accounts receivable?

Arthur Company borrows $20,000 for one year a 9% interest, but must maintain a $1,600 compensating balance. The effective rate of interest on this loan is

Which of the following is one of the two steps of the 2-step test for derecognition of receivables stated in IAS 39, International Accounting Standard 39, "Financial Instruments: Recognition and Measurement"?

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

The accountant for the Goshen Company assembled the following data: Prepare a 4-column bank reconciliation as of July 31, using the form that reconciles both the book and bank balances to a correct cash amount.

Which of the following would be considered part of the category "trade receivables"?

Maple Company provides for doubtful accounts expense at the rate of 3 percent of credit sales. The following data are available for last year: The allowance for doubtful accounts balance at December 31, after adjusting entries, should be

Accounts receivable usually are factored

Which one of the following statements is incorrect?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 7: The Revenuereceivablescash Cycle

In calculating a company's accounts receivable turnover, which of the following sets of factors would be used?

A discount given to a customer for purchasing a large volume of merchandise is typically referred to as a

Based on the aging of its accounts receivable at December 31, Pribob Company determined that the net realizable value of the receivables at that date is $760,000. Additional information is as follows: Pribob's doubtful accounts expense for the year ended December 31 is

The following information was abstracted from the 2011 financial statements of Jennings Company: Prepare the adjusting entry for doubtful accounts expense under each of the following assumptions:

Which of the following factors are used to compute the number of days' sales in accounts receivable?

Arthur Company borrows $20,000 for one year a 9% interest, but must maintain a $1,600 compensating balance. The effective rate of interest on this loan is

Which of the following is one of the two steps of the 2-step test for derecognition of receivables stated in IAS 39, International Accounting Standard 39, "Financial Instruments: Recognition and Measurement"?

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

The accountant for the Goshen Company assembled the following data: Prepare a 4-column bank reconciliation as of July 31, using the form that reconciles both the book and bank balances to a correct cash amount.

Which of the following would be considered part of the category "trade receivables"?

Maple Company provides for doubtful accounts expense at the rate of 3 percent of credit sales. The following data are available for last year: The allowance for doubtful accounts balance at December 31, after adjusting entries, should be

Accounts receivable usually are factored

Which one of the following statements is incorrect?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters