Question 1

Marketable securities are classified into three types; which one is not one of the three types?

Accepted Answer

A)  Available-for-sale. 
B)  Mark-to-market. 
C)  Trading. 
D)  Held-to-maturity. 
A)  Available-for-sale. 
B)  Mark-to-market. 
C)  Trading. 
D)  Held-to-maturity.

Question 2

A good system of internal control will include all of the following except:

Accepted Answer

A)  Preparing a pro-forma financial statement on a monthly basis. 
B)  Separating the handling of cash from the maintenance of accounting records. 
C)  Making all major payments by check. 
D)  Reconciling bank statements with accounting records. 
A)  Preparing a pro-forma financial statement on a monthly basis. 
B)  Separating the handling of cash from the maintenance of accounting records. 
C)  Making all major payments by check. 
D)  Reconciling bank statements with accounting records.

Question 3

Which of the following items is reported in neither the income statement nor the statement of cash flows?

Accepted Answer

A)  Sale of marketable securities at a loss. 
B)  Sale of marketable securities at a gain. 
C)  Adjustment of available-for-sale marketable securities owned to current market value at balance sheet date. 
D)  Investment of excess cash in marketable securities. 
A)  Sale of marketable securities at a loss. 
B)  Sale of marketable securities at a gain. 
C)  Adjustment of available-for-sale marketable securities owned to current market value at balance sheet date. 
D)  Investment of excess cash in marketable securities.

Question 4

Financial assets-effects of transactions
Five events involving financial assets are described below:
(a.) Sold merchandise on account.
(b.) Sold available-for-sale marketable securities at a gain. Cash proceeds from the sale were equal to the current market value of the securities reflected in the last balance sheet.
(c.) Collected an account receivable.
(d.) Adjusted the allowance for doubtful accounts to reflect the portion of accounts receivable estimated to be uncollectible at year-end.
(e.) Made mark-to-market adjustment reducing the balance in the available-for-sale marketable securities account to reflect a decrease in the market value of securities owned.
Indicate the effects of each independent transaction or adjusting entry upon the financial measurements shown in the four column headings below. Use the code letters, I for increase, D for decrease, and NE for no effect.

Accepted Answer

@#IMG-DLM&
*Note to Instructor: Exchanging marketa

Question 5

The balance shown on a bank statement is always less than the month-end balance of a company's cash account in the general ledger.

Accepted Answer

A) True 
 B)False

Question 6

Kennedy Company uses the balance sheet approach in estimating uncollectible accounts expense. The company prepares an adjusting entry to recognize this expense at the end of each month. During the month of July, the company wrote-off a $3,500 receivable and made no recoveries of previous write-offs. Following the adjusting entry for July, the credit balance in the Allowance for Doubtful Accounts was $3,000 larger than it was on July 1. What amount of uncollectible account expense was recorded for July?

Accepted Answer

A)  $2,500. 
B)  $1,000. 
C)  $1,500. 
D)  $6,500. 
A)  $2,500. 
B)  $1,000. 
C)  $1,500. 
D)  $6,500.

Question 7

Under the allowance method, when a receivable that had been previously written off is collected:

Accepted Answer

A)  Income is recognized. 
B)  An expense is reduced. 
C)  Net income is not affected. 
D)  Net assets are increased. 
A)  Income is recognized. 
B)  An expense is reduced. 
C)  Net income is not affected. 
D)  Net assets are increased.

Question 8

What is the amount of the deposit in transit?

Accepted Answer

A)  $5,856. 
B)  $9,513. 
C)  $3,067. 
D)  $3,083. 
A)  $5,856. 
B)  $9,513. 
C)  $3,067. 
D)  $3,083.

Question 9

In order for a company's accounting records to be up-to-date and accurate after a bank reconciliation has been completed, journal entries should be made for any service charges by the bank and for deposits-in-transit.

Accepted Answer

A) True 
 B)False

Question 10

If a 15%, 60-day note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will:

Accepted Answer

A)  Include a debit to Notes Receivable for $5,750. 
B)  Include a debit to Notes Receivable for $5,062.50. 
C)  Include a credit to Interest Revenue for $62.50. 
D)  Include a debit to Notes Receivable for $5,000 and no entry for interest. 
A)  Include a debit to Notes Receivable for $5,750. 
B)  Include a debit to Notes Receivable for $5,062.50. 
C)  Include a credit to Interest Revenue for $62.50. 
D)  Include a debit to Notes Receivable for $5,000 and no entry for interest.

Question 11

A company with more than one bank checking account should show more than one account for Cash in its balance sheet.

Accepted Answer

A) True 
 B)False

Question 12

Gains (or losses) on sales of marketable securities, as well as any unrealized holding gains (or losses) on investments in available for sale securities, are reported in the income statement.

Accepted Answer

A) True 
 B)False

Question 13

Deegan Industries has an accounts receivable turnover rate of 8. Which of the following statements is not true?

Accepted Answer

A)  Deegan's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5. 
B)  Deegan waits approximately 46 days to make collections of its credit sales. (Use 365 days in a year.) 
C)  Deegan writes off accounts receivable as uncollectible if they are over 45 days old. 
D)  Deegan's net credit sales are about eight times the amount of its average accounts receivable. 
A)  Deegan's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5. 
B)  Deegan waits approximately 46 days to make collections of its credit sales. (Use 365 days in a year.) 
C)  Deegan writes off accounts receivable as uncollectible if they are over 45 days old. 
D)  Deegan's net credit sales are about eight times the amount of its average accounts receivable.

Question 14

U.S. Treasury bills that mature within six months are cash equivalents.

Accepted Answer

A) True 
 B)False

Question 15

Assuming Neptune does not sell this investment, the financial statements prepared at December 31, 2011 will report:

Accepted Answer

A)  Investments in Marketable Securities of $700,000, reduced by a $30,000 Unrealized Holding Gain on Investments, in the asset section of the balance sheet. 
B)  The asset Investments in Marketable Securities of $700,000 in the balance sheet, and a $25,000 Unrealized Holding Loss on Investments in the income statement. 
C)  The asset Investments in Marketable Securities of $725,000, and a $5,000 Unrealized Holding Loss deducted from total stockholders' equity. 
D)  Investment in Marketable Securities of $725,000 in the asset section of the balance sheet, with a $25,000 Unrealized Holding Gain on Investments included in the stockholders' equity section. 
A)  Investments in Marketable Securities of $700,000, reduced by a $30,000 Unrealized Holding Gain on Investments, in the asset section of the balance sheet. 
B)  The asset Investments in Marketable Securities of $700,000 in the balance sheet, and a $25,000 Unrealized Holding Loss on Investments in the income statement. 
C)  The asset Investments in Marketable Securities of $725,000, and a $5,000 Unrealized Holding Loss deducted from total stockholders' equity. 
D)  Investment in Marketable Securities of $725,000 in the asset section of the balance sheet, with a $25,000 Unrealized Holding Gain on Investments included in the stockholders' equity section.

Question 16

When a petty cash fund is in use:

Accepted Answer

A)  Petty cash is debited only when the fund is replenished. 
B)  The general bank account is debited only when this fund is established. 
C)  Small payments are made out of cash receipts before they are deposited. 
D)  Expenses paid from the fund are recorded when the fund is replenished. 
A)  Petty cash is debited only when the fund is replenished. 
B)  The general bank account is debited only when this fund is established. 
C)  Small payments are made out of cash receipts before they are deposited. 
D)  Expenses paid from the fund are recorded when the fund is replenished.

Question 17

The purpose of establishing a petty cash fund is to:

Accepted Answer

A)  Achieve internal control over small cash disbursements not made by check. 
B)  Keep track of expenditures paid out of cash receipts from customers prior to deposit. 
C)  Ensure that the amount of cash in the bank does not become excessive. 
D)  Keep enough cash on hand in the office to cover all normal operating expenses of the business for a period of time. 
A)  Achieve internal control over small cash disbursements not made by check. 
B)  Keep track of expenditures paid out of cash receipts from customers prior to deposit. 
C)  Ensure that the amount of cash in the bank does not become excessive. 
D)  Keep enough cash on hand in the office to cover all normal operating expenses of the business for a period of time.

Question 18

Cardinal Company's bank statement showed a balance at May 31 of $180,974. The only reconciling items consisted of a large number of outstanding checks totaling $51,847. At May 31, what balance should Cardinal's Cash account show?

Accepted Answer

A)  $232,821. 
B)  $129,127. 
C)  $77,280. 
D)  Some other amount. 
A)  $232,821. 
B)  $129,127. 
C)  $77,280. 
D)  Some other amount.

Question 19

Deposits-in-transit would not appear on a company's bank reconciliation but would appear on the company's bank statement.

Accepted Answer

A) True 
 B)False

Question 20

The direct write-off method is more conservative than the allowance method for valuation of receivables.

Accepted Answer

A) True 
 B)False

Exam 7: Financial Assets

Marketable securities are classified into three types; which one is not one of the three types?

A good system of internal control will include all of the following except:

Which of the following items is reported in neither the income statement nor the statement of cash flows?

The balance shown on a bank statement is always less than the month-end balance of a company's cash account in the general ledger.

Under the allowance method, when a receivable that had been previously written off is collected:

What is the amount of the deposit in transit?

In order for a company's accounting records to be up-to-date and accurate after a bank reconciliation has been completed, journal entries should be made for any service charges by the bank and for deposits-in-transit.

If a 15%, 60-day note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will:

A company with more than one bank checking account should show more than one account for Cash in its balance sheet.

Gains (or losses) on sales of marketable securities, as well as any unrealized holding gains (or losses) on investments in available for sale securities, are reported in the income statement.

Deegan Industries has an accounts receivable turnover rate of 8. Which of the following statements is not true?

U.S. Treasury bills that mature within six months are cash equivalents.

Assuming Neptune does not sell this investment, the financial statements prepared at December 31, 2011 will report:

When a petty cash fund is in use:

The purpose of establishing a petty cash fund is to:

Cardinal Company's bank statement showed a balance at May 31 of $180,974. The only reconciling items consisted of a large number of outstanding checks totaling $51,847. At May 31, what balance should Cardinal's Cash account show?

Deposits-in-transit would not appear on a company's bank reconciliation but would appear on the company's bank statement.

The direct write-off method is more conservative than the allowance method for valuation of receivables.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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