Exam 7: Financial Assets

Accounting terminology Listed below are nine technical accounting terms emphasized in this chapter. Mark-to-market Factoring Direct write-off Financial asset Cash equivalent Bank reconciliation Allowance for doubtful accounts Accounts receivable turnover Uncollectible accounts expense Each of the following statements may (or may not) describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms. ____ a. A transaction in which a business sells its accounts receivables to a financial institution. ____ b. An estimate of the portion of year-end accounts receivable that ultimately will turn out to be uncollectible. ____ c. Schedule explaining any differences between cash balances appearing in the accounting records and in the monthly bank statement. ____ d. Balance sheet valuation standard applicable to investments in marketable securities. ____ e. Cash and assets convertible directly into known amounts of cash, such as marketable securities and receivables. ____ f. A ratio, computed by dividing 365 days by average receivables, that indicates the liquidity of the receivables. ____ g. Method of accounting for uncollectible receivables that fails to match revenues and expenses.

If the income statement method of estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 2% of net credit sales, the net realizable value of Four Star accounts receivable at the end of the month is:

Cash equivalents:

It has been found that improper revenue recognition was the most common scheme in fraud-related SEC enforcement actions.

What is the total amount of the outstanding checks at June 30?

When preparing a bank reconciliation, checks outstanding will:

At the beginning of the year, Robert Company's Allowance for Doubtful Accounts had a $3,200 credit balance. During January, a provision of 2% of sales was made for uncollectible accounts expense. During January, sales totaled $350,000, and $2,900 of accounts receivable were written off as worthless. No recoveries of accounts previously written off were made during the month. Robert's financial statements for January show:

On January 1, Lucas established a petty cash fund of $350, which it replenishes at the end of each month. When a surprise count of the petty cash fund is made on March 5, the petty cash box contains $70 in cash and receipts for the following items: This situation indicates:

Accounts receivable turnover rate During 2010, Larsen Company's accounts receivable averaged $750,000. Larsen's 2010 income statement reported net sales of $6,780,000, uncollectible accounts expense of $160,000, and net income of $768,000. (Assume 365 days in a year.) Using the information, compute the following for Larsen Company: (a) Accounts receivable turnover: (Round to the nearest two decimals.) (b) Average number of days to collect accounts receivable (round to nearest day, if necessary): (Round to the nearest %.)

Jensen's entry to record the collection of this note at maturity includes a:

Balance sheet method-journal entries The general ledger controlling account for Accounts Receivable has a balance of $120,500 at year-end before adjustment. The company uses the balance sheet approach to estimate uncollectible accounts. By aging the individual customers' accounts, it was determined that the doubtful accounts amounted to $5,020. Prepare the year-end adjusting entry for uncollectible accounts under each of the following independent assumptions. (a.) Allowance for Doubtful Accounts has a credit balance of $2,850. (b.) Allowance for Doubtful Accounts has a debit balance of $925.

In reconciling a bank statement, which of the following items could cause the cash per the bank statement to be greater than the balance of cash shown in the depositor's accounting records?

Internal control is strengthened by a policy of making payments by check, or from cash receipts, or from a petty cash fund.

Marketable securities includes investments in bonds and in the capital stocks of publicly traded corporations.

When the direct write-off method is used to recognize uncollectible accounts expense, an Allowance for Doubtful Accounts is not required.

An NSF check returned by the bank should be entered in the depositor's accounting records by a debit to:

When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the depositor's records are:

Assuming Dynamic, Inc. uses the income statement approach (an allowance method) to account for uncollectible accounts, uncollectible accounts expense for March is:

Financial assets include all of the following except:

As of December 31, 2009, Valley Company has $16,920 cash in its checking account, as well as several other items listed below: What amount should be shown in Valley's December 31, 2009, balance sheet as "Cash and cash equivalents"?