Question 1

Which of the following authoritative IFRS guidance specifically addresses issues related to cash?

Accepted Answer

A)  IAS No.1 (Presentation of Financial Statements) 
B)  IFRS No. 7 (Financial Instruments: Disclosures) 
C)  IAS No. 39 (Financial Instruments: Recognition and Measurement) 
D)  None of these answer choices are correct. 
A)  IAS No.1 (Presentation of Financial Statements) 
B)  IFRS No. 7 (Financial Instruments: Disclosures) 
C)  IAS No. 39 (Financial Instruments: Recognition and Measurement) 
D)  None of these answer choices are correct.

Question 2

Which of the following concepts relates to using the allowance method in accounting for accounts receivable?

Accepted Answer

A)  Bad debt expense is an estimate that is based on historical and prospective information. 
B)  Bad debt expense is based on the actual amounts determined to be uncollectible. 
C)  Bad debt expense is an estimate that is based only on an analysis of the receivables aging. 
D)  Bad debt expense is management's determination of which accounts will be sent to the attorney for collection. 
A)  Bad debt expense is an estimate that is based on historical and prospective information. 
B)  Bad debt expense is based on the actual amounts determined to be uncollectible. 
C)  Bad debt expense is an estimate that is based only on an analysis of the receivables aging. 
D)  Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.

Question 3

During the year, Kiner Company made an entry to write off a $16,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $200,000 and the balance in the allowance account was $18,000. The net realizable value of accounts receivable after the write-off entry was

Accepted Answer

A)  $200,000. 
B)  $198,000. 
C)  $166,000. 
D)  $182,000. 
A)  $200,000. 
B)  $198,000. 
C)  $166,000. 
D)  $182,000.

Question 4

Companies value and report short-term receivables at net realizable value_the net amount they expect to receive in cash.

Accepted Answer

A) True 
 B)False

Question 5

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 with recourse basis. The recourse obligation has a fair value of $2,500. The loss to be reported is

Accepted Answer

A)  $15,000. 
B)  $17,500. 
C)  $25,000. 
D)  $42,500. 
A)  $15,000. 
B)  $17,500. 
C)  $25,000. 
D)  $42,500.

Question 6

All claims held against customers and others for money, goods, or services are reported as current assets.

Accepted Answer

A) True 
 B)False

Question 7

On April 2, Kelvin sold $30,000 of inventory items on credit with the terms 1/10, net 30. Payment on $18,000 sales was received on April 8 and the remaining payment on $12,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a:

Accepted Answer

A)  debit to Cash and credit to Accounts Receivable for $11,880. 
B)  debit to Accounts Receivable and credit to Sales Revenue for $30,000. 
C)  debit to Accounts Receivable and credit to Sales Discount Forfeited for $120. 
D)  debit to Cash and credit to Sales Discount Forfeited for $300. 
A)  debit to Cash and credit to Accounts Receivable for $11,880. 
B)  debit to Accounts Receivable and credit to Sales Revenue for $30,000. 
C)  debit to Accounts Receivable and credit to Sales Discount Forfeited for $120. 
D)  debit to Cash and credit to Sales Discount Forfeited for $300.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

AG Inc. made a $15,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?

Accepted Answer

A)  Debit Accounts Receivable for $14,850. 
B)  Debit Accounts Receivable for $14,850 and Sales Discounts for $150. 
C)  Debit Accounts Receivable for $15,000. 
D)  Debit Accounts Receivable for $15,000 and Sales Discounts for $150. 
A)  Debit Accounts Receivable for $14,850. 
B)  Debit Accounts Receivable for $14,850 and Sales Discounts for $150. 
C)  Debit Accounts Receivable for $15,000. 
D)  Debit Accounts Receivable for $15,000 and Sales Discounts for $150.

Question 10

Which of the following statements is incorrect regarding the classification of accounts and notes receivable?

Accepted Answer

A)  Segregation of the different types of receivables is required if they are material. 
B)  Disclose any loss contingencies that exist on the receivables. 
C)  Any discount or premium resulting from the determination of present value in notes receivable transactions is an asset or liability respectively. 
D)  Valuation accounts should be ap?propriately offset against the proper receivable accounts. 
A)  Segregation of the different types of receivables is required if they are material. 
B)  Disclose any loss contingencies that exist on the receivables. 
C)  Any discount or premium resulting from the determination of present value in notes receivable transactions is an asset or liability respectively. 
D)  Valuation accounts should be ap?propriately offset against the proper receivable accounts.

Question 11

Why do companies provide trade discounts?

Accepted Answer

A)  To avoid frequent changes in catalogs. 
B)  To induce prompt payment. 
C)  To easily alter prices for different customers. 
D)  To avoid frequent changes in catalogs and to easily alter prices for different customers. 
A)  To avoid frequent changes in catalogs. 
B)  To induce prompt payment. 
C)  To easily alter prices for different customers. 
D)  To avoid frequent changes in catalogs and to easily alter prices for different customers.

Question 12

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 13

Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct?

Accepted Answer

A)  Net approach. 
B)  Gross approach. 
C)  Allowance approach. 
D)  All three approaches are theoretically correct. 
A)  Net approach. 
B)  Gross approach. 
C)  Allowance approach. 
D)  All three approaches are theoretically correct.

Question 14

The percentage-of-sales method results in a more accurate valuation of receivables on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as

Accepted Answer

A)  a deduction from sales in the income statement. 
B)  an item of "other expense" in the income statement. 
C)  a deduction from accounts receivable in determining the net realizable value of accounts receivable. 
D)  sales discounts forfeited in the cost of goods sold section of the income statement. 
A)  a deduction from sales in the income statement. 
B)  an item of "other expense" in the income statement. 
C)  a deduction from accounts receivable in determining the net realizable value of accounts receivable. 
D)  sales discounts forfeited in the cost of goods sold section of the income statement.

Question 16

Key similarities between U.S. GAAP and IFRS include all of the following except

Accepted Answer

A)  the definition used for cash equivalents. 
B)  accounting and reporting issues related to recognition and measurement of receivables, such as the use of allowance accounts. 
C)  working toward implementing fair value measurement for all financial instruments. 
D)  the same criteria is used to derecognize a receivable. 
A)  the definition used for cash equivalents. 
B)  accounting and reporting issues related to recognition and measurement of receivables, such as the use of allowance accounts. 
C)  working toward implementing fair value measurement for all financial instruments. 
D)  the same criteria is used to derecognize a receivable.

Question 17

On July 22, Peter sold $15,500 of inventory items on credit with the terms 2/15, net 30. Payment on $10,000 sales was received on August 1 and the remaining payment was received on August 12. Assuming Peter uses the gross method of accounting for sales discounts, which one of the following entries was made on August 1 to record the cash received?

Accepted Answer

The answer of On July 22, Peter sold $15,500 of...

Question 18

Entries for bad debt expense.
The trial balance before adjustment of Risen Company reports the following balances:

Instructions

(a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 6% of gross accounts receivable and (2) 1% of net sales.
(b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $2,500 instead of a credit balance. How will this difference affect the journal entries in part 
(a)?
(c) What is the theoretical justification for each of the two allowance methods used to estimate bad debts?

Accepted Answer

@#IMG-DLM& The entry would not change under the pe

Question 19

Under IFRS, there is no specific standard related to pledging receivables.

Accepted Answer

A) True 
 B)False

Question 20

Use the following information for questions 104 and 105.
A trial balance before adjustments included the following:  
-If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is

Accepted Answer

A)  $7,080. 
B)  $8,600. 
C)  $8,448. 
D)  $10,120. 
A)  $7,080. 
B)  $8,600. 
C)  $8,448. 
D)  $10,120.

Exam 7: Cash and Receivables

Which of the following authoritative IFRS guidance specifically addresses issues related to cash?

Which of the following concepts relates to using the allowance method in accounting for accounts receivable?

During the year, Kiner Company made an entry to write off a $16,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $200,000 and the balance in the allowance account was $18,000. The net realizable value of accounts receivable after the write-off entry was

Companies value and report short-term receivables at net realizable value_the net amount they expect to receive in cash.

All claims held against customers and others for money, goods, or services are reported as current assets.

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

AG Inc. made a $15,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?

Which of the following statements is incorrect regarding the classification of accounts and notes receivable?

Why do companies provide trade discounts?

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

Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct?

The percentage-of-sales method results in a more accurate valuation of receivables on the balance sheet.

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as

Key similarities between U.S. GAAP and IFRS include all of the following except

Under IFRS, there is no specific standard related to pledging receivables.

Use the following information for questions 104 and 105. A trial balance before adjustments included the following: -If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is

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

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