Question 1

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

Accepted Answer

A)  Accounts receivable. 
B)  Allowance for uncollectible accounts. 
C)  Bad debts expense. 
D)  Retained earnings. 
A)  Accounts receivable. 
B)  Allowance for uncollectible accounts. 
C)  Bad debts expense. 
D)  Retained earnings.

Question 2

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 17, assuming the correct payment was received on that date?

Accepted Answer

A)  $\begin{array}{|l|r|r|}
\hline \text { Cash } & 7,840 & \
\hline \text { Accounts receivable } & & 7,840 \
\hline
\end{array}$ 
B)  $\begin{array}{|l|r|r|}
\hline \text { Cash } & 7,840 & \
\hline \text { Sales discounts } & 160 & \
\hline \text { Accounts receivable } & & 8,000 \
\hline
\end{array}$ 
C)  $\begin{array}{|c|c|c|}
\hline \text { Cash } & 7,840 \
\hline \text { Sales } & 160 \
\hline \text { Accounts receivable } &&8,000 \
\hline
\end{array}$ 
D)  $\begin{array}{|l|r|r|}
\hline \text { Cash } & 8,000 & \
\hline \text { Sales discounts } & 160 & \
\hline \text { Accounts receivable } & & 8,000 \
\hline \text { Sales } & & 160 \
\hline
\end{array}$ 
A)  $\begin{array}{|l|r|r|}
\hline \text { Cash } & 7,840 & \
\hline \text { Accounts receivable } & & 7,840 \
\hline
\end{array}$ 
B)  $\begin{array}{|l|r|r|}
\hline \text { Cash } & 7,840 & \
\hline \text { Sales discounts } & 160 & \
\hline \text { Accounts receivable } & & 8,000 \
\hline
\end{array}$ 
C)  $\begin{array}{|c|c|c|}
\hline \text { Cash } & 7,840 \
\hline \text { Sales } & 160 \
\hline \text { Accounts receivable } &&8,000 \
\hline
\end{array}$ 
D)  $\begin{array}{|l|r|r|}
\hline \text { Cash } & 8,000 & \
\hline \text { Sales discounts } & 160 & \
\hline \text { Accounts receivable } & & 8,000 \
\hline \text { Sales } & & 160 \
\hline
\end{array}$

Question 3

On March 12, 2018, Admiral Electronics sold 20 fax machines to Cool Stuff Co. for $10,000, subject to terms 2/10, n/30. Admiral uses the gross method of accounting for sales discounts.
Required:
1. Prepare the journal entry to record the sale.
2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on March 20, 2018.
3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on April 5, 2018.

Accepted Answer

The answer of On March 12, 2018, Admiral Electronics sold...

Question 4

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2018. The notes included: 
Note A: Dated 5/31/2018, principal of $120,000 and interest due 3/31/2019.
Note B: Dated 7/1/2018, principal of $200,000 and interest at 8% annually, due on 4/1/2019.
Frankenstein had accrued a total of $14,400 interest receivable from these notes in its 12/31/2018 balance sheet.
-
The annual interest rate on Note A is closest to:

Accepted Answer

A)  9.14%. 
B)  8%. 
C)  9.74%. 
D)  9.44%. 
A)  9.14%. 
B)  8%. 
C)  9.74%. 
D)  9.44%.

Question 5

Securitization of receivables is a type of secured borrowing.

Accepted Answer

A) True 
 B)False

Question 6

The petty cash fund of Western Glass Company contained the following items on November 30, 2018:
 
The petty cash fund was established on November 1, 2018, with a transfer of $250 from cash to the petty cash account.
Required:
Prepare the journal entries to establish the petty cash account and to replenish the fund at the end of November.

Accepted Answer

To establish the fund on November 1, 201

Question 7

Under the CECL approach used in U.S. GAAP, impairments are only recognized for losses that occur more than a year in the future when a receivable has deteriorated in credit quality.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following does not reduce the balance in accounts receivable?

Accepted Answer

A)  Returns on credit sales. 
B)  Collections from customers. 
C)  Recognizing bad debts expense. 
D)  Write-offs. 
A)  Returns on credit sales. 
B)  Collections from customers. 
C)  Recognizing bad debts expense. 
D)  Write-offs.

Question 9

Sales returns and cash discounts are both examples of variable consideration that must be accounted for when receivables are recognized.

Accepted Answer

A) True 
 B)False

Question 10

In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges.

Accepted Answer

A) True 
 B)False

Question 11

Guido Properties owes First State Bank $60 million under a 7% note with two years remaining to maturity. Due to financial difficulties of Guido, the previous year's interest ($4.2 million) was not received. The bank agrees to settle the note receivable and accrued interest receivable in exchange for land having a fair value of $44 million.
Required: Compute the loss on troubled debt restructuring that the bank would record.

Accepted Answer

$20.2 million
Land 44.0 millio

Question 12

Important elements of an internal control system for cash disbursements include each of the following except:

Accepted Answer

A)  Only authorized personnel should sign checks. 
B)  All expenditures should be authorized before a check is prepared. 
C)  All disbursements, other than very small disbursements, should be made by check. 
D)  The same person that prepares the check should also record it in the proper journal. 
A)  Only authorized personnel should sign checks. 
B)  All expenditures should be authorized before a check is prepared. 
C)  All disbursements, other than very small disbursements, should be made by check. 
D)  The same person that prepares the check should also record it in the proper journal.

Question 13

Peecher accepted a three-year, noninterest-bearing note in exchange for merchandise sold. Which of the following is true?

Accepted Answer

A)  Peecher would credit a discount on note receivable when recording the sale. 
B)  Peecher would debit interest revenue over the life of the note. 
C)  Peecher would debit notes receivable when the note is collected. 
D)  Peecher would multiply sales revenue by the effective interest rate to determine interest revenue each period. 
A)  Peecher would credit a discount on note receivable when recording the sale. 
B)  Peecher would debit interest revenue over the life of the note. 
C)  Peecher would debit notes receivable when the note is collected. 
D)  Peecher would multiply sales revenue by the effective interest rate to determine interest revenue each period.

Question 14

False Value Hardware began 2018 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts. 
-False Value Hardware's 2018 income statement would report net sales of:

Accepted Answer

A)  $622,000. 
B)  $607,000. 
C)  $646,000. 
D)  $611,000. 
A)  $622,000. 
B)  $607,000. 
C)  $646,000. 
D)  $611,000.

Question 15

Accounts receivable are normally reported at the:

Accepted Answer

A)  Present value of future cash receipts. 
B)  Current value plus accrued interest. 
C)  Expected amount to be received. 
D)  Current value less expected collection costs. 
A)  Present value of future cash receipts. 
B)  Current value plus accrued interest. 
C)  Expected amount to be received. 
D)  Current value less expected collection costs.

Question 16

Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2018. The note, along with interest at 6%, is due on June 30, 2019. On September 30, 2018, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank?

Accepted Answer

A)  $40,600. 
B)  $36,000. 
C)  $39,220. 
D)  $36,820. 
A)  $40,600. 
B)  $36,000. 
C)  $39,220. 
D)  $36,820.

Question 17

In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which:

Accepted Answer

A)  The transferee has received substantially all the risks and rewards of ownership. 
B)  The age of the receivables transferred differs from the average age of the receivables. 
C)  The transferor of the receivable surrenders control over the assets transferred. 
D)  The transferee relies on funds from the transferor to maintain operations. 
A)  The transferee has received substantially all the risks and rewards of ownership. 
B)  The age of the receivables transferred differs from the average age of the receivables. 
C)  The transferor of the receivable surrenders control over the assets transferred. 
D)  The transferee relies on funds from the transferor to maintain operations.

Question 18

Last year, Simpson Company had a receivables turnover ratio of 12. Homer, Simpson's president, was delighted when the ratio went to 18 for this year. This year, Simpson's long-standing credit terms of net 30 were changed to net 10. Should Homer be happy? Explain.

Accepted Answer

Homer needs to compare the average colle

Question 19

Cash may not include:

Accepted Answer

A)  Foreign currency. 
B)  Money orders. 
C)  Restricted cash. 
D)  Undeposited customer checks. 
A)  Foreign currency. 
B)  Money orders. 
C)  Restricted cash. 
D)  Undeposited customer checks.

Question 20

Cash equivalents do not include:

Accepted Answer

A)  Money market funds. 
B)  High grade marketable equity securities. 
C)  U.S. treasury bills. 
D)  Commercial paper. 
A)  Money market funds. 
B)  High grade marketable equity securities. 
C)  U.S. treasury bills. 
D)  Commercial paper.

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 17, assuming the correct payment was received on that date?

Securitization of receivables is a type of secured borrowing.

Under the CECL approach used in U.S. GAAP, impairments are only recognized for losses that occur more than a year in the future when a receivable has deteriorated in credit quality.

Which of the following does not reduce the balance in accounts receivable?

Sales returns and cash discounts are both examples of variable consideration that must be accounted for when receivables are recognized.

In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges.

Important elements of an internal control system for cash disbursements include each of the following except:

Peecher accepted a three-year, noninterest-bearing note in exchange for merchandise sold. Which of the following is true?

Accounts receivable are normally reported at the:

In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which:

Last year, Simpson Company had a receivables turnover ratio of 12. Homer, Simpson's president, was delighted when the ratio went to 18 for this year. This year, Simpson's long-standing credit terms of net 30 were changed to net 10. Should Homer be happy? Explain.

Cash may not include:

Cash equivalents do not include:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Inventories: Measurement

Inventories: Additional Issues

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters

Exam 7: Cash and Receivables

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 17, assuming the correct payment was received on that date?

Securitization of receivables is a type of secured borrowing.

Under the CECL approach used in U.S. GAAP, impairments are only recognized for losses that occur more than a year in the future when a receivable has deteriorated in credit quality.

Which of the following does not reduce the balance in accounts receivable?

Sales returns and cash discounts are both examples of variable consideration that must be accounted for when receivables are recognized.

In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges.

Important elements of an internal control system for cash disbursements include each of the following except:

Peecher accepted a three-year, noninterest-bearing note in exchange for merchandise sold. Which of the following is true?

Accounts receivable are normally reported at the:

In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which:

Last year, Simpson Company had a receivables turnover ratio of 12. Homer, Simpson's president, was delighted when the ratio went to 18 for this year. This year, Simpson's long-standing credit terms of net 30 were changed to net 10. Should Homer be happy? Explain.

Cash may not include:

Cash equivalents do not include:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Inventories: Measurement

Inventories: Additional Issues

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters