Question 1

Cookie Ltd. receives a four-year, $100,000, zero-interest-bearing note. The present value of this note is $82,270. What is the implicit rate of interest?

Accepted Answer

A)  3% 
B)  5% 
C)  7% 
D)  9% 
A)  3% 
B)  5% 
C)  7% 
D)  9% B

Question 2

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called

Accepted Answer

A)  an account receivable. 
B)  a bank overdraft. 
C)  a compensating balance. 
D)  restricted cash. 
A)  an account receivable. 
B)  a bank overdraft. 
C)  a compensating balance. 
D)  restricted cash. C

Question 3

A Cash Over and Short account is

Accepted Answer

A)  not generally acceptable under Canadian GAAP. 
B)  debited when the sum of the receipts and the cash in the fund is more than the imprest amount. 
C)  debited when the sum of the receipts and the cash in the fund is less than the imprest amount. 
D)  a contra account to Cash. 
A)  not generally acceptable under Canadian GAAP. 
B)  debited when the sum of the receipts and the cash in the fund is more than the imprest amount. 
C)  debited when the sum of the receipts and the cash in the fund is less than the imprest amount. 
D)  a contra account to Cash. C

Question 4

Nontrade receivables
Nontrade receivables are created by a variety of transactions and can be written promises either to pay cash or to deliver other assets. Provide three examples of nontrade receivables.

Accepted Answer

Examples of nontrade receivables include

Question 5

Cupcake Corp. has sold goods at terms 2/10, n/30. If the discount is not taken, the amount receivable is $8,725. The entry to record the sale is

Accepted Answer

A)  a debit and credit of $7,852.50 to Accounts Receivable and Sales respectively. 
B)  a debit and credit of $8,550.50 to Accounts Receivable and Sales respectively. 
C)  a debit and credit of $8,725 to Accounts Receivable and Sales respectively. 
D)  debits of $8,550.50 and $174.50 to Accounts Receivable and "Forfeited Sales Discounts" respectively, and a credit to Sales for the total. 
A)  a debit and credit of $7,852.50 to Accounts Receivable and Sales respectively. 
B)  a debit and credit of $8,550.50 to Accounts Receivable and Sales respectively. 
C)  a debit and credit of $8,725 to Accounts Receivable and Sales respectively. 
D)  debits of $8,550.50 and $174.50 to Accounts Receivable and "Forfeited Sales Discounts" respectively, and a credit to Sales for the total.

Question 6

If a petty cash fund is established in the amount of $550, and contains $500 in cash and $45 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts:

Accepted Answer

A)  Petty Cash, $45. 
B)  Petty Cash, $50. 
C)  Cash, $45; Cash Over and Short, $5. 
D)  Cash, $50. 
A)  Petty Cash, $45. 
B)  Petty Cash, $50. 
C)  Cash, $45; Cash Over and Short, $5. 
D)  Cash, $50.

Question 7

Sudan Ltd.'s allowance for doubtful accounts was $85,000 at the end of 2020 and $105,000 at the end of 2019. For the year ended December 31, 2020, Sudan reported bad debt expense of $18,000 in its income statement. What amount did Sudan debit to allowance for doubtful accounts during 2020 to write off actual bad debts?

Accepted Answer

A)  $38,000 
B)  $34,650 
C)  $20,000 
D)  $12,000 
A)  $38,000 
B)  $34,650 
C)  $20,000 
D)  $12,000

Question 8

Sales Returns and Allowances
Assume that Olympia Corporation follows ASPE and estimates that approximately 5% of its $1.5 million of trade receivables outstanding will be returned or some adjustment will be made to the sales price.
Instructions
a) Prepare the entry to show expected sales returns and allowances.
b) Explain why it is important to prepare and include this entry in Olympia's financial statements.

Accepted Answer

a)@#IMG-DLM&
* $1.5 million x 5% = $75,000
b) It i

Question 9

Which of the following is NOT a difference between factoring and securitization of receivables?

Accepted Answer

A)  In securitization, many investors are involved, whereas factoring usually involves only one company. 
B)  Receivables are derecognized when securitized, but not when factored. 
C)  The quality of receivables factored tends to be lower than those securitized. 
D)  The seller retains responsibility to collect amounts due when securitized, but not when factored. 
A)  In securitization, many investors are involved, whereas factoring usually involves only one company. 
B)  Receivables are derecognized when securitized, but not when factored. 
C)  The quality of receivables factored tends to be lower than those securitized. 
D)  The seller retains responsibility to collect amounts due when securitized, but not when factored.

Question 10

Accounts receivable analysis and securitization
Discuss why adjustments might have to be made and caution has to be exercised when analyzing accounts receivable due to the increased use of securitization transactions.

Accepted Answer

Securitization is a financing transactio

Question 11

In preparing its bank reconciliation for the month of April 2020, Henke Inc. has the following information available: $\begin{array}{llcc}
  \text { Balance per bank statement, \( 4 / 30 / 20 $  } &&\$34,140  \
 \text {NSF cheque returned with $ 4 / 30 / 20 $ bank statement  }& &450\
 \text {Deposits in transit, $ 4 / 30 / 20 $  } &&5,000\
 \text {Outstanding cheques, 4/30/20  } &&5,200\
 \text { Bank service charges for April } &&20\

\end{array}\)
 What should be the correct balance of cash at April 30, 2020?

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 12

Playtime sold toys listed at $280 per unit to Jack Inc. for $252, a trade discount of 10 percent. Jack Inc. in turn sells the toys in the market at $265. Jenny should record the receivable and related sales revenue (per unit) at

Accepted Answer

A)  $280. 
B)  $265. 
C)  $252. 
D)  $227. 
A)  $280. 
B)  $265. 
C)  $252. 
D)  $227.

Question 13

Dividends and interest receivable would be classified as

Accepted Answer

A)  loans receivable. 
B)  trade receivables. 
C)  notes receivable. 
D)  nontrade receivables. 
A)  loans receivable. 
B)  trade receivables. 
C)  notes receivable. 
D)  nontrade receivables.

Question 14

The following accounts were included on Mali Co.'s unadjusted trial balance at December 31, 2020: 
$\begin{array}{llcc}
  \text {  } &  \underline{\text { Debit }} & \underline{ \text {  Credit} }  \
 \text {  Accounts receivable.} &\$850,000&\
 \text {Allowance for doubtful accounts  } &11,000&\
 \text { Net credit sales. } &&\$2,950,000\
\end{array}$

Mali estimates that 1.5 % of the gross accounts receivable will become uncollectible. After the proper adjustment at December 31, 2020, the allowance for doubtful accounts should have a credit balance of

Accepted Answer

A)  $23,750. 
B)  $12,750. 
C)  $11,000. 
D)  $ 1,750. 
A)  $23,750. 
B)  $12,750. 
C)  $11,000. 
D)  $ 1,750.

Question 15

The straight-line method of amortization of discounts and premiums for long-term notes

Accepted Answer

A)  is allowed by both IFRS and ASPE. 
B)  reflects the economic reality of the loan. 
C)  is only allowed by ASPE. 
D)  requires more complicated calculations than the effective interest method. 
A)  is allowed by both IFRS and ASPE. 
B)  reflects the economic reality of the loan. 
C)  is only allowed by ASPE. 
D)  requires more complicated calculations than the effective interest method.

Question 16

Note with fair value not equal to cash consideration
On January 1, 2020, Tanzania Corp. lent $50,000 to its CEO, interest-free. However, the loan is repayable in five instalments, each December 31, until paid. The market rate for similar loans (with similar credit risk) is 4%.
Instructions
a) Calculate the present value (fair value) of this loan (round to the nearest dollar).
b) Prepare the journal entry to record this transaction.

Accepted Answer

a) 5 N, 4

Question 17

Congo Ltd. prepared the following bank reconciliation at March 31: Balance per bank statement....................................$37,200
Add: Deposit in transit..............................................10,300
....................................................................................47,500
Less: Outtanding cheques............................................12,600
Correct cash balance per books, March 31..................$34,900 Data per bank statement for the month of April follows:
Deposits..............................................$47,700
Disburiements....................................49,700
 All reconciling items at March 31 cleared the bank in April. Outstanding cheques at April 30 totalled $5,000. There were no deposits in transit at April 30. What is the correct cash balance per books at April 30?

Accepted Answer

A)  $30,200 
B)  $32,900 
C)  $35,200 
D)  $40,500 
A)  $30,200 
B)  $32,900 
C)  $35,200 
D)  $40,500

Question 18

Regarding receivables recognition and measurement, which of the following is true regarding the related IFRS standard?

Accepted Answer

A)  It requires the effective interest method is used to recognize interest and related premiums or discounts. 
B)  It requires the straight-line method is used to recognize interest and related premiums or discounts. 
C)  It allows a choice between the effective interest and straight-line methods. 
D)  None of these statements is correct. 
A)  It requires the effective interest method is used to recognize interest and related premiums or discounts. 
B)  It requires the straight-line method is used to recognize interest and related premiums or discounts. 
C)  It allows a choice between the effective interest and straight-line methods. 
D)  None of these statements is correct.

Question 19

Which of the following actions would NOT be considered good management of accounts receivable?

Accepted Answer

A)  assessing creditworthiness of new or potential customers 
B)  very loose or flexible credit terms to encourage sales 
C)  offering discounts to encourage faster payment 
D)  regular aged receivables analysis 
A)  assessing creditworthiness of new or potential customers 
B)  very loose or flexible credit terms to encourage sales 
C)  offering discounts to encourage faster payment 
D)  regular aged receivables analysis

Question 20

In preparing its bank reconciliation at May 31, 2020, Kennedy Co. has the following information available: Balance per bank statement.......................................$78,000
Deposit in transit........................................................15,600
Outstanding cheques.................................................4,200
Note collected by bank in May...................................7,200

The correct balance of cash at May 31, 2020 is

Accepted Answer

A)  $95,600. 
B)  $94,800. 
C)  $89,400. 
D)  $84,000. 
A)  $95,600. 
B)  $94,800. 
C)  $89,400. 
D)  $84,000.

Cookie Ltd. receives a four-year, $100,000, zero-interest-bearing note. The present value of this note is $82,270. What is the implicit rate of interest?

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called

A Cash Over and Short account is

Nontrade receivables Nontrade receivables are created by a variety of transactions and can be written promises either to pay cash or to deliver other assets. Provide three examples of nontrade receivables.

Cupcake Corp. has sold goods at terms 2/10, n/30. If the discount is not taken, the amount receivable is $8,725. The entry to record the sale is

If a petty cash fund is established in the amount of $550, and contains $500 in cash and $45 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts:

Which of the following is NOT a difference between factoring and securitization of receivables?

Accounts receivable analysis and securitization Discuss why adjustments might have to be made and caution has to be exercised when analyzing accounts receivable due to the increased use of securitization transactions.

Playtime sold toys listed at $280 per unit to Jack Inc. for $252, a trade discount of 10 percent. Jack Inc. in turn sells the toys in the market at $265. Jenny should record the receivable and related sales revenue (per unit) at

Dividends and interest receivable would be classified as

The straight-line method of amortization of discounts and premiums for long-term notes

Regarding receivables recognition and measurement, which of the following is true regarding the related IFRS standard?

Which of the following actions would NOT be considered good management of accounts receivable?

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Exam 7: Cash and Receivables

Cookie Ltd. receives a four-year, $100,000, zero-interest-bearing note. The present value of this note is $82,270. What is the implicit rate of interest?

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called

A Cash Over and Short account is

Nontrade receivables Nontrade receivables are created by a variety of transactions and can be written promises either to pay cash or to deliver other assets. Provide three examples of nontrade receivables.

Cupcake Corp. has sold goods at terms 2/10, n/30. If the discount is not taken, the amount receivable is $8,725. The entry to record the sale is

If a petty cash fund is established in the amount of $550, and contains $500 in cash and $45 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts:

Which of the following is NOT a difference between factoring and securitization of receivables?

Accounts receivable analysis and securitization Discuss why adjustments might have to be made and caution has to be exercised when analyzing accounts receivable due to the increased use of securitization transactions.

Playtime sold toys listed at $280 per unit to Jack Inc. for $252, a trade discount of 10 percent. Jack Inc. in turn sells the toys in the market at $265. Jenny should record the receivable and related sales revenue (per unit) at

Dividends and interest receivable would be classified as

The straight-line method of amortization of discounts and premiums for long-term notes

Regarding receivables recognition and measurement, which of the following is true regarding the related IFRS standard?

Which of the following actions would NOT be considered good management of accounts receivable?

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters