Question 1

Entries made in the general journal after preparing a bank reconciliation are called closing entries.

Accepted Answer

A) True 
 B)False

Question 2

The bookkeeper prepared a check for $68 but accidentally recorded it as $86. When preparing the bank reconciliation, this should be corrected by:

Accepted Answer

A)  Adding $18 to the bank balance. 
B)  Subtracting $18 from the bank balance. 
C)  Adding $18 to the book balance. 
D)  Subtracting $18 from the book balance. 
A)  Adding $18 to the bank balance. 
B)  Subtracting $18 from the bank balance. 
C)  Adding $18 to the book balance. 
D)  Subtracting $18 from the book balance.

Question 3

Windsor uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $7,400. The net realizable value of Windsor's accounts receivable in the January 31 balance sheet is:

Accepted Answer

A)  $321,400. 
B)  $340,000. 
C)  $322,600. 
D)  $347,400. 
A)  $321,400. 
B)  $340,000. 
C)  $322,600. 
D)  $347,400.

Question 4

Bank reconciliation--computations and journal entry
The Cash account in the ledger of Pine Golf Club shows a balance of $11,925 at December 31, 2009. The December 31 bank statement shows a balance of $10,440. The only reconciling items consist of:
Bank service charges of $32.
Deposit in transit of $1,813.
NSF check from customer L. Diamond in the amount of $126.
Error in recording check no. 970 for utilities: check was written in the amount of $834 but was recorded in Pine's accounting records as $384.
Outstanding checks.
(a) What is the amount of the adjusted cash balance at December 31, 2009?
$_______________
(b) What is the total amount of outstanding checks at December 31, 2009?
$_______________
(c) Record the journal entry necessary, if any, to adjust Pine's Golf Club accounting records at December 31, 2006. (An explanation is not required; a single compound journal entry is acceptable.)

Accepted Answer

(a) Adjusted cash balance on Dec. 31, 20

Question 5

The accounting records of Golden Company showed cash of $15,250 at June 30. The balance per the bank statement at June 30 was $15,125. The only reconciling items were deposits in transit of $3,200, outstanding checks totaling $4,100, an NSF check for $1,000 returned by the bank which Golden had not yet charged back to the customer, and a bank service charge of $25. The preparation of a bank reconciliation should indicate cash owned by Golden at June 30 in the amount of:

Accepted Answer

A)  $14,475. 
B)  $15,375. 
C)  $14,225. 
D)  $15,525. 
A)  $14,475. 
B)  $15,375. 
C)  $14,225. 
D)  $15,525.

Question 6

At December 31, before adjusting and closing the accounts had occurred, the Allowance for Doubtful Accounts of Seaboard Corporation showed a debit balance of $3,200. An aging of the accounts receivable indicated the amount probably uncollectible to be $2,100. Under these circumstances, a year-end adjusting entry for uncollectible accounts expense would include a:

Accepted Answer

A)  Debit to the Allowance for Doubtful Accounts for $1,100. 
B)  Credit to the Allowance for Doubtful Accounts for $1,100. 
C)  Debit to Uncollectible Accounts Expense of $2,100. 
D)  Debit to Uncollectible Accounts Expense of $5,300. 
A)  Debit to the Allowance for Doubtful Accounts for $1,100. 
B)  Credit to the Allowance for Doubtful Accounts for $1,100. 
C)  Debit to Uncollectible Accounts Expense of $2,100. 
D)  Debit to Uncollectible Accounts Expense of $5,300.

Question 7

In general terms, financial assets appear in the balance sheet at:

Accepted Answer

A)  Face value. 
B)  Current value. 
C)  Cost. 
D)  Estimated future sales value. 
A)  Face value. 
B)  Current value. 
C)  Cost. 
D)  Estimated future sales value.

Question 8

Which of the following best describes the application of generally accepted accounting principles to the valuation of accounts receivable?

Accepted Answer

A)  Realization principle-Accounts receivable are shown at their net realizable value in the balance sheet. 
B)  Matching principle-The loss due to an uncollectible account is recognized in the period in which the sale is made, not in the period in which the account receivable is determined to be worthless. 
C)  Cost principle-Accounts receivable are shown at the initial cost of the merchandise to customers, less the cost the seller must pay to cover uncollectible accounts. 
D)  Principle of conservatism-Accountants favor using the lowest reason?able estimate for the amount of uncollectible accounts shown in the balance sheet. 
A)  Realization principle-Accounts receivable are shown at their net realizable value in the balance sheet. 
B)  Matching principle-The loss due to an uncollectible account is recognized in the period in which the sale is made, not in the period in which the account receivable is determined to be worthless. 
C)  Cost principle-Accounts receivable are shown at the initial cost of the merchandise to customers, less the cost the seller must pay to cover uncollectible accounts. 
D)  Principle of conservatism-Accountants favor using the lowest reason?able estimate for the amount of uncollectible accounts shown in the balance sheet.

Question 9

What is the amount of the deposit in transit?

Accepted Answer

Deposit in transit: $1,158
Bal

Question 10

The direct write-off method of recognizing uncollectible accounts expense:

Accepted Answer

A)  Is acceptable only when most of the company's sales are on credit. 
B)  Records uncollectible accounts expense when individual accounts receivable are determined to be worthless. 
C)  Records uncollectible accounts expense when customers exceed their credit limits. 
D)  Uses a valuation account to record specific customer accounts deemed uncollectible. 
A)  Is acceptable only when most of the company's sales are on credit. 
B)  Records uncollectible accounts expense when individual accounts receivable are determined to be worthless. 
C)  Records uncollectible accounts expense when customers exceed their credit limits. 
D)  Uses a valuation account to record specific customer accounts deemed uncollectible.

Question 11

Gold Company received a 60-day, 12% note for $8,000 on June 16. Which of the following statements is true?

Accepted Answer

A)  Gold will receive $8,000 plus interest of $960 at maturity. 
B)  Gold should record a total receivable due of $8,080 on June 16. 
C)  The principal of the note plus interest is due on August 15. 
D)  The maturity value of this note is $8,000. 
A)  Gold will receive $8,000 plus interest of $960 at maturity. 
B)  Gold should record a total receivable due of $8,080 on June 16. 
C)  The principal of the note plus interest is due on August 15. 
D)  The maturity value of this note is $8,000.

Question 12

In financial statements prepared on December 31, 2010, Neptune Corporation reports:

Accepted Answer

A)  The asset Investments in Marketable Securities at $700,000 with footnote disclosure of the market value of $730,000. 
B)  The asset Investments in Marketable Securities at $730,000, and a $30,000 Unrealized Holding Gain included in total stockholders' equity. 
C)  The asset Investments in Marketable Securities at $730,000, and a $30,000 gain recognized in the income statement. 
D)  The asset Investments in Marketable Securities at $700,000, and a $30,000 Unrealized Holding Gain included in total stockholders' equity. 
A)  The asset Investments in Marketable Securities at $700,000 with footnote disclosure of the market value of $730,000. 
B)  The asset Investments in Marketable Securities at $730,000, and a $30,000 Unrealized Holding Gain included in total stockholders' equity. 
C)  The asset Investments in Marketable Securities at $730,000, and a $30,000 gain recognized in the income statement. 
D)  The asset Investments in Marketable Securities at $700,000, and a $30,000 Unrealized Holding Gain included in total stockholders' equity.

Question 13

Many fraudulent financial reporting schemes seek to manipulate accounts payable in order to overstate revenue and income.

Accepted Answer

A) True 
 B)False

Question 14

The Kansas Company makes credit sales to customers who use bank credit cards (such as Visa or MasterCard) as well as to customers who use non-bank credit cards (such as American Express or Diner's Club). In this situation:

Accepted Answer

A)  Sales to customers using bank credit cards are recorded as cash sales. 
B)  Regardless of the type of credit card used by the customer, Kansas records a receivable from the credit card company when a credit sale is made. 
C)  Regardless of the type of credit card used by the customer, Kansas estimates uncollectible accounts related to these credit sales using the allowance method. 
D)  The fees charged by the credit card company reduce the dollar amount of sales recorded. 
A)  Sales to customers using bank credit cards are recorded as cash sales. 
B)  Regardless of the type of credit card used by the customer, Kansas records a receivable from the credit card company when a credit sale is made. 
C)  Regardless of the type of credit card used by the customer, Kansas estimates uncollectible accounts related to these credit sales using the allowance method. 
D)  The fees charged by the credit card company reduce the dollar amount of sales recorded.

Question 15

Enclosed with the bank statement received by Sydney Company at October 31 was an NSF check for $300. No entry has yet been made by the company to reflect the bank's action in charging back the NSF check. During preparation of the bank reconciliation, the NSF check should be:

Accepted Answer

A)  Deducted from the balance per the depositor's records. 
B)  Deducted from the balance per the bank statement. 
C)  Added to the balance per the bank statement. 
D)  Added to the balance per the depositor's records. 
A)  Deducted from the balance per the depositor's records. 
B)  Deducted from the balance per the bank statement. 
C)  Added to the balance per the bank statement. 
D)  Added to the balance per the depositor's records.

Question 16

Joe Costello handles cash receipts from customers and also has responsibility for issuing credit memoranda, writing off uncollectible accounts, and maintaining the accounts receivable records. When customers pay their accounts, Costello occasionally issues a credit memorandum and steals the cash received from the customer. This fraud should come to light if an employee other than Costello:

Accepted Answer

A)  Reconciles the bank statement to the accounting records. 
B)  Reconciles the accounts receivable subsidiary ledger to the accounts receivable controlling account. 
C)  Investigates weekly all accounts written off as uncollectible. 
D)  Reconciles credit memoranda for sales returns to returned merchandise accepted by the receiving department. 
A)  Reconciles the bank statement to the accounting records. 
B)  Reconciles the accounts receivable subsidiary ledger to the accounts receivable controlling account. 
C)  Investigates weekly all accounts written off as uncollectible. 
D)  Reconciles credit memoranda for sales returns to returned merchandise accepted by the receiving department.

Question 17

When determining the uncollectible accounts expense in computing taxable income, income tax regulations:

Accepted Answer

A)  Require the allowance method. 
B)  Require the direct write-off method. 
C)  Require the income statement approach. 
D)  Allow any method. 
A)  Require the allowance method. 
B)  Require the direct write-off method. 
C)  Require the income statement approach. 
D)  Allow any method.

Question 18

"Concentrations of credit risk" occur if:

Accepted Answer

A)  A significant portion of receivables are due from a few major customers. 
B)  A significant portion of receivables are from customers in the same industry. 
C)  Both of the above. 
D)  Neither of the above. 
A)  A significant portion of receivables are due from a few major customers. 
B)  A significant portion of receivables are from customers in the same industry. 
C)  Both of the above. 
D)  Neither of the above.

Question 19

Each of these categories of assets is normally shown in the balance sheet at current value, except:

Accepted Answer

A)  Inventories. 
B)  Accounts receivable. 
C)  Short-term investments in marketable securities. 
D)  Cash. 
A)  Inventories. 
B)  Accounts receivable. 
C)  Short-term investments in marketable securities. 
D)  Cash.

Question 20

The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments. This item:

Accepted Answer

A)  Is included in the income statement. 
B)  Is shown as a reduction in total stockholders' equity. 
C)  Indicates that Baxter's marketable securities have a current market value higher than cost. 
D)  Indicate that Baxter Corporation sold marketable securities during the period at a gain. 
A)  Is included in the income statement. 
B)  Is shown as a reduction in total stockholders' equity. 
C)  Indicates that Baxter's marketable securities have a current market value higher than cost. 
D)  Indicate that Baxter Corporation sold marketable securities during the period at a gain.

Exam 7: Financial Assets

Entries made in the general journal after preparing a bank reconciliation are called closing entries.

The bookkeeper prepared a check for $68 but accidentally recorded it as $86. When preparing the bank reconciliation, this should be corrected by:

Windsor uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $7,400. The net realizable value of Windsor's accounts receivable in the January 31 balance sheet is:

In general terms, financial assets appear in the balance sheet at:

Which of the following best describes the application of generally accepted accounting principles to the valuation of accounts receivable?

What is the amount of the deposit in transit?

The direct write-off method of recognizing uncollectible accounts expense:

Gold Company received a 60-day, 12% note for $8,000 on June 16. Which of the following statements is true?

In financial statements prepared on December 31, 2010, Neptune Corporation reports:

Many fraudulent financial reporting schemes seek to manipulate accounts payable in order to overstate revenue and income.

The Kansas Company makes credit sales to customers who use bank credit cards (such as Visa or MasterCard) as well as to customers who use non-bank credit cards (such as American Express or Diner's Club). In this situation:

Enclosed with the bank statement received by Sydney Company at October 31 was an NSF check for $300. No entry has yet been made by the company to reflect the bank's action in charging back the NSF check. During preparation of the bank reconciliation, the NSF check should be:

When determining the uncollectible accounts expense in computing taxable income, income tax regulations:

"Concentrations of credit risk" occur if:

Each of these categories of assets is normally shown in the balance sheet at current value, except:

The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments. This item:

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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