Question 1

Which of the following statements concerning the estimation of bad debt expense by using a percentage of credit sales is incorrect?

Accepted Answer

A) Produces the same results, as an aging of accounts receivable. 
B) Causes an adjustment to the allowance account without regard to the balance in that account immediately prior to the adjustment. 
C) Is based primarily on the matching principle. 
D) Emphasizes the income statement. 
E) Only incidentally measures accounts receivable at net realizable value. 
A) Produces the same results, as an aging of accounts receivable. 
B) Causes an adjustment to the allowance account without regard to the balance in that account immediately prior to the adjustment. 
C) Is based primarily on the matching principle. 
D) Emphasizes the income statement. 
E) Only incidentally measures accounts receivable at net realizable value.

Question 2

At the end of 2003,the following balances appeared in the ledger accounts of a company prior to the adjusting and closing entries:   The estimated bad debt rate used by the company,based on outstanding customer receivables,is 3 percent.The amount that should be used in the correcting entry to record bad debt expense at the end of 2003 is $___________________.

Accepted Answer

[($156,000

Question 3

When a specific bad debt is written off as uncollectible,and subsequently collected in full,there is no effect to the income statement.

Accepted Answer

A) True 
 B)False

Question 4

There are fewer note disclosures required under ASPE than under IFRS for financial instruments.

Accepted Answer

A) True 
 B)False

Question 5

ASPE requires that all discounts or premiums on Notes Receivable be amortized using the effective interest method.

Accepted Answer

A) True 
 B)False

Question 6

When an interest-bearing note payable is given to purchase an asset,the face amount of the note and the recorded cost of the assets received will always be the same.

Accepted Answer

A) True 
 B)False

Question 7

When individual customers' accounts have credit balances of material amounts,these amounts:

Accepted Answer

A) May be shown as "credit balances of customers' accounts" in the current assets section. 
B) May be deducted from the debit balances in other customers' accounts on the balance sheet. 
C) Must be reported (or disclosed) separately in the liability section of the balance sheet. 
D) Should be omitted from the balance sheet. 
A) May be shown as "credit balances of customers' accounts" in the current assets section. 
B) May be deducted from the debit balances in other customers' accounts on the balance sheet. 
C) Must be reported (or disclosed) separately in the liability section of the balance sheet. 
D) Should be omitted from the balance sheet.

Question 8

When a bad debt is written off and subsequently collected in full:

Accepted Answer

A) The bad debt expense for the period of collection is reduced. 
B) The allowance for doubtful accounts is reduced. 
C) The net realizable value of accounts receivable increases. 
D) A gain is recognized. 
E) There is no effect to the income statement. 
A) The bad debt expense for the period of collection is reduced. 
B) The allowance for doubtful accounts is reduced. 
C) The net realizable value of accounts receivable increases. 
D) A gain is recognized. 
E) There is no effect to the income statement.

Question 9

A company has $9,000 on deposit in Bank A and is overdrawn $4,000 with Bank C; the company should report a cash balance of:

Accepted Answer

A) $4,000 
B) $5,000 
C) $9,000 
D) $13,000 
A) $4,000 
B) $5,000 
C) $9,000 
D) $13,000

Question 10

Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.

Accepted Answer

A) True 
 B)False

Question 11

A company had poor internal control over its cash transactions.Facts about its cash position at June 30,2008,were as follows:
The cash account showed a balance of $37,804,which included undeposited receipts.A credit of $200 on the bank's records did not appear on the books of the company.The balance per the bank statement was $31,102.Outstanding cheques were: No.62 for $232,No.183 for $300,No.284 for $506,No.8621 for $382,No.8623 for $414,and No.8632 for $290.
The cashier removed all undeposited receipts in excess of $7,588 and prepared the following reconciliation:   Prepare a supporting schedule showing how much the cashier removed.Also,explain how the cashier attempted to conceal the theft.

Accepted Answer

@#IMG-DLM& Less adjusted bank balance: @#IMG-DLM& Less: Outs

Question 12

G owes a debt which is now due amounting to $50,000.The creditor has agreed to accept payment in six equal annual instalments with a 10 percent interest rate.The first payment is to be made one year hence.Each periodic payment will be $_______________________.

Accepted Answer

$50,000/(P

Question 13

The allowance method of recognizing bad debt expense (as opposed to the direct write-off method) can be applied in more than one way.What two conditions must be met before the allowance method can be used?

Accepted Answer

A) Bad debts must be expected and material. 
B) Bad debts must be relevant and reliable. 
C) Bad debts must be consistent over time and the method used to estimate them must be consistently applied. 
D) Bad debts must be probable and estimable. 
A) Bad debts must be expected and material. 
B) Bad debts must be relevant and reliable. 
C) Bad debts must be consistent over time and the method used to estimate them must be consistently applied. 
D) Bad debts must be probable and estimable.

Question 14

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

Accepted Answer

A) direct write off. 
B) percentage of credit sales. 
C) the balance in the trade receivable accounts. 
D) aging the trade receivable accounts. 
A) direct write off. 
B) percentage of credit sales. 
C) the balance in the trade receivable accounts. 
D) aging the trade receivable accounts.

Question 15

When a firm (assignor) assigns part of its accounts receivable as collateral for a loan:

Accepted Answer

A) The assignor relinquishes control over the receivables 
B) The transaction is essentially the same as factoring without recourse 
C) The assigned accounts are reclassified as a separate account within total accounts receivable 
D) The loan is offset against the assigned accounts receivable in the assignor's balance sheet 
A) The assignor relinquishes control over the receivables 
B) The transaction is essentially the same as factoring without recourse 
C) The assigned accounts are reclassified as a separate account within total accounts receivable 
D) The loan is offset against the assigned accounts receivable in the assignor's balance sheet

Question 16

Separation of responsibilities is essential in the control procedures for both cash inflows and cash outflows.

Accepted Answer

A) True 
 B)False

Question 17

The allowance method for estimating and reporting bad debt expense:

Accepted Answer

A) Demonstrates a practical application of the full-disclosure principle. 
B) Generally recognizes gains and losses on bad debts in the period when the related account receivable is removed from the accounting records. 
C) Is optional under GAAP for all retail companies. 
D) Generally adheres to the matching principle better than the specific write-off method. 
A) Demonstrates a practical application of the full-disclosure principle. 
B) Generally recognizes gains and losses on bad debts in the period when the related account receivable is removed from the accounting records. 
C) Is optional under GAAP for all retail companies. 
D) Generally adheres to the matching principle better than the specific write-off method.

Question 18

Simple interest is always computed based on the principal amount.

Accepted Answer

A) True 
 B)False

Question 19

Hedging instruments must always be classified as Fair Value through Profit or Loss (FVTPL).

Accepted Answer

A) True 
 B)False

Which of the following statements concerning the estimation of bad debt expense by using a percentage of credit sales is incorrect?

When a specific bad debt is written off as uncollectible,and subsequently collected in full,there is no effect to the income statement.

There are fewer note disclosures required under ASPE than under IFRS for financial instruments.

ASPE requires that all discounts or premiums on Notes Receivable be amortized using the effective interest method.

When an interest-bearing note payable is given to purchase an asset,the face amount of the note and the recorded cost of the assets received will always be the same.

When individual customers' accounts have credit balances of material amounts,these amounts:

When a bad debt is written off and subsequently collected in full:

A company has $9,000 on deposit in Bank A and is overdrawn $4,000 with Bank C; the company should report a cash balance of:

Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.

G owes a debt which is now due amounting to $50,000.The creditor has agreed to accept payment in six equal annual instalments with a 10 percent interest rate.The first payment is to be made one year hence.Each periodic payment will be $_______________________.

The allowance method of recognizing bad debt expense (as opposed to the direct write-off method) can be applied in more than one way.What two conditions must be met before the allowance method can be used?

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

When a firm (assignor) assigns part of its accounts receivable as collateral for a loan:

Separation of responsibilities is essential in the control procedures for both cash inflows and cash outflows.

The allowance method for estimating and reporting bad debt expense:

Simple interest is always computed based on the principal amount.

Hedging instruments must always be classified as Fair Value through Profit or Loss (FVTPL).

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Financial Instruments: Investments in Debt and Equity Securities

Filters

Exam 7: Financial Assets: Cash and Receivables

Which of the following statements concerning the estimation of bad debt expense by using a percentage of credit sales is incorrect?

When a specific bad debt is written off as uncollectible,and subsequently collected in full,there is no effect to the income statement.

There are fewer note disclosures required under ASPE than under IFRS for financial instruments.

ASPE requires that all discounts or premiums on Notes Receivable be amortized using the effective interest method.

When an interest-bearing note payable is given to purchase an asset,the face amount of the note and the recorded cost of the assets received will always be the same.

When individual customers' accounts have credit balances of material amounts,these amounts:

When a bad debt is written off and subsequently collected in full:

A company has $9,000 on deposit in Bank A and is overdrawn $4,000 with Bank C; the company should report a cash balance of:

Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.

G owes a debt which is now due amounting to $50,000.The creditor has agreed to accept payment in six equal annual instalments with a 10 percent interest rate.The first payment is to be made one year hence.Each periodic payment will be $_______________________.

The allowance method of recognizing bad debt expense (as opposed to the direct write-off method) can be applied in more than one way.What two conditions must be met before the allowance method can be used?

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

When a firm (assignor) assigns part of its accounts receivable as collateral for a loan:

Separation of responsibilities is essential in the control procedures for both cash inflows and cash outflows.

The allowance method for estimating and reporting bad debt expense:

Simple interest is always computed based on the principal amount.

Hedging instruments must always be classified as Fair Value through Profit or Loss (FVTPL).

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Financial Instruments: Investments in Debt and Equity Securities

Filters