Question 1

How is the account Allowance for Uncollectible Accounts presented in the financial statements, and what purpose does this presentation serve?

Accepted Answer

Allowance for Uncollectible Accounts is

Question 2

What purpose is served by a factoring arrangement? What does it mean to factor accounts receivable with recourse?

Accepted Answer

Factoring involves the sale or transfer

Question 3

It is usually a good business practice to maintain as large a balance in the Cash account as possible.

Accepted Answer

A) True 
 B)False

Question 4

An example of a cash equivalent is

Accepted Answer

A)  a 120-day time deposit. 
B)  notes receivable. 
C)  accounts receivable. 
D)  a 60-day certificate of deposit. 
A)  a 120-day time deposit. 
B)  notes receivable. 
C)  accounts receivable. 
D)  a 60-day certificate of deposit.

Question 5

The sale or transfer of accounts receivable to raise funds is called

Accepted Answer

A)  discounting. 
B)  collateralizing. 
C)  pledging. 
D)  factoring. 
A)  discounting. 
B)  collateralizing. 
C)  pledging. 
D)  factoring.

Question 6

Which of the following statements is true about factoring without recourse?

Accepted Answer

A)  The seller of the receivables is liable upon default of the debtor. 
B)  The factor's risk is lower than if the factoring were with recourse. 
C)  An example is the use of major credit cards. 
D)  The fee will be lower than if the factoring were with recourse. 
A)  The seller of the receivables is liable upon default of the debtor. 
B)  The factor's risk is lower than if the factoring were with recourse. 
C)  An example is the use of major credit cards. 
D)  The fee will be lower than if the factoring were with recourse.

Question 7

When Company A discounts, with recourse, a note to Company B, Company B has a contingent liability until the note is paid.

Accepted Answer

A) True 
 B)False

Question 8

On December 31, Skinner Enterprises has a $400 debit balance in Allowance for Uncollectible Accounts. If an accounts receivable aging method analysis indicated that an estimated $3,200 of December 31 receivables are uncollectible, for what amount would the adjusting entry for uncollectible accounts be recorded? (Show your work.)

Accepted Answer

$3,600 ($3

Question 9

An NSF check should appear in which section of the bank reconciliation?

Accepted Answer

A)  Deduction from the balance per books 
B)  Deduction from the balance per bank 
C)  Addition to the balance per books 
D)  Addition to the balance per bank 
A)  Deduction from the balance per books 
B)  Deduction from the balance per bank 
C)  Addition to the balance per books 
D)  Addition to the balance per bank

Question 10

On December 31, Alsop Products has a $300 credit balance in Allowance for Uncollectible Accounts. It estimates that 4 percent of the $60,000 in sales are uncollectible. After the appropriate adjusting entry for uncollectible accounts has been made, what will be the balance in Allowance for Uncollectible Accounts using the percentage of net sales method? Indicate if the balance is a debit or credit. (Show your work.)

Accepted Answer

$2,700 cre

Question 11

Notes receivable and cash are examples of short-term financial assets.

Accepted Answer

A) True 
 B)False

Question 12

Under the accounts receivable aging method, the balance in Allowance for Uncollectible Accounts must be considered prior to adjusting for estimated uncollectible accounts.

Accepted Answer

A) True 
 B)False

Question 13

Sally's Dress Shop has $5,800 in Accounts Receivable at December 31. The company's accountant estimates that $300 of the $5,800 will never be collected. Complete the current asset section of the balance sheet below.

Accepted Answer

The answer of Sally's Dress Shop has $5,800 in Accounts...

Question 14

All operating transactions eventually use or generate cash.

Accepted Answer

A) True 
 B)False

Question 15

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000. Allowance for Uncollectible Accounts has a credit balance of $1,000. Net sales for the year were $500,000. In the past, 2 percent of sales have proved uncollectible, and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts.
Using the accounts receivable aging method, the Allowance for Uncollectible Accounts balance (after adjustment) would be

Accepted Answer

A)  $14,500. 
B)  $14,000. 
C)  $13,500. 
D)  $12,500. 
A)  $14,500. 
B)  $14,000. 
C)  $13,500. 
D)  $12,500.

Question 16

The goal of a successful credit policy is to maximize the potential profit on total credit sales while

Accepted Answer

A)  limiting credit losses to an acceptable level. 
B)  minimizing the number of credit customers. 
C)  keeping credit sales as low as possible. 
D)  selling only to customers who will pay. 
A)  limiting credit losses to an acceptable level. 
B)  minimizing the number of credit customers. 
C)  keeping credit sales as low as possible. 
D)  selling only to customers who will pay.

Question 17

When using the direct charge-off method, year-end adjustments for uncollectible accounts expense must be made.

Accepted Answer

A) True 
 B)False

Question 18

In case of a dishonored note the payee's entry includes a

Accepted Answer

A)  credit to Accounts Receivable. 
B)  debit to Interest Expense. 
C)  debit to Notes Receivable. 
D)  credit to Interest Income. 
A)  credit to Accounts Receivable. 
B)  debit to Interest Expense. 
C)  debit to Notes Receivable. 
D)  credit to Interest Income.

Question 19

The matching rule

Accepted Answer

A)  results in the recording of a known amount for bad-debt losses. 
B)  necessitates the recording of an estimated amount for bad debts. 
C)  requires that all bad-debt losses be recorded when an individual customer defaults. 
D)  is violated when the allowance method is employed. 
A)  results in the recording of a known amount for bad-debt losses. 
B)  necessitates the recording of an estimated amount for bad debts. 
C)  requires that all bad-debt losses be recorded when an individual customer defaults. 
D)  is violated when the allowance method is employed.

Question 20

Each of the following is a characteristic of a promissory note except a(n)

Accepted Answer

A)  maturity date that can be determined on the date the note is signed. 
B)  payee who has an unconditional right to receive a definite amount on a definite date. 
C)  maker who agrees to pay a definite sum subject to certain conditions. 
D)  amount to be paid that can be determined on the date the note is signed. 
A)  maturity date that can be determined on the date the note is signed. 
B)  payee who has an unconditional right to receive a definite amount on a definite date. 
C)  maker who agrees to pay a definite sum subject to certain conditions. 
D)  amount to be paid that can be determined on the date the note is signed.

Exam 9: Cash and Receivables

How is the account Allowance for Uncollectible Accounts presented in the financial statements, and what purpose does this presentation serve?

What purpose is served by a factoring arrangement? What does it mean to factor accounts receivable with recourse?

It is usually a good business practice to maintain as large a balance in the Cash account as possible.

An example of a cash equivalent is

The sale or transfer of accounts receivable to raise funds is called

Which of the following statements is true about factoring without recourse?

When Company A discounts, with recourse, a note to Company B, Company B has a contingent liability until the note is paid.

An NSF check should appear in which section of the bank reconciliation?

Notes receivable and cash are examples of short-term financial assets.

Under the accounts receivable aging method, the balance in Allowance for Uncollectible Accounts must be considered prior to adjusting for estimated uncollectible accounts.

Sally's Dress Shop has $5,800 in Accounts Receivable at December 31. The company's accountant estimates that $300 of the $5,800 will never be collected. Complete the current asset section of the balance sheet below.

All operating transactions eventually use or generate cash.

The goal of a successful credit policy is to maximize the potential profit on total credit sales while

When using the direct charge-off method, year-end adjustments for uncollectible accounts expense must be made.

In case of a dishonored note the payee's entry includes a

The matching rule

Each of the following is a characteristic of a promissory note except a(n)

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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