Question 1

Cash control systems are the methods and procedures used to ensure

Accepted Answer

A)  that current obligations are met 
B)  that excess cash does not exist 
C)  the safeguarding of cash 
D)  that unused cash is invested 
A)  that current obligations are met 
B)  that excess cash does not exist 
C)  the safeguarding of cash 
D)  that unused cash is invested C

Question 2

When the percentage of credit sales is used the accounts receivable are reported at their net realizable value.

Accepted Answer

A) True 
 B)False  False

Question 3

When accounts receivable are assigned, the risk of ownership

Accepted Answer

A)  and title pass to the finance company 
B)  and the title are retained by the borrowing company 
C)  passes to the finance company, but the title is retained by the borrowing company 
D)  is retained by the borrowing company, but the title is passed to the finance company 
A)  and title pass to the finance company 
B)  and the title are retained by the borrowing company 
C)  passes to the finance company, but the title is retained by the borrowing company 
D)  is retained by the borrowing company, but the title is passed to the finance company B

Question 4

When a company writes off an account receivable using the direct write-off method, the effect of this write-off on the financial statements is to

Accepted Answer

A)  increase the net realizable value of accounts receivable 
B)  reduce total expenses 
C)  reduce total assets 
D)  increase working capital 
A)  increase the net realizable value of accounts receivable 
B)  reduce total expenses 
C)  reduce total assets 
D)  increase working capital

Question 5

Brad's Market's accountant is preparing its May bank reconciliation and has collected the following data: 
  
Additionally, deposits in transit and outstanding checks from April's reconciliation were $4,400 and $2,800, respectively. The correct balance for cash at May 31 should be

Accepted Answer

A)  $10,960 
B)  $12,780 
C)  $11,180 
D)  $13,980 
A)  $10,960 
B)  $12,780 
C)  $11,180 
D)  $13,980

Question 6

What two issues are related to the valuation of receivables?

Accepted Answer

@#IMG-DLM&_TB6205_00

Question 7

Which of the following would not be considered a cash equivalent?

Accepted Answer

A)  travel advances 
B)  commercial paper 
C)  treasury bills 
D)  money market fund securities 
A)  travel advances 
B)  commercial paper 
C)  treasury bills 
D)  money market fund securities

Question 8

A member of the board of directors has just returned from a meeting with the external auditors concerning the company's internal controls. The director noticed that the auditors stressed the importance of cash control and wants you, the company controller, to explain internal controls for cash.
Required: 
a.Define internal control and explain its purpose.
b.Identify at least four typical internal controls over cash.

Accepted Answer

a.Internal control consists of the polic

Question 9

Based on the following information: 
  If bad debts are estimated to be 3% of net credit sales, the adjusting entry to recognize uncollectible accounts will include a debit to expense for

Accepted Answer

A)  $76,020 
B)  $75,270 
C)  $76,050 
D)  $75,300 
A)  $76,020 
B)  $75,270 
C)  $76,050 
D)  $75,300

Question 10

In certain circumstances a company may find it necessary to accelerate the cash inflows potentially generated from its accounts receivable. This can be accomplished through pledging, assigning, or factoring the accounts receivable.
Required:
Explain each of these arrangements. Include in your discussion an explanation of each agreement, who retains the risks and benefits of ownership, whether or not the agreement is formally recorded in the company's accounting records, and how the agreement is disclosed in the company's financial statements.

Accepted Answer

A company pledges its accounts receivabl

Question 11

Trade receivables are a sub classification of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of a factoring agreement?

Accepted Answer

A)  using a Neiman Marcus charge card for retail purchases 
B)  using a Sears charge card for retail purchases 
C)  using a JCPenney charge card for retail purchases 
D)  using an American Express card for retail purchases 
A)  using a Neiman Marcus charge card for retail purchases 
B)  using a Sears charge card for retail purchases 
C)  using a JCPenney charge card for retail purchases 
D)  using an American Express card for retail purchases

Question 13

A company records the transfer of accounts receivable as a sale if

Accepted Answer

A)  the transferee obtains the right to exchange 
B)  the transferred assets have been isolated from the transferor 
C)  the transferor can repurchase the transferred assets before their maturity 
D)  all of the above conditions are met 
A)  the transferee obtains the right to exchange 
B)  the transferred assets have been isolated from the transferor 
C)  the transferor can repurchase the transferred assets before their maturity 
D)  all of the above conditions are met

Question 14

Based on the following information as of December 31: 
 
 Required:
Compute the total amount that will appear for current assets on the December 31 balance sheet.

Accepted Answer

$11,950 ($750 + $450

Question 15

Deposits made directly to the bank would be

Accepted Answer

A)  added to the company's records 
B)  deducted from the company's records 
C)  added to the bank statement balance 
D)  deducted from the bank statement balance 
A)  added to the company's records 
B)  deducted from the company's records 
C)  added to the bank statement balance 
D)  deducted from the bank statement balance

Question 16

If a company usually sells its accounts receivable, it records any factoring commissions as a(n)

Accepted Answer

A)  loss 
B)  expense 
C)  receivable 
D)  liability 
A)  loss 
B)  expense 
C)  receivable 
D)  liability

Question 17

Which is not a key element of internal control over cash receipts?

Accepted Answer

A)  daily recording of all cash receipts in the accounting records 
B)  daily entry in a voucher register 
C)  immediate counting by the person opening the mail or using the cash register 
D)  daily bank deposits 
A)  daily recording of all cash receipts in the accounting records 
B)  daily entry in a voucher register 
C)  immediate counting by the person opening the mail or using the cash register 
D)  daily bank deposits

Question 18

Based on the following information: 
 
 If bad debts are estimated to be 1 1/2% of ending accounts receivable, the adjusting entry to recognize bad debts will include a debit to Bad Debt Expense for

Accepted Answer

A)  $170 
B)  $190 
C)  $210 
D)  $250 
A)  $170 
B)  $190 
C)  $210 
D)  $250

Question 19

When a company factors its accounts receivable, it

Accepted Answer

A)  enters into a lending agreement with the institution to receive cash on specific customer accounts 
B)  sells individual accounts to a financial institution 
C)  uses these accounts only as a collateral for a loan 
D)  transfers the accounts but retains title of the accounts until the loan is paid 
A)  enters into a lending agreement with the institution to receive cash on specific customer accounts 
B)  sells individual accounts to a financial institution 
C)  uses these accounts only as a collateral for a loan 
D)  transfers the accounts but retains title of the accounts until the loan is paid

Question 20

All of the following are necessary components of internal control over cash except

Accepted Answer

A)  a petty cash system 
B)  a cash reserve 
C)  a bank reconciliation 
D)  the daily deposit of all receipts in the company's bank account 
A)  a petty cash system 
B)  a cash reserve 
C)  a bank reconciliation 
D)  the daily deposit of all receipts in the company's bank account

Exam 6: Cash and Receivables

Cash control systems are the methods and procedures used to ensure

When the percentage of credit sales is used the accounts receivable are reported at their net realizable value.

When accounts receivable are assigned, the risk of ownership

When a company writes off an account receivable using the direct write-off method, the effect of this write-off on the financial statements is to

Brad's Market's accountant is preparing its May bank reconciliation and has collected the following data: Additionally, deposits in transit and outstanding checks from April's reconciliation were $4,400 and $2,800, respectively. The correct balance for cash at May 31 should be

What two issues are related to the valuation of receivables?

Which of the following would not be considered a cash equivalent?

Based on the following information: If bad debts are estimated to be 3% of net credit sales, the adjusting entry to recognize uncollectible accounts will include a debit to expense for

Trade receivables are a sub classification of accounts receivable.

Which of the following is an example of a factoring agreement?

A company records the transfer of accounts receivable as a sale if

Based on the following information as of December 31: Required: Compute the total amount that will appear for current assets on the December 31 balance sheet.

Deposits made directly to the bank would be

If a company usually sells its accounts receivable, it records any factoring commissions as a(n)

Which is not a key element of internal control over cash receipts?

Based on the following information: If bad debts are estimated to be 1 1/2% of ending accounts receivable, the adjusting entry to recognize bad debts will include a debit to Bad Debt Expense for

When a company factors its accounts receivable, it

All of the following are necessary components of internal control over cash except

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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