Question 1

Short-term, highly liquid investments may be included with cash on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

Moon Inc. factors $2,000,000 of its accounts receivables with recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair value of the recourse liability at $200,000. What would be the debit to Cash in the journal entry to record this transaction?

Accepted Answer

A)  $2,000,000. 
B)  $1,920,000. 
C)  $1,760,000. 
D)  $1,560,000. 
A)  $2,000,000. 
B)  $1,920,000. 
C)  $1,760,000. 
D)  $1,560,000.

Question 3

Why is the allowance method preferred over the direct write-off method of accounting for bad debts?

Accepted Answer

A)  Allowance method is used for tax purposes. 
B)  Estimates are used. 
C)  Determining worthless accounts under direct write-off method is difficult to do. 
D)  Improved matching of bad debt expense with revenue. 
A)  Allowance method is used for tax purposes. 
B)  Estimates are used. 
C)  Determining worthless accounts under direct write-off method is difficult to do. 
D)  Improved matching of bad debt expense with revenue.

Question 4

Which of the following statements is false?

Accepted Answer

A)  The imprest petty cash system in effect adheres to the rule of disbursement by check. 
B)  Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end. 
C)  The Petty Cash account is debited when the fund is replenished. 
D)  All of these answers are false. 
A)  The imprest petty cash system in effect adheres to the rule of disbursement by check. 
B)  Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end. 
C)  The Petty Cash account is debited when the fund is replenished. 
D)  All of these answers are false.

Question 5

At the beginning of 2013, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2013 year-end statement of financial position and $1,000 as sales revenue for 2013. What effect did this accounting for the note have on Gannon's net earnings for 2013, 2014, 2015, and its retained earnings at the end of 2015, respectively?

Accepted Answer

A)  Overstate, overstate, understate, zero 
B)  Overstate, understate, understate, understate 
C)  Overstate, overstate, overstate, overstate 
D)  None of these answer choices are correct. 
A)  Overstate, overstate, understate, zero 
B)  Overstate, understate, understate, understate 
C)  Overstate, overstate, overstate, overstate 
D)  None of these answer choices are correct.

Question 6

Trade discounts are

Accepted Answer

A)  not recorded in the accounts; rather they are a means of computing a price. 
B)  used to avoid frequent changes in catalogues. 
C)  used to quote different prices for different quantities purchased. 
D)  all of the above. 
A)  not recorded in the accounts; rather they are a means of computing a price. 
B)  used to avoid frequent changes in catalogues. 
C)  used to quote different prices for different quantities purchased. 
D)  all of the above.

Question 7

When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n)

Accepted Answer

A)  trade discount. 
B)  nominal discount. 
C)  enhancement discount. 
D)  cash discount. 
A)  trade discount. 
B)  nominal discount. 
C)  enhancement discount. 
D)  cash discount.

Question 8

A Cash Over and Short account

Accepted Answer

A)  is not generally accepted. 
B)  is debited when the petty cash fund proves out over. 
C)  is debited when the petty cash fund proves out short. 
D)  is a contra account to Cash. 
A)  is not generally accepted. 
B)  is debited when the petty cash fund proves out over. 
C)  is debited when the petty cash fund proves out short. 
D)  is a contra account to Cash.

Question 9

Bank overdrafts, if material, should be

Accepted Answer

A)  reported as a deduction from the current asset section. 
B)  reported as a deduction from cash. 
C)  netted against cash and a net cash amount reported. 
D)  reported as a current liability. 
A)  reported as a deduction from the current asset section. 
B)  reported as a deduction from cash. 
C)  netted against cash and a net cash amount reported. 
D)  reported as a current liability.

Question 10

Use the following information to answer Question 1 and 2.
Harrison Company has a loan receivable with a carrying value of $15,000 at December 31, 2013. On January 3, 2014, the borrower, Thomas Clark Imports, declares bankruptcy, and Harrison estimates that it will collect only 60% of the loan balance.
-Which of the following entries would Harrison make to record the impairment under IFRS?

Accepted Answer

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

Question 11

David Company uses the gross method to record sales made on credit. On June 10, 2014, it sold goods worth $200,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2014, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2014. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.?

Accepted Answer

A)  $98,000. 
B)  $100,000. 
C)  $200,000. 
D)  $196,000. 
A)  $98,000. 
B)  $100,000. 
C)  $200,000. 
D)  $196,000.

Question 12

The accounting for cash discounts and trade discounts are

Accepted Answer

A)  the same. 
B)  always recorded net. 
C)  not the same. 
D)  tied to the timing of cash collections on the account. 
A)  the same. 
B)  always recorded net. 
C)  not the same. 
D)  tied to the timing of cash collections on the account.

Question 13

Remington Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $750,000 and cash collections of $700,000. The accounts receivable turnover is

Accepted Answer

A)  5.0. 
B)  5.5. 
C)  6.0. 
D)  7.5. 
A)  5.0. 
B)  5.5. 
C)  6.0. 
D)  7.5.

Question 14

When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value.

Accepted Answer

A) True 
 B)False

Question 15

For a loan receivable, impairment loss is calculated as the difference between the investment in the loan and the expected future cash flows discounted at the loan's historical effective interest rate.

Accepted Answer

A) True 
 B)False

Question 16

IFRS requires an impairment loss for a loan receivable to be recognized when

Accepted Answer

A)  its carrying amount is less than its recoverable amount. 
B)  its recoverable amount is less than its carrying amount. 
C)  its present value of expected future cash flows is greater than its carrying amount. 
D)  its principal amount is less than its interest amount. 
A)  its carrying amount is less than its recoverable amount. 
B)  its recoverable amount is less than its carrying amount. 
C)  its present value of expected future cash flows is greater than its carrying amount. 
D)  its principal amount is less than its interest amount.

Question 17

The net amount reported for short-term receivables is not affected when a specific account receivable is determined to be uncollectible.

Accepted Answer

A) True 
 B)False

Question 18

Lawrence Company has cash in bank of $22,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of

Accepted Answer

A)  $20,000. 
B)  $22,000. 
C)  $25,000. 
D)  $26,000. 
A)  $20,000. 
B)  $22,000. 
C)  $25,000. 
D)  $26,000.

Question 19

McGlone Corporation had a 1/1/14 balance in the Allowance for Doubtful Accounts of $25,000. During 2014, it wrote off $18,000 of accounts and collected $5,250 on accounts previously written off. The balance in Accounts Receivable was $500,000 at 1/1 and $600,000 at 12/31. At 12/31/14, McGlone estimates that 5% of accounts receivable will prove to be uncollectible. What should McGlone report as its Allowance for Doubtful Accounts at 12/31/14?

Accepted Answer

A)  $12,000. 
B)  $12,250. 
C)  $17,250. 
D)  $30,000. 
A)  $12,000. 
B)  $12,250. 
C)  $17,250. 
D)  $30,000.

Question 20

On February 1, 2014, Henson Company factored receivables with a carrying amount of $500,000 to Agee Company. Agee 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 Henson Company for February.Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is

Accepted Answer

A)  $0. 
B)  $15,000. 
C)  $25,000. 
D)  $40,000. 
A)  $0. 
B)  $15,000. 
C)  $25,000. 
D)  $40,000.

Short-term, highly liquid investments may be included with cash on the balance sheet.

Why is the allowance method preferred over the direct write-off method of accounting for bad debts?

Which of the following statements is false?

Trade discounts are

When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n)

A Cash Over and Short account

Bank overdrafts, if material, should be

The accounting for cash discounts and trade discounts are

Remington Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $750,000 and cash collections of $700,000. The accounts receivable turnover is

When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value.

For a loan receivable, impairment loss is calculated as the difference between the investment in the loan and the expected future cash flows discounted at the loan's historical effective interest rate.

IFRS requires an impairment loss for a loan receivable to be recognized when

The net amount reported for short-term receivables is not affected when a specific account receivable is determined to be uncollectible.

Lawrence Company has cash in bank of $22,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of

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

Short-term, highly liquid investments may be included with cash on the balance sheet.

Why is the allowance method preferred over the direct write-off method of accounting for bad debts?

Which of the following statements is false?

Trade discounts are

When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n)

A Cash Over and Short account

Bank overdrafts, if material, should be

The accounting for cash discounts and trade discounts are

Remington Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $750,000 and cash collections of $700,000. The accounts receivable turnover is

When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value.

For a loan receivable, impairment loss is calculated as the difference between the investment in the loan and the expected future cash flows discounted at the loan's historical effective interest rate.

IFRS requires an impairment loss for a loan receivable to be recognized when

The net amount reported for short-term receivables is not affected when a specific account receivable is determined to be uncollectible.

Lawrence Company has cash in bank of $22,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of

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