Question 1

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and

Accepted Answer

A)  is acceptable as a means to pay current liabilities. 
B)  has a current market value that is greater than its original cost 
C)  bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation. 
D)  is so near its maturity that it presents insignificant risk of changes in interest rates. 
A)  is acceptable as a means to pay current liabilities. 
B)  has a current market value that is greater than its original cost 
C)  bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation. 
D)  is so near its maturity that it presents insignificant risk of changes in interest rates.

Question 2

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach

Accepted Answer

A)  gives a reasonably correct statement of receivables in the balance sheet. 
B)  best relates bad debt expense to the period of sale. 
C)  is the only generally accepted method for valuing accounts receivable. 
D)  makes estimates of uncollectible accounts unnecessary. 
A)  gives a reasonably correct statement of receivables in the balance sheet. 
B)  best relates bad debt expense to the period of sale. 
C)  is the only generally accepted method for valuing accounts receivable. 
D)  makes estimates of uncollectible accounts unnecessary.

Question 3

Kennison Company has cash in bank of $15,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of

Accepted Answer

A)  $14,000. 
B)  $15,000. 
C)  $17,000. 
D)  $18,000. 
A)  $14,000. 
B)  $15,000. 
C)  $17,000. 
D)  $18,000.

Question 4

Accounts receivable assigned.
Accounts receivable in the amount of $500,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $400,000. The finance company charged a 4% commission on the face amount of the loan, and the note bears interest at 9% per year.During the first month, Marsh collected $260,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note.

Instructions
Make all the entries for Marsh Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company.

Accepted Answer

The answer of Accounts receivable assigned.
Accounts receivable in the amount...

Question 5

How is days to collect accounts receivable determined?

Accepted Answer

A)  365 days divided by accounts receivable turnover. 
B)  Net sales divided by 365. 
C)  Net sales divided by average net trade receivables. 
D)  Accounts receivable turnover divided by 365 days. 
A)  365 days divided by accounts receivable turnover. 
B)  Net sales divided by 365. 
C)  Net sales divided by average net trade receivables. 
D)  Accounts receivable turnover divided by 365 days.

Question 6

Companies include postdated checks and petty cash funds as cash.

Accepted Answer

A) True 
 B)False

Question 7

Deposits held as compensating balances

Accepted Answer

A)  usually do not earn interest. 
B)  if legally restricted and held against short-term credit may be included as cash. 
C)  if legally restricted and held against long-term credit may be included among current assets. 
D)  none of these answers are correct. 
A)  usually do not earn interest. 
B)  if legally restricted and held against short-term credit may be included as cash. 
C)  if legally restricted and held against long-term credit may be included among current assets. 
D)  none of these answers are correct.

Question 8

Becky had net sales (all on account) in 2014 of $600,000. At December 31, 2013, before adjusting entries, the balances in selected accounts were: accounts receivable $750,000 debit, and allowance for doubtful accounts $1,500 debit. Becky estimates that 3% of its net sales will prove to be uncollectible. What is the net realizable value of the receivables reported on the financial statements at December 31, 2014?

Accepted Answer

A)  $133,500 
B)  $730,500 
C)  $732,000 
D)  $733,500 
A)  $133,500 
B)  $730,500 
C)  $732,000 
D)  $733,500

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a debit balance of $3,000 in the allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

Accepted Answer

A)  $12,700. 
B)  $15,700. 
C)  $61,000. 
D)  $67,000. 
A)  $12,700. 
B)  $15,700. 
C)  $61,000. 
D)  $67,000.

Question 11

What is the normal journal entry when writing-off an account as uncollectible under the allowance method?

Accepted Answer

A)  Debit Allowance for Doubtful Accounts, credit Accounts Receivable. 
B)  Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. 
C)  Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. 
D)  Debit Accounts Receivable, credit Allowance for Doubtful Accounts. 
A)  Debit Allowance for Doubtful Accounts, credit Accounts Receivable. 
B)  Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. 
C)  Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. 
D)  Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

Question 12

On December 31, 2014, Flint Corporation sold for $100,000 an old machine having an original cost of $180,000 and a book value of $80,000. The terms of the sale were as follows:$20,000 down payment$40,000 payable on December 31 each of the next two yearsThe 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, 2014 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)  $70,364 
B)  $90,364. 
C)  $80,000. 
D)  $140,728. 
A)  $70,364 
B)  $90,364. 
C)  $80,000. 
D)  $140,728.

Question 13

The FASB believes that historical cost for financial instruments provides more relevant and understandable information than fair value.

Accepted Answer

A) True 
 B)False

Question 14

If the month-end bank statement shows a balance of $72,000, outstanding checks are $24,000, a deposit of $8,000 was in transit at month end, and a check for $1,000 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

Accepted Answer

A)  $55,000. 
B)  $57,000. 
C)  $41,000. 
D)  $87,000. 
A)  $55,000. 
B)  $57,000. 
C)  $41,000. 
D)  $87,000.

Question 15

When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss.

Accepted Answer

A) True 
 B)False

Question 16

When should a transfer of receivables be recorded as a sale?

Accepted Answer

A)  The transferred assets are isolated from the transferor. 
B)  The transferor does not maintain effective control over the transferred assets through an agreement to repurchase or redeem them prior to their maturity. 
C)  The transferee has the right to pledge or exchange the transferred assets. 
D)  All of these answers are correct. 
A)  The transferred assets are isolated from the transferor. 
B)  The transferor does not maintain effective control over the transferred assets through an agreement to repurchase or redeem them prior to their maturity. 
C)  The transferee has the right to pledge or exchange the transferred assets. 
D)  All of these answers are correct.

Question 17

Moon Inc assigns $3,000,000 of its accounts receivables as collateral for a $2 million loan with a bank. The bank assesses a 3% finance charge on the loan amount and charges interest on the note at 6%. What would be the journal entry to record this transaction?

Accepted Answer

A)  Debit Cash for $1,940,000, debit Interest Expense for $60,000, and credit Notes payable for $2,000,000. 
B)  Debit Cash for $1,940,000, debit Interest Expense for $60,000, and credit Accounts Receivable for $2,000,000. 
C)  Debit Cash for $1,940,000, debit Interest Expense for $60,000, debit Due from Bank for $1,000,000, and credit Accounts Receivable for $3,000,000. 
D)  Debit Cash for $1,820,000, debit Interest Expense for $180,000, and credit Notes Payable for $2,000,000. 
A)  Debit Cash for $1,940,000, debit Interest Expense for $60,000, and credit Notes payable for $2,000,000. 
B)  Debit Cash for $1,940,000, debit Interest Expense for $60,000, and credit Accounts Receivable for $2,000,000. 
C)  Debit Cash for $1,940,000, debit Interest Expense for $60,000, debit Due from Bank for $1,000,000, and credit Accounts Receivable for $3,000,000. 
D)  Debit Cash for $1,820,000, debit Interest Expense for $180,000, and credit Notes Payable for $2,000,000.

Question 18

How can accounting for bad debts be used for earnings management?

Accepted Answer

A)  Determining which accounts to write-off. 
B)  Changing the percentage of sales recorded as bad debt expense. 
C)  Using an aging of the accounts receivable balance to determine bad debt expense. 
D)  Reversing previous write-offs. 
A)  Determining which accounts to write-off. 
B)  Changing the percentage of sales recorded as bad debt expense. 
C)  Using an aging of the accounts receivable balance to determine bad debt expense. 
D)  Reversing previous write-offs.

Question 19

Maxwell 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. Maxwell estimates the recourse obligation at $2,400. What amount should Maxwell 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 20

Certificates of deposit are usually classified as cash on the balance sheet.

Accepted Answer

A) True 
 B)False

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach

Kennison Company has cash in bank of $15,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of

How is days to collect accounts receivable determined?

Companies include postdated checks and petty cash funds as cash.

Deposits held as compensating balances

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

What is the normal journal entry when writing-off an account as uncollectible under the allowance method?

The FASB believes that historical cost for financial instruments provides more relevant and understandable information than fair value.

If the month-end bank statement shows a balance of $72,000, outstanding checks are $24,000, a deposit of $8,000 was in transit at month end, and a check for $1,000 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss.

When should a transfer of receivables be recorded as a sale?

Moon Inc assigns $3,000,000 of its accounts receivables as collateral for a $2 million loan with a bank. The bank assesses a 3% finance charge on the loan amount and charges interest on the note at 6%. What would be the journal entry to record this transaction?

How can accounting for bad debts be used for earnings management?

Certificates of deposit are usually classified as cash on the balance sheet.

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters

Exam 7: Cash and Receivables

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach

Kennison Company has cash in bank of $15,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of

How is days to collect accounts receivable determined?

Companies include postdated checks and petty cash funds as cash.

Deposits held as compensating balances

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

What is the normal journal entry when writing-off an account as uncollectible under the allowance method?

The FASB believes that historical cost for financial instruments provides more relevant and understandable information than fair value.

If the month-end bank statement shows a balance of $72,000, outstanding checks are $24,000, a deposit of $8,000 was in transit at month end, and a check for $1,000 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss.

When should a transfer of receivables be recorded as a sale?

Moon Inc assigns $3,000,000 of its accounts receivables as collateral for a $2 million loan with a bank. The bank assesses a 3% finance charge on the loan amount and charges interest on the note at 6%. What would be the journal entry to record this transaction?

How can accounting for bad debts be used for earnings management?

Certificates of deposit are usually classified as cash on the balance sheet.

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters