Question 1

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. C

Question 2

McGraw Motors both sells and leases vehicles. With sales temporarily slowing due to the economy, the company factored a significant portion of its lease receivables. The company factored with recourse receivables with a carrying amount of $22 million in exchange for $21.45 million less a holdback of $550,000 for potential uncollectable accounts. Due to poor economic conditions, the actual uncollectable accounts amounted to $900,000.
Record the entries on McGraw's books relating to the $22 million factoring of lease receivables.

Accepted Answer

The answer of McGraw Motors both sells and leases vehicles....

Question 3

Explain the differences and relationships among expenditures, assets, and expenses. Use an example to support your discussion.

Accepted Answer

An expenditure is an outlay of cash or incurment of a liability that could result in an expense or an asset being recorded for accounting purposes.
The expenditure results in an asset if it satisfies the definition and recognition criteria for an asset; otherwise, the amount must be expensed.
Previously recorded assets turn into expenses as the benefits from the assets are used up. For example, a payment to purchase a machine would result in an asset (property, plant, and equipment)because the machine is expected to generate future benefits, it results from a past transaction, it is under the control of the enterprise, and its future benefits are reasonably estimable. As the equipment is used, depreciation expense is recorded.

Question 4

Explain how a company's revenue recognition policy can be used to manipulate earnings.

Accepted Answer

A company seeking to temporarily boost e

Question 5

The following accounts were abstracted from Almond Co.'s unadjusted trial balance at December 31, 2019: $\begin{array}{c}
\begin{array}{lll}
\
\text {Net credit sales}\
\text {Accounts receivable}\
\text {Allowance for uncollectible accounts}
\end{array}
\begin{array}{lll}
\underline{\text {Debit}}\
\
\$800,000\
\
\end{array}
\begin{array}{lll}
\underline{\text { Credit }}\
\$2,950,000\
\
11,000
\end{array}
\end{array}$
 The company estimates that 1.5 percent of the net credit sales will become uncollectible. After adjustment at December 31, 2019, the allowance for doubtful accounts should have a credit balance of

Accepted Answer

A) 11,000 
B) 12,000 
C) 44,250 
D) 55,250 
A) 11,000 
B) 12,000 
C) 44,250 
D) 55,250

Question 6

What dollar amount will be included in "cash and cash equivalents"? $$\begin{array} { | l | r | } 
\hline \text { Investment in shares of a public company } & \$ 11,000 \
\hline \text { Investment in a money market fund } & 8,000 \
\hline \text { Cash restricted for plant expansion } & 1,000 \
\hline \text { Three-month term deposits } & 2,000 \
\hline
\end{array}$$

Accepted Answer

A) $8,000 
B) $10,000 
C) $19,000 
D) $21,000 
A) $8,000 
B) $10,000 
C) $19,000 
D) $21,000

Question 7

Small Company (SC)is in its fourth year of retail operations. The owner/manager previously employed a part-time bookkeeper to sign cheques, as well as to prepare journal entries, bank reconciliations, and monthly financial statements. SC has just hired you as the first full-time accountant to replace the bookkeeper, and you are preparing the December 31, 2021 financial statements.
Required:
a. Briefly explain the concept of "segregation of duties."
b. Identify an internal control issue relating to SC's cash-handling procedures, and provide your recommendation(s)to improve SC's internal controls over cash.

Accepted Answer

a. Segregation of duties is intended to

Question 8

Sahil Inc. reported credit sales of $600,000 and cash collections of $450,000 for last year. The ending balance in accounts receivable was $800,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $80,000 at the beginning of the year. What was the bad debt expense for the year?

Accepted Answer

A) $1,500 
B) $6,000 
C) $8,000 
D) $86,000 
A) $1,500 
B) $6,000 
C) $8,000 
D) $86,000

Question 9

Pomegranate Company's bank balance on its October 31, 2021 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, 2021.

Accepted Answer

None

Question 10

What dollar amount will be included in "cash and cash equivalents"? $$\begin{array} { | l | r | } 
\text { Treasury bills maturing in } 30 \text { days } & \$ 12,000 \
\hline \text { Investment in a money market fund } & 8,000 \
\hline \text { Cash on hand } & 1,000 \
\hline \text { Postage stamps } & 1,000 \
\hline
\end{array}$$

Accepted Answer

A) $9,000 
B) $12,000 
C) $21,000 
D) $22,000 
A) $9,000 
B) $12,000 
C) $21,000 
D) $22,000

Question 11

Which statement is correct?

Accepted Answer

A) The "gross" method for recording cash discounts is conceptually better than the "net" method. 
B) The net method understates expenses. 
C) The gross method overstates revenue. 
D) Under the "gross" method, an entry is needed if the discount is taken. 
A) The "gross" method for recording cash discounts is conceptually better than the "net" method. 
B) The net method understates expenses. 
C) The gross method overstates revenue. 
D) Under the "gross" method, an entry is needed if the discount is taken.

Question 12

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 13

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 gross method of accounting for cash discounts?

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 14

Brasser Co. started using the percentage of sales method to account for bad debts in 2021. In 2020, the company's first fiscal year, the company had used the direct write-off method because the amount of bad debts was judged to be immaterial. The following information relates to the company's sales and receivables.
 $$\begin{array} { | l | r | r | } 
\hline & 2020 & 2021 \
\hline \text { Credit sales } & \$ 18,750,000 & \$ 18,900,000 \
\hline \text { Estimated bad debts as a percentage of credit } & & \
\text { sales } & 0.5 \% & 0.4 \% \
\hline \text { Accounts written off } & 65,750 & 93,600 \
\hline
\end{array}$$ Required:
a. Calculate the correct balance in the allowance for doubtful accounts (ADA)at the end of 2021. Remember to include the effect of the change in accounting policy on 2020 accounts.
b. Record the write-off entry for 2021 and the year-end adjusting entries for 2021 to adjust the ADA. (Ignore income tax effects)

Accepted Answer

a. The balance of the allowance for doub

Question 15

XYZ Company estimates their allowance for doubtful accounts (ADA)by aging their accounts receivable. At the end of 2021, the balance in the ADA was $165,000. During 2022, XYZ wrote off $16,000 and collected a $14,500 receivable that had been previously written off as uncollectable. At the end of 2022, the aging schedule indicated that the balance in the ADA should be $187,000. How much is the bad debts expense for 2022?

Accepted Answer

The answer of XYZ Company estimates their allowance for doubtful...

Question 16

Philip Corp reported credit sales of $240,000 and write-offs of bad debts of $57,000 for last year. Accounts receivable had a balance of $1,127,000 at the beginning of the year and $881,000 at the end of the year. How much cash was collected from customers during the year?

Accepted Answer

A) $246,000 
B) $429,000 
C) $486,000 
D) $669,000 
A) $246,000 
B) $429,000 
C) $486,000 
D) $669,000

Question 17

At the end of its first year of operations, December 31, 2019, Felicity Ltd.'s accounts show the following amounts:
 $\begin{array}{|l|lrr|}
  \hline\text { Accounts receivable } &\$1,845,000  \
\hline \text { Allowance for doubtful accounts, before any adjusting or dosing } &\
 \text { entries } &11,000 \text {Cr }\
\hline \text { Bad debt expense for 2019 prior to any adjusting or closing } &\
 \text {entries  } &48,000 \text {Dr }\
\hline \text { Customer accounts written off as uncollectable during 2019 } &37,000\
\hline 
\end{array}$
 The company estimates that the following amounts of accounts receivable will not be collectible:
 $$\begin{array} { | l | c | c | c | c | c | } 
\hline \text { Days outstanding } & \mathbf { 0 } - \mathbf { 3 0 } & \mathbf { 3 1 } - \mathbf { 7 5 } & \mathbf { 7 6 } - \mathbf { 1 2 0 } & \mathbf { 1 2 0 } + & \text { Total } \
\hline \text { Amount } & 510,000 & 444,000 & 403,000 & 128,000 & 1,485,000 \
\hline \% \text { not collectible } & 5 \% & 9 \% & 15 \% & 28 \% & \ldots \
\hline
\end{array}$$ What should be the amount of bad debt expense for the year ended December 31, 2019?

Accepted Answer

\[\begin{array} { | l | c | c | c | c |

Question 18

Family Fun reported credit sales of $800,000, cash collections of $550,000 and bad debt expense of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the ending balance in the accounts receivable account?

Accepted Answer

A) $450,000 
B) $1,235,000 
C) $1,250,000 
D) $1,800,000 
A) $450,000 
B) $1,235,000 
C) $1,250,000 
D) $1,800,000

Question 19

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 20

Thineesha Corp. 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. What was the bad debt expense for the year?

Accepted Answer

A) $9,000 
B) $10,000 
C) $15,000 
D) $55,000 
A) $9,000 
B) $10,000 
C) $15,000 
D) $55,000

Which statement is correct?

Explain the differences and relationships among expenditures, assets, and expenses. Use an example to support your discussion.

Explain how a company's revenue recognition policy can be used to manipulate earnings.

What dollar amount will be included in "cash and cash equivalents"? Investment in shares of a public company \ 11,000 Investment in a money market fund 8,000 Cash restricted for plant expansion 1,000 Three-month term deposits 2,000

What dollar amount will be included in "cash and cash equivalents"? Treasury bills maturing in 30 days \ 12,000 Investment in a money market fund 8,000 Cash on hand 1,000 Postage stamps 1,000

Which statement is correct?

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 gross method of accounting for cash discounts?

Philip Corp reported credit sales of $240,000 and write-offs of bad debts of $57,000 for last year. Accounts receivable had a balance of $1,127,000 at the beginning of the year and $881,000 at the end of the year. How much cash was collected from customers during the year?

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

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

Exam 5: Cash and Receivables

Which statement is correct?

Explain the differences and relationships among expenditures, assets, and expenses. Use an example to support your discussion.

Explain how a company's revenue recognition policy can be used to manipulate earnings.

What dollar amount will be included in "cash and cash equivalents"? Investment in shares of a public company \ 11,000 Investment in a money market fund 8,000 Cash restricted for plant expansion 1,000 Three-month term deposits 2,000

What dollar amount will be included in "cash and cash equivalents"? Treasury bills maturing in 30 days \ 12,000 Investment in a money market fund 8,000 Cash on hand 1,000 Postage stamps 1,000

Which statement is correct?

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 gross method of accounting for cash discounts?

Philip Corp reported credit sales of $240,000 and write-offs of bad debts of $57,000 for last year. Accounts receivable had a balance of $1,127,000 at the beginning of the year and $881,000 at the end of the year. How much cash was collected from customers during the year?

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

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