Question 1

What is a compensating balance?

Accepted Answer

A)  Savings account balances. 
B)  Margin accounts held with brokers. 
C)  Temporary investments serving as collateral for outstanding loans. 
D)  Minimum deposits required to be maintained in connection with a borrowing arrangement. 
A)  Savings account balances. 
B)  Margin accounts held with brokers. 
C)  Temporary investments serving as collateral for outstanding loans. 
D)  Minimum deposits required to be maintained in connection with a borrowing arrangement.

Question 2

The cash account shows a balance of $90,000 before reconciliation. The bank statement does not include a deposit of $4,600 made on the last day of the month. The bank statement shows a collection by the bank of $1,880 and a customer's check for $640 was returned because it was NSF. A customer's check for $900 was recorded on the books as $1,080, and a check written for $158 was recorded as $194. The correct balance in the cash account was

Accepted Answer

A)  $91,024. 
B)  $91,096. 
C)  $91,456. 
D)  $95,696. 
A)  $91,024. 
B)  $91,096. 
C)  $91,456. 
D)  $95,696.

Question 3

Use the following information to answer Questions 7 and 8.
Johnstone Company has a loan receivable with a carrying value of $125,000 at December 31, 2013. On January 1, 2014, the borrower, Ralph Young Industries, declares bankruptcy, and Johnstone estimates that it will collect only 45% of the loan balance.
-Which of the following entries would Johnstone make to record the impairment under IFRS?

Accepted Answer

The answer of Use the following information to answer Questions...

Question 4

Under which section of the balance sheet is "cash restricted for plant expansion" reported?

Accepted Answer

A)  Current assets. 
B)  Non-current assets. 
C)  Current liabilities. 
D)  Stockholders' equity. 
A)  Current assets. 
B)  Non-current assets. 
C)  Current liabilities. 
D)  Stockholders' equity.

Question 5

Kaniper Company has the following items at year-end:   Kaniper should report cash and cash equivalents of

Accepted Answer

A)  $30,000. 
B)  $30,300. 
C)  $35,800. 
D)  $37,200. 
A)  $30,000. 
B)  $30,300. 
C)  $35,800. 
D)  $37,200.

Question 6

Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $600,000 to Arch Inc. Arch Inc. will pay $650,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue?

Accepted Answer

A)  $540,000. 
B)  $585,000. 
C)  $600,000. 
D)  $650,000. 
A)  $540,000. 
B)  $585,000. 
C)  $600,000. 
D)  $650,000.

Question 7

Geary Co. assigned $800,000 of accounts receivable to Kwik Finance Co. as security for a loan of $670,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $220,000 on assigned accounts after deducting $760 of discounts. Geary accepted returns worth $2,700 and wrote off assigned accounts totaling $5,960.Entries during the first month would include a

Accepted Answer

A)  debit to Cash of $220,760. 
B)  debit to Bad Debt Expense of $5,960. 
C)  debit to Allowance for Doubtful Accounts of $5,960. 
D)  debit to Accounts Receivable of $229,420. 
A)  debit to Cash of $220,760. 
B)  debit to Bad Debt Expense of $5,960. 
C)  debit to Allowance for Doubtful Accounts of $5,960. 
D)  debit to Accounts Receivable of $229,420.

Question 8

In preparing its bank reconciliation for the month of April 2014, Henke, Inc. has the following information available.   What should be the correct balance of cash at April 30, 2014?

Accepted Answer

A)  $34,370 
B)  $33,940 
C)  $33,490 
D)  $33,470 
A)  $34,370 
B)  $33,940 
C)  $33,490 
D)  $33,470

Question 9

Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using 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 10

What is imputed interest?

Accepted Answer

A)  Interest based on the stated interest rate. 
B)  Interest based on the implicit interest rate. 
C)  Interest based on the average interest rate. 
D)  Interest based on the coupon rate. 
A)  Interest based on the stated interest rate. 
B)  Interest based on the implicit interest rate. 
C)  Interest based on the average interest rate. 
D)  Interest based on the coupon rate.

Question 11

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 12

In preparing its August 31, 2014 bank reconciliation, Bing Corp. has available thefollowing information:   At August 31, 2014, Bing's correct cash balance is

Accepted Answer

A)  $19,800. 
B)  $19,200. 
C)  $19,100. 
D)  $17,500. 
A)  $19,800. 
B)  $19,200. 
C)  $19,100. 
D)  $17,500.

Question 13

Travel advances should be reported as

Accepted Answer

A)  supplies. 
B)  cash because they represent the equivalent of money. 
C)  investments. 
D)  none of these answers are correct. 
A)  supplies. 
B)  cash because they represent the equivalent of money. 
C)  investments. 
D)  none of these answers are correct.

Question 14

The following information is available for Murphy Company:   As a result of a review and aging of accounts receivable in early January 2015, it has been determined that an allowance for doubtful accounts of $11,000 is needed at December 31, 2014. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2014?

Accepted Answer

A)  $9,000 
B)  $11,000 
C)  $13,000 
D)  $27,000 
A)  $9,000 
B)  $11,000 
C)  $13,000 
D)  $27,000

Question 15

When preparing a bank reconciliation, bank credits are

Accepted Answer

A)  added to the bank statement balance. 
B)  deducted from the bank statement balance. 
C)  added to the balance per books. 
D)  deducted from the balance per books. 
A)  added to the bank statement balance. 
B)  deducted from the bank statement balance. 
C)  added to the balance per books. 
D)  deducted from the balance per books.

Question 16

IFRS and U.S. IFRS are very similar in accounting for cash and receivables.

Accepted Answer

A) True 
 B)False

Question 17

Trade receivables include notes receivable and advances to officers and employees.

Accepted Answer

A) True 
 B)False

Question 18

Lester Company received a seven-year zero-interest-bearing note on February 22, 2014, in exchange for property it sold to Porter Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of interest for a note of this type was 7% on February 22, 2014, 7.5% on December 31, 2014, 7.7% on February 22, 2015, and 8% on December 31, 2015. What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2014 and 2015, respectively?

Accepted Answer

A)  0% and 0% 
B)  7% and 7% 
C)  7% and 7.7% 
D)  7.5% and 8% 
A)  0% and 0% 
B)  7% and 7% 
C)  7% and 7.7% 
D)  7.5% and 8%

Question 19

Both the FASB and IASB have indicated that they believe all financial instruments should be recorded and reported at fair value.

Accepted Answer

A) True 
 B)False

Question 20

All of the following are associated with the valuation of accounts receivable except

Accepted Answer

A)  uncollectible accounts. 
B)  returns. 
C)  cash discounts under the net method. 
D)  allowances granted. 
A)  uncollectible accounts. 
B)  returns. 
C)  cash discounts under the net method. 
D)  allowances granted.

What is a compensating balance?

Under which section of the balance sheet is "cash restricted for plant expansion" reported?

Kaniper Company has the following items at year-end: Kaniper should report cash and cash equivalents of

Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $600,000 to Arch Inc. Arch Inc. will pay $650,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue?

In preparing its bank reconciliation for the month of April 2014, Henke, Inc. has the following information available. What should be the correct balance of cash at April 30, 2014?

Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method?

What is imputed interest?

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

In preparing its August 31, 2014 bank reconciliation, Bing Corp. has available thefollowing information: At August 31, 2014, Bing's correct cash balance is

Travel advances should be reported as

When preparing a bank reconciliation, bank credits are

IFRS and U.S. IFRS are very similar in accounting for cash and receivables.

Trade receivables include notes receivable and advances to officers and employees.

Both the FASB and IASB have indicated that they believe all financial instruments should be recorded and reported at fair value.

All of the following are associated with the valuation of accounts receivable except

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

What is a compensating balance?

Under which section of the balance sheet is "cash restricted for plant expansion" reported?

Kaniper Company has the following items at year-end: Kaniper should report cash and cash equivalents of

Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $600,000 to Arch Inc. Arch Inc. will pay $650,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue?

In preparing its bank reconciliation for the month of April 2014, Henke, Inc. has the following information available. What should be the correct balance of cash at April 30, 2014?

Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method?

What is imputed interest?

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

In preparing its August 31, 2014 bank reconciliation, Bing Corp. has available thefollowing information: At August 31, 2014, Bing's correct cash balance is

Travel advances should be reported as

When preparing a bank reconciliation, bank credits are

IFRS and U.S. IFRS are very similar in accounting for cash and receivables.

Trade receivables include notes receivable and advances to officers and employees.

Both the FASB and IASB have indicated that they believe all financial instruments should be recorded and reported at fair value.

All of the following are associated with the valuation of accounts receivable except

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