Question 1

Showing marketable securities on the balance sheet at current market values violates the consistency principle.

Accepted Answer

A) True 
 B)False

Question 2

Sales to customers using bank credit cards, such as Visa or MasterCard, are recorded as:

Accepted Answer

A)  Cash sales. 
B)  An account receivable from the cardholder. 
C)  An account receivable from the bank. 
D)  Credit card discount expense. 
A)  Cash sales. 
B)  An account receivable from the cardholder. 
C)  An account receivable from the bank. 
D)  Credit card discount expense.

Question 3

When preparing a bank reconciliation, bank service charges will:

Accepted Answer

A)  Increase the balance per depositor's records. 
B)  Decrease the balance per depositor's records. 
C)  Increase the balance per the bank statement. 
D)  Decrease the balance per the bank statement. 
A)  Increase the balance per depositor's records. 
B)  Decrease the balance per depositor's records. 
C)  Increase the balance per the bank statement. 
D)  Decrease the balance per the bank statement.

Question 4

Which of the following is not an example of internal control over cash?

Accepted Answer

A)  Preparation of a cash budget. 
B)  Daily deposits of cash receipts at the bank. 
C)  Combining the functions of signing checks with the approval of expenditures. 
D)  Preparation of bank reconciliation. 
A)  Preparation of a cash budget. 
B)  Daily deposits of cash receipts at the bank. 
C)  Combining the functions of signing checks with the approval of expenditures. 
D)  Preparation of bank reconciliation.

Question 5

Note receivable--journal entries
On September 1, 2010, Dental Equipment Corporation sold equipment priced at $350,000 in exchange for a six-month note receivable with an annual interest rate of 12%, all due at maturity.
(a.) Prepare the December 31, 2010 (fiscal year-end), adjusting entry made by Dental with regard to this note receivable.
(b.) Prepare the entry made by Dental on March 1, 2011(maturity date of note), to record collection of note and interest.
(a) 2010 General Journal
Dec. 31
(b) 2011 March 1
(c.) Assume that on March 1, 2011, the maker of the note defaults and Dental does not collect the note. Prepare the entry to be made to Dental on March 1, 2011, in this situation.
(c) 2011 March 1

Accepted Answer

The answer of Note receivable--journal entries
On September 1, 2010, Dental...

Question 6

The Allowance for Doubtful Accounts should be listed on the balance sheet as a current liability.

Accepted Answer

A) True 
 B)False

Question 7

Randall, Inc. uses the allowance method supported by an aging of its accounts receivable to recognize uncollectible accounts expense in its financial statements. What method of recognizing this expense does Randall use in its income tax return?

Accepted Answer

A)  It must use the same method. 
B)  The direct write-off method. 
C)  Either the balance sheet or income statement approach is acceptable. 
D)  None, since uncollectible accounts expense is not deductible for income tax purposes. 
A)  It must use the same method. 
B)  The direct write-off method. 
C)  Either the balance sheet or income statement approach is acceptable. 
D)  None, since uncollectible accounts expense is not deductible for income tax purposes.

Question 8

When preparing a bank reconciliation, deposits in transit will:

Accepted Answer

A)  Increase the balance per depositor's records. 
B)  Decrease the balance per depositor's records. 
C)  Increase the balance per the bank statement. 
D)  Decrease the balance per the bank statement. 
A)  Increase the balance per depositor's records. 
B)  Decrease the balance per depositor's records. 
C)  Increase the balance per the bank statement. 
D)  Decrease the balance per the bank statement.

Question 9

Assuming the maker of the note defaults on May 1, 2011, Salem will record on this date:

Accepted Answer

A)  An account receivable of $900,000 from the maker of the note. 
B)  An account receivable in the amount of $900,000, as well as interest expense of $27,000. 
C)  An account receivable in the amount of $927,000, as well as interest revenue of $18,000. 
D)  An account receivable in the amount of $900,000, as well as interest revenue of $18,000. 
A)  An account receivable of $900,000 from the maker of the note. 
B)  An account receivable in the amount of $900,000, as well as interest expense of $27,000. 
C)  An account receivable in the amount of $927,000, as well as interest revenue of $18,000. 
D)  An account receivable in the amount of $900,000, as well as interest revenue of $18,000.

Question 10

Fisher Corporation invested $320,000 cash in available-for-sale marketable securities in early December. On December 31, the quoted market price for these securities is $337,000. Which of the following statements is correct?

Accepted Answer

A)  Fisher's December income statement includes a $17,000 gain on investments. 
B)  If Fisher sells these investments on January 2 for $300,000, it will report a loss of $37,000. 
C)  Fisher's December 31 balance sheet reports marketable securities at $320,000 and an unrealized holding gain on investments of $17,000. 
D)  Fisher's December 31 balance sheet reports marketable securities at $337,000 and an unrealized holding gain on investments of $17,000. 
A)  Fisher's December income statement includes a $17,000 gain on investments. 
B)  If Fisher sells these investments on January 2 for $300,000, it will report a loss of $37,000. 
C)  Fisher's December 31 balance sheet reports marketable securities at $320,000 and an unrealized holding gain on investments of $17,000. 
D)  Fisher's December 31 balance sheet reports marketable securities at $337,000 and an unrealized holding gain on investments of $17,000.

Question 11

When the account Allowance for Doubtful Accounts is used, writing-off of an uncollectible accounts receivable will:

Accepted Answer

A)  Reduce income. 
B)  Reduce an expense. 
C)  Not change income or total assets. 
D)  Increase total assets. 
A)  Reduce income. 
B)  Reduce an expense. 
C)  Not change income or total assets. 
D)  Increase total assets.

Question 12

Tutor uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $8,600. What is the amount of uncollectible accounts expense recognized in Tutor's income statement for March?

Accepted Answer

A)  $8,600. 
B)  $6,800. 
C)  $10,400. 
D)  $1,800. 
A)  $8,600. 
B)  $6,800. 
C)  $10,400. 
D)  $1,800.

Question 13

After preparing a bank reconciliation, a journal entry would be required for which of the following?

Accepted Answer

A)  A deposit in transit. 
B)  A check for $48 given to a supplier but not yet recorded by the company's bank. 
C)  Interest earned on the company's checking account. 
D)  A deposit made by a company with a similar name and credited to your account. 
A)  A deposit in transit. 
B)  A check for $48 given to a supplier but not yet recorded by the company's bank. 
C)  Interest earned on the company's checking account. 
D)  A deposit made by a company with a similar name and credited to your account.

Question 14

Mark-to-market is the balance sheet valuation standard for:

Accepted Answer

A)  Investments in all financial assets. 
B)  Investments in available-for-sale marketable securities. 
C)  Investments in capital stock of any corporation. 
D)  Stockholders' equity of any publicly traded corporation. 
A)  Investments in all financial assets. 
B)  Investments in available-for-sale marketable securities. 
C)  Investments in capital stock of any corporation. 
D)  Stockholders' equity of any publicly traded corporation.

Question 15

When preparing a bank reconciliation, an NSF check will:

Accepted Answer

A)  Increase the balance per depositor's records. 
B)  Decrease the balance per depositor's records. 
C)  Increase the balance per the bank statement. 
D)  Decrease the balance per the bank statement. 
A)  Increase the balance per depositor's records. 
B)  Decrease the balance per depositor's records. 
C)  Increase the balance per the bank statement. 
D)  Decrease the balance per the bank statement.

Question 16

A line of credit creates a liability for the borrower when it is granted by the bank.

Accepted Answer

A) True 
 B)False

Question 17

Assuming a single journal entry is made to adjust Quinn Company's accounting records at January 31, the journal entry includes:

Accepted Answer

A)  A debit to Rent Expense for $90. 
B)  A credit to Accounts Receivable,G.Denton, for $426. 
C)  A credit to Cash for $450. 
D)  A credit to Cash for $1,720. 
A)  A debit to Rent Expense for $90. 
B)  A credit to Accounts Receivable,G.Denton, for $426. 
C)  A credit to Cash for $450. 
D)  A credit to Cash for $1,720.

Question 18

Assuming Dynamic, Inc. uses the direct write-off method of accounting for uncollectible accounts, uncollectible accounts expense for March is:

Accepted Answer

A)  $13,500. 
B)  $6,000. 
C)  $11,500. 
D)  $17,500. 
A)  $13,500. 
B)  $6,000. 
C)  $11,500. 
D)  $17,500.

Question 19

Uncollectible accounts expense:

Accepted Answer

A)  Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit. 
B)  Is the amount of cash a business must pay each time a credit customer fails to pay his or her account. 
C)  Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable. 
D)  Represents the loss in value of accounts receivable that are estimated to be uncollectible. 
A)  Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit. 
B)  Is the amount of cash a business must pay each time a credit customer fails to pay his or her account. 
C)  Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable. 
D)  Represents the loss in value of accounts receivable that are estimated to be uncollectible.

Question 20

Financial assets may be current or long-term assets.

Accepted Answer

A) True 
 B)False

Exam 7: Financial Assets

Showing marketable securities on the balance sheet at current market values violates the consistency principle.

Sales to customers using bank credit cards, such as Visa or MasterCard, are recorded as:

When preparing a bank reconciliation, bank service charges will:

Which of the following is not an example of internal control over cash?

The Allowance for Doubtful Accounts should be listed on the balance sheet as a current liability.

Randall, Inc. uses the allowance method supported by an aging of its accounts receivable to recognize uncollectible accounts expense in its financial statements. What method of recognizing this expense does Randall use in its income tax return?

When preparing a bank reconciliation, deposits in transit will:

Assuming the maker of the note defaults on May 1, 2011, Salem will record on this date:

Fisher Corporation invested $320,000 cash in available-for-sale marketable securities in early December. On December 31, the quoted market price for these securities is $337,000. Which of the following statements is correct?

When the account Allowance for Doubtful Accounts is used, writing-off of an uncollectible accounts receivable will:

Tutor uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $8,600. What is the amount of uncollectible accounts expense recognized in Tutor's income statement for March?

After preparing a bank reconciliation, a journal entry would be required for which of the following?

Mark-to-market is the balance sheet valuation standard for:

When preparing a bank reconciliation, an NSF check will:

A line of credit creates a liability for the borrower when it is granted by the bank.

Assuming a single journal entry is made to adjust Quinn Company's accounting records at January 31, the journal entry includes:

Assuming Dynamic, Inc. uses the direct write-off method of accounting for uncollectible accounts, uncollectible accounts expense for March is:

Uncollectible accounts expense:

Financial assets may be current or long-term assets.

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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