Question 1

Which of the following items should not be included in the Cash caption on the balance sheet?

Accepted Answer

A) Coins and currency in the cash register 
B) Checks from other parties presently in the cash register 
C) Amounts on deposit in checking account at the bank 
D) Postage stamps on hand 
A) Coins and currency in the cash register 
B) Checks from other parties presently in the cash register 
C) Amounts on deposit in checking account at the bank 
D) Postage stamps on hand D

Question 2

Notes receivable are generally reported as noncurrent assets.

Accepted Answer

A) True 
 B)False  False

Question 3

Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been.

Accepted Answer

A) True 
 B)False  True

Question 4

Use the following information for questions 
Henry Co.assigned $400,000 of accounts receivable to Easy Finance Co.as security for a loan of $335,000.Easy charged a 2% commission on the amount of the loan; the interest rate on the note was 10%.During the first month, Henry collected $110,000 on assigned accounts after deducting $380 of discounts.Henry accepted returns worth $1,350 and wrote off assigned accounts totaling $2,980.
-Entries during the first month would include a

Accepted Answer

A) debit to Cash of $110,380. 
B) debit to Bad Debt Expense of $2,980. 
C) debit to Allowance for Doubtful Accounts of $2,980. 
D) debit to Accounts Receivable of $114,710. 
A) debit to Cash of $110,380. 
B) debit to Bad Debt Expense of $2,980. 
C) debit to Allowance for Doubtful Accounts of $2,980. 
D) debit to Accounts Receivable of $114,710.

Question 5

Which of the following methods of determining annual bad debt expense best achieves the matching concept?

Accepted Answer

A) Percentage of sales 
B) Percentage of ending accounts receivable 
C) Percentage of average accounts receivable 
D) Direct write-off 
A) Percentage of sales 
B) Percentage of ending accounts receivable 
C) Percentage of average accounts receivable 
D) Direct write-off

Question 6

The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over valuation of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 7

Marshell Company has cash in bank of $15,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000.Marshell should report cash of

Accepted Answer

A) $13,000. 
B) $15,000. 
C) $18,000. 
D) $19,000. 
A) $13,000. 
B) $15,000. 
C) $18,000. 
D) $19,000.

Question 8

Joe Novak Corporation factored, with recourse, $100,000 of accounts receivable with Huskie Financing.The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances.Joe Novak estimates the recourse obligation at $2,400.What amount should Joe Novak report as a loss on sale of receivables?

Accepted Answer

A) $ -0-. 
B) $3,000. 
C) $5,400. 
D) $10,400. 
A) $ -0-. 
B) $3,000. 
C) $5,400. 
D) $10,400.

Question 9

Use the following information for questions 
A trial balance before adjustments included the following: $\begin{array}{lrr}&\text { Debit } & \text { Credit }\
\text { Sales } & & \$ 425,000 \
\text { Sales returns and allowance } & \$ 14,000 & \
\text { Accounts receivable } & 43,000 & \
\text { Allowance for doubtful accounts } & & 760
\end{array}$
-If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the adjustment is

Accepted Answer

A) $6,700. 
B) $8,220. 
C) $8,500. 
D) $9,740. 
A) $6,700. 
B) $8,220. 
C) $8,500. 
D) $9,740.

Question 10

Mike McKinney Corporation had accounts receivable of $100,000 at 1/1.The only transactions affecting accounts receivable were sales of $600,000 and cash collections of $550,000.The accounts receivable turnover is

Accepted Answer

A) 4.0. 
B) 4.4. 
C) 4.8. 
D) 6.0. 
A) 4.0. 
B) 4.4. 
C) 4.8. 
D) 6.0.

Question 11

Use the following information for questions 
A trial balance before adjustments included the following: $\begin{array}{lrr}&\text { Debit } & \text { Credit }\
\text { Sales } & & \$ 425,000 \
\text { Sales returns and allowance } & \$ 14,000 & \
\text { Accounts receivable } & 43,000 & \
\text { Allowance for doubtful accounts } & & 760
\end{array}$
-If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is

Accepted Answer

A) $3,540. 
B) $4,300. 
C) $4,224. 
D) $5,060. 
A) $3,540. 
B) $4,300. 
C) $4,224. 
D) $5,060.

Question 12

Before year-end adjusting entries, Bass Company's account balances at December 31, 2007, for accounts receivable and the related allowance for uncollectible accounts were $600,000 and $45,000, respectively.An aging of accounts receivable indicated that $62,500 of the December 31 receivables are expected to be uncollectible.The net realizable value of accounts receivable after adjustment is

Accepted Answer

A) $582,500. 
B) $537,500. 
C) $492,500. 
D) $555,000. 
A) $582,500. 
B) $537,500. 
C) $492,500. 
D) $555,000.

Question 13

Nottingham Corporation had accounts receivable of $100,000 at 1/1.The only transactions affecting accounts receivable were sales of $900,000 and cash collections of $850,000.The accounts receivable turnover is

Accepted Answer

A) 6.0. 
B) 6.6. 
C) 7.2. 
D) 9.0. 
A) 6.0. 
B) 6.6. 
C) 7.2. 
D) 9.0.

Question 14

Savings accounts are usually classified as cash on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

Sandler Company has the following account balances at year-end: $\begin{array}{lr}
\text { Accounts receivable } & \$ 80,000 \
\text { Allowance for doubtful accounts } & 4,800 \
\text { Sales discounts } & 3,200
\end{array}$ Sandler should report accounts receivable at a net amount of

Accepted Answer

A) $72,000. 
B) $75,200. 
C) $76,800. 
D) $80,000. 
A) $72,000. 
B) $75,200. 
C) $76,800. 
D) $80,000.

Question 16

Use the following information for questions 
On February 1, 2007, Norton Company factored receivables with a carrying amount of $300,000 to Koch Company.Koch Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables.Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Norton Company for February.
-Assume that Norton factors the receivables on a without recourse basis.The loss to be reported is

Accepted Answer

A) $0. 
B) $9,000. 
C) $15,000. 
D) $24,000. 
A) $0. 
B) $9,000. 
C) $15,000. 
D) $24,000.

Question 17

Bank overdrafts are always offset against the cash account in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

On December 31, 2007, Eller Corporation sold for $75,000 an old machine having an original cost of $135,000 and a book value of $60,000.The terms of the sale were as follows: $15,000 down payment
$30,000 payable on December 31 each of the next two years
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction.What should be the amount of the notes receivable net of the unamortized discount on December 31, 2007 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.)

Accepted Answer

A) $52,773. 
B) $67,773. 
C) $60,000. 
D) $105,546. 
A) $52,773. 
B) $67,773. 
C) $60,000. 
D) $105,546.

Question 19

What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet?

Accepted Answer

A) As offsets to capital. 
B) By means of footnotes only. 
C) As assets but separately from other receivables. 
D) As trade notes and accounts receivable if they otherwise qualify as current assets. 
A) As offsets to capital. 
B) By means of footnotes only. 
C) As assets but separately from other receivables. 
D) As trade notes and accounts receivable if they otherwise qualify as current assets.

Question 20

May Co.prepared an aging of its accounts receivable at December 31, 2007 and determined that the net realizable value of the receivables was $300,000.Additional information is available as follows: $\begin{array} { l  }
 \text {Allowance for uncollectible accounts at $ 1 / 1 / 07 $-credit balance }&\$34,000\
 \text {  Accounts written off as uncollectible during 2007}&23,000\
 \text {Accounts receivable at $ 12 / 31 / 07 $ }&325,000\
 \text { Uncollectible accounts recovered during 2007}&5,000\
\end{array}$
 For the year ended December 31, 2007, May's uncollectible accounts expense would be

Accepted Answer

A) $25,000. 
B) $23,000. 
C) $16,000. 
D) $9,000. 
A) $25,000. 
B) $23,000. 
C) $16,000. 
D) $9,000.

Which of the following items should not be included in the Cash caption on the balance sheet?

Notes receivable are generally reported as noncurrent assets.

Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been.

Which of the following methods of determining annual bad debt expense best achieves the matching concept?

The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over valuation of accounts receivable.

Marshell Company has cash in bank of $15,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000.Marshell should report cash of

Mike McKinney Corporation had accounts receivable of $100,000 at 1/1.The only transactions affecting accounts receivable were sales of $600,000 and cash collections of $550,000.The accounts receivable turnover is

Nottingham Corporation had accounts receivable of $100,000 at 1/1.The only transactions affecting accounts receivable were sales of $900,000 and cash collections of $850,000.The accounts receivable turnover is

Savings accounts are usually classified as cash on the balance sheet.

Sandler Company has the following account balances at year-end: Accounts receivable \ 80,000 Allowance for doubtful accounts 4,800 Sales discounts 3,200 Sandler should report accounts receivable at a net amount of

Bank overdrafts are always offset against the cash account in the balance sheet.

What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet?

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Filters

Exam 7: Cash and Receivables

Which of the following items should not be included in the Cash caption on the balance sheet?

Notes receivable are generally reported as noncurrent assets.

Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been.

Which of the following methods of determining annual bad debt expense best achieves the matching concept?

The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over valuation of accounts receivable.

Marshell Company has cash in bank of $15,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000.Marshell should report cash of

Mike McKinney Corporation had accounts receivable of $100,000 at 1/1.The only transactions affecting accounts receivable were sales of $600,000 and cash collections of $550,000.The accounts receivable turnover is

Nottingham Corporation had accounts receivable of $100,000 at 1/1.The only transactions affecting accounts receivable were sales of $900,000 and cash collections of $850,000.The accounts receivable turnover is

Savings accounts are usually classified as cash on the balance sheet.

Sandler Company has the following account balances at year-end: Accounts receivable \ 80,000 Allowance for doubtful accounts 4,800 Sales discounts 3,200 Sandler should report accounts receivable at a net amount of

Bank overdrafts are always offset against the cash account in the balance sheet.

What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet?

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Filters