Question 1

Explain how a company can use its credit policy for customers and allowance for bad debts policies to manipulate earnings.

Accepted Answer

A legitimate way to increase sales is to

Question 2

Marvelos Inc.reported credit sales of $1,000,000 and cash sales of $100,000 for last year.The ending balance in accounts receivable was $1,500,000.Bad debt expense is estimated at 1% of ending accounts receivable.The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year.Assuming there are no write-offs made during the year,what was the balance in the allowance for doubtful accounts at the end of the year?

Accepted Answer

A) $11,000 
B) $15,000 
C) $51,000 
D) $55,000 
A) $11,000 
B) $15,000 
C) $51,000 
D) $55,000

Question 3

Pauline Company estimates the allowance for doubtful accounts by aging its accounts receivable.At the end of 2018,the balance in the allowance account was $50,000.During 2019,the company wrote off $5,000 and collected a $3,000 receivable that had been previously written off as uncollectable.At the end of 2019,the aging schedule indicated that the balance of the allowance for doubtful accounts should be $64,000.What is the bad debt expense for 2019?

Accepted Answer

A) $16,000 
B) $19,000 
C) $66,000 
D) $69,000 
A) $16,000 
B) $19,000 
C) $66,000 
D) $69,000

Question 4

Which statement is not correct about estimating the allowance for doubtful accounts under the balance sheet approach?

Accepted Answer

A) Accounts receivable are stated at their net realizable value. 
B) Accounts receivable are stated at their fair value. 
C) Bad debt expense is based on the accounts receivable balance. 
D) Bad debt expense is based on an aging of the accounts receivable. 
A) Accounts receivable are stated at their net realizable value. 
B) Accounts receivable are stated at their fair value. 
C) Bad debt expense is based on the accounts receivable balance. 
D) Bad debt expense is based on an aging of the accounts receivable.

Question 5

At December 31,2018,Pinebrook Inc.reported $135,000 in accounts receivable and $9,300 in the allowance for doubtful accounts.In 2019,the company had $875,000 in credit sales and collected $915,000 on accounts receivable.Pinebrook also wrote off $2,500 in uncollectable accounts.The company uses the aging method to estimate bad debts,and management has estimated that the allowance for doubtful accounts for December 31,2019 should be $8,800.
Required:
a.Provide the journal entry to record bad debts expense for the year 2019.(Ignore information contained in part (b)below. )
b.While auditing the books of Pinebrook,you discover that the company's bookkeeper has erroneously recorded a transaction: for one customer who went bankrupt in 2019,she wrote off the $6,800 receivable with a debit to bad debts expense.Determine the error's effects (overstated/understated)on the December 31,2019 balance sheet (accounts receivable,allowance for doubtful accounts)and the income statement for the year 2019.
c.In January 2020,the company factored all of its receivables ($95,000)without recourse for proceeds of $77,000.Present the journal entry to record this transaction.

Accepted Answer

a.
 @#IMG-DLM& 
Journal entry to record bad debts

Question 6

Which statement about receivables is correct?

Accepted Answer

A) Receivables are non-monetary items. 
B) Monetary items are measured at their present value. 
C) Trade receivables generally have payments terms extending beyond 3 months. 
D) Trade receivables should generally be recorded at their discounted present value. 
A) Receivables are non-monetary items. 
B) Monetary items are measured at their present value. 
C) Trade receivables generally have payments terms extending beyond 3 months. 
D) Trade receivables should generally be recorded at their discounted present value.

Question 7

Fruit Valley Inc.reported cash sales of $250,000,credit sales of $850,000,cash collections from receivables of $500,000,bad debt write-offs of $25,000 and bad debt expense of $35,000 for last year.Accounts receivable had a balance of $1,000,000 at the end of the year.What was the balance in the accounts receivable account at the beginning of the year?

Accepted Answer

A) $425,000 
B) $460,000 
C) $650,000 
D) $675,000 
A) $425,000 
B) $460,000 
C) $650,000 
D) $675,000

Question 8

What amount will be included in "cash and cash equivalents"?

Accepted Answer

A) $0 
B) $12,000 
C) $36,000 
D) $64,000 
A) $0 
B) $12,000 
C) $36,000 
D) $64,000

Question 9

Intercoastal Shelving Company made a sale to Superb Knives for $8,800 on December 10,2019.Since it was approaching year end,Intercoastal wanted to encourage prompt payment,so it provided generous discounts for those clients able to pay promptly.Thus Intercoastal offered terms of 5/10,net 20.Superb paid the invoice on January 20,2020.
How should Intercoastal record the invoice and its subsequent collection if the company uses (a)the gross method or (b)the net method?

Accepted Answer

The answer of Intercoastal Shelving Company made a sale to...

Question 10

Which statement is not correct?

Accepted Answer

A) Factoring with recourse creates a liability on the balance sheet. 
B) Factoring with recourse creates a receivable on the balance sheet. 
C) Factoring without recourse negatively impacts working capital. 
D) Factoring without recourse means that the seller takes the collection risk. 
A) Factoring with recourse creates a liability on the balance sheet. 
B) Factoring with recourse creates a receivable on the balance sheet. 
C) Factoring without recourse negatively impacts working capital. 
D) Factoring without recourse means that the seller takes the collection risk.

Question 11

Medical Machines reported credit sales of $800,000,cash returns of $25,000 and bad debt expense of $150,000 for last year.Accounts receivable had a balance of $1,000,000 at the beginning of the year and $1,250,000 at the end of the year.Assuming there are no write-offs during the year,how much cash was collected from customers during the year?

Accepted Answer

A) $375,000 
B) $525,000 
C) $550,000 
D) $650,000 
A) $375,000 
B) $525,000 
C) $550,000 
D) $650,000

Question 12

At the end of its first year of operations,December 31,2019,Felicity Ltd.'s accounts show the following amounts:
   
The company estimates that the following amounts of accounts receivable will not be collectible:
   
What should be the amount of bad debt expense for the year ended December 31,2019?

Accepted Answer

@#IMG-DLM& 
Estimated ADA based on aging

Question 13

What is one way to segregate duties to improve controls over cash?

Accepted Answer

A) Request all customers to pay in cash. 
B) Separate sales employees from employees who book the accounting entries. 
C) Request all customers to pay by cheques made payable to "CASH." 
D) Have the employee who is responsible for making cash deposits to the bank also do the bank reconciliations. 
A) Request all customers to pay in cash. 
B) Separate sales employees from employees who book the accounting entries. 
C) Request all customers to pay by cheques made payable to "CASH." 
D) Have the employee who is responsible for making cash deposits to the bank also do the bank reconciliations.

Question 14

Micelle Inc.reported credit sales of $600,000,cash collections of $450,000 and bad debt expense of $15,000 for last year.Accounts receivable had a balance of $1,000,000 at the end of the year.Assuming there are no write-offs made during the year,what was the balance in the accounts receivable account at the beginning of the year?

Accepted Answer

A) $400,000 
B) $850,000 
C) $865,000 
D) $1,150,000 
A) $400,000 
B) $850,000 
C) $865,000 
D) $1,150,000

Question 15

What are the general recognition criteria for non-cash assets under GAAP?

Accepted Answer

A) If the item meets the definition of an asset,it must have an indefinite life. 
B) If the item meets the definition of an expense,it must be measurable. 
C) In order for the item to be an asset,it will have future economic benefits,be under the entity's control,and result form past transactions. 
D) Future transactions can be recorded under GAAP. 
A) If the item meets the definition of an asset,it must have an indefinite life. 
B) If the item meets the definition of an expense,it must be measurable. 
C) In order for the item to be an asset,it will have future economic benefits,be under the entity's control,and result form past transactions. 
D) Future transactions can be recorded under GAAP.

Question 16

Pomegranate Company's bank balance on its October 31,2018 bank statement is $11,500.Pomegranate's accountant is preparing a bank reconciliation and determined that three cheques issued by Pomegranate to its suppliers for a total of $6,500 had not yet cleared the bank.Also,a deposit for $700 made by Pomegranate on October 31 did not appear on the bank statement.Bank service charges of $240 appear on the bank statement,but have not yet been recorded in the general ledger.
Given the above information,prepare a bank reconciliation to determine the correct cash balance that should be reflected in Pomegranate's general ledger at October 31,2018.

Accepted Answer

The answer of Pomegranate Company's bank balance on its October...

Question 17

Define "cash" and explain how funds that are subject tor restrictions should be accounted for in the accounting records.

Accepted Answer

Cash refers to cash on hand and demand d

Question 18

A $50,000 sale transaction is made with terms of 2/10,net 30.Assuming that the customer takes the discount,what amount is booked to the "cash discount" account under the net method of recording a discount?

Accepted Answer

A) $0 
B) $1,000 debit 
C) $1,000 credit 
D) $49,000 debit 
A) $0 
B) $1,000 debit 
C) $1,000 credit 
D) $49,000 debit

Question 19

What amount will be included in "cash and cash equivalents"?

Accepted Answer

A) $36,000 
B) $42,000 
C) $52,000 
D) $64,000 
A) $36,000 
B) $42,000 
C) $52,000 
D) $64,000

Question 20

Which statement is correct?

Accepted Answer

A) A transfer with recourse means that the purchaser cannot go back to the company for compensation of bad debts. 
B) A transfer with recourse means that the purchaser of the receivables takes the collection risk. 
C) A transfer with recourse means that the seller of the receivables takes the collection risk. 
D) A transfer without recourse means that the seller of the receivables takes the collection risk. 
A) A transfer with recourse means that the purchaser cannot go back to the company for compensation of bad debts. 
B) A transfer with recourse means that the purchaser of the receivables takes the collection risk. 
C) A transfer with recourse means that the seller of the receivables takes the collection risk. 
D) A transfer without recourse means that the seller of the receivables takes the collection risk.

Explain how a company can use its credit policy for customers and allowance for bad debts policies to manipulate earnings.

Which statement is not correct about estimating the allowance for doubtful accounts under the balance sheet approach?

Which statement about receivables is correct?

What amount will be included in "cash and cash equivalents"?

Which statement is not correct?

At the end of its first year of operations,December 31,2019,Felicity Ltd.'s accounts show the following amounts: The company estimates that the following amounts of accounts receivable will not be collectible: What should be the amount of bad debt expense for the year ended December 31,2019?

What is one way to segregate duties to improve controls over cash?

What are the general recognition criteria for non-cash assets under GAAP?

Define "cash" and explain how funds that are subject tor restrictions should be accounted for in the accounting records.

A $50,000 sale transaction is made with terms of 2/10,net 30.Assuming that the customer takes the discount,what amount is booked to the "cash discount" account under the net method of recording a discount?

What amount will be included in "cash and cash equivalents"?

Which statement is correct?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Inventories

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

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Exam 5: Cash and Receivables

Explain how a company can use its credit policy for customers and allowance for bad debts policies to manipulate earnings.

Which statement is not correct about estimating the allowance for doubtful accounts under the balance sheet approach?

Which statement about receivables is correct?

What amount will be included in "cash and cash equivalents"?

Which statement is not correct?

At the end of its first year of operations,December 31,2019,Felicity Ltd.'s accounts show the following amounts: The company estimates that the following amounts of accounts receivable will not be collectible: What should be the amount of bad debt expense for the year ended December 31,2019?

What is one way to segregate duties to improve controls over cash?

What are the general recognition criteria for non-cash assets under GAAP?

Define "cash" and explain how funds that are subject tor restrictions should be accounted for in the accounting records.

A $50,000 sale transaction is made with terms of 2/10,net 30.Assuming that the customer takes the discount,what amount is booked to the "cash discount" account under the net method of recording a discount?

What amount will be included in "cash and cash equivalents"?

Which statement is correct?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Inventories

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters