Question 1

The "adjusted or correct cash balance" in a bank reconciliation is always equal to the bank balance plus all deposits in transit.

Accepted Answer

A) True 
 B)False  False

Question 2

Entel Inc. factored $100,000 of its accounts receivable without recourse with a factor and received $80,000. Of the $20,000 difference, $8,000 was the financing fee and the remainder was held back for sales adjustments. The firm and the factor agree to share equally the cost of any sales adjustments exceeding $12,000. Actual sales adjustments amounted to $14,000; the remaining amount of receivables was collected. Entel's entry to record the factoring of accounts receivable will include:

Accepted Answer

A)  dr. cash $92,000 
B)  dr. receivable from factor $12,000 
C)  dr. receivable from factor $8,000 
D)  dr. receivable from factor $20,000 
A)  dr. cash $92,000 
B)  dr. receivable from factor $12,000 
C)  dr. receivable from factor $8,000 
D)  dr. receivable from factor $20,000 B

Question 3

The members of which of the following pairs of methods of accounts receivable financing are most similar?

Accepted Answer

A)  Assignment of accounts receivable, factoring of accounts receivable without recourse 
B)  Factoring of accounts receivable with recourse accounted for as a loan, factoring of accounts receivable with recourse accounted for as a sale 
C)  Factoring of accounts receivable without recourse, factoring of accounts receivable with recourse accounted for as a sale 
D)  Factoring of accounts receivable without recourse, factoring of accounts receivable with recourse accounted for as a loan 
A)  Assignment of accounts receivable, factoring of accounts receivable without recourse 
B)  Factoring of accounts receivable with recourse accounted for as a loan, factoring of accounts receivable with recourse accounted for as a sale 
C)  Factoring of accounts receivable without recourse, factoring of accounts receivable with recourse accounted for as a sale 
D)  Factoring of accounts receivable without recourse, factoring of accounts receivable with recourse accounted for as a loan C

Question 4

Cash, as defined for financial reporting purposes, includes currency, coin, and deposits at commercial banks, which are available for immediate use.

Accepted Answer

A) True 
 B)False

Question 5

E Company's bank statement and cash account for the month of August 2003 were as follows:
BANK STATEMENT SUMMARIZED** $\begin{array}{|l|l|}
\hline \text { Balance, July 31, } 2003 & \$ 4,800 \
\hline \text { Deposits, Aug. 2003 } & 16,500 \
\hline \text { Cheques, Aug. 2003 } & (17.200) \
\hline \text { Customer XYZ, NSF cheque returned (this cheque was previously deposited) } & (40) \\hline \text { Note receivable collected for } E \text { (including } 10 \% \text { interest) } & 1,650 \
\hline \text { Bank service charges } & (13) \
\hline & \$ 5,697 \
\hline
\end{array}$CASH ACCOUNT*
Bal. July 31 6,000
Aug. Deposits 17,500 | Aug. cheques 20,000
___________
*Includes Aug. 31, 2003, cash on hand, $257
**Data from July 31, 2003, bank reconciliation:
Cash on hand = $250
Outstanding cheques = $550
Deposits in transit = $1,500
Required:
(a) Complete an August 31, 2003 bank reconciliation in all respects (you must compute the August 31, 2003 outstanding cheques and deposits in transit).
(b) Give all of the August 31, 2003 entries based upon your bank reconciliation (you can give separate entries or combine them into one entry).

Accepted Answer

(b) Entries:@#IMG-DLM&*Deposit in tran

Question 6

Transaction costs arising from the purchase of amortized cost or FVOCI investments may be capitalized to the investment account or expensed.

Accepted Answer

A) True 
 B)False

Question 7

A company received two one-year notes in payment for merchandise sold. One note had a face amount of $6,000 and was interest-bearing at an annual rate of 18 percent. The other note had a face amount of $7,080 and was non-interest-bearing (its implied interest rate was 18 percent).

Accepted Answer

A)  The total amount of cash ultimately to be received will be more for the interest-bearing note. 
B)  Both notes will cause the same total interest to be recognized. 
C)  The amount of interest revenue, which should be recognized, is more for the interest-bearing note. 
D)  The amount, which should be credited to sales revenue, is more for the non-interest-bearing note. 
E)  The non-interest-bearing note shows a higher book value immediately after the sale. 
A)  The total amount of cash ultimately to be received will be more for the interest-bearing note. 
B)  Both notes will cause the same total interest to be recognized. 
C)  The amount of interest revenue, which should be recognized, is more for the interest-bearing note. 
D)  The amount, which should be credited to sales revenue, is more for the non-interest-bearing note. 
E)  The non-interest-bearing note shows a higher book value immediately after the sale.

Question 8

When accounts receivable are factored without recourse, what account does the transferor credit?

Accepted Answer

A)  Accounts receivable 
B)  Sales 
C)  Liability 
D)  Accounts receivable assigned 
A)  Accounts receivable 
B)  Sales 
C)  Liability 
D)  Accounts receivable assigned

Question 9

Loans and receivable with a view to sale in the long-term would be accounted for using Fair Value through Profit or Loss (FVTPL).

Accepted Answer

A) True 
 B)False

Question 10

The time value of money is measured by the excess of resources received, or paid over the amount of resources lent or borrowed at a different date.

Accepted Answer

A) True 
 B)False

Question 11

On September 16, 2013, a corporation sold to a bank, a customer's 18 percent, 60-day note, dated August 31, 2013, with a face amount of $3,000. The bank discounted the note at 15 percent. The cash received by the corporation was (assume 360 days per year):

Accepted Answer

A)  $2,943.75 
B)  $3,000.00 
C)  $3,022.01 
D)  $3,032.06 
A)  $2,943.75 
B)  $3,000.00 
C)  $3,022.01 
D)  $3,032.06

Question 12

Which of the following would be classified as a trade receivable?

Accepted Answer

A)  Cash dividends receivable 
B)  Amounts due from customers 
C)  Claims in litigation 
D)  Loans to employees 
A)  Cash dividends receivable 
B)  Amounts due from customers 
C)  Claims in litigation 
D)  Loans to employees

Question 13

When receivables are factored with recourse and recorded as a loan, the transferor generally

Accepted Answer

A)  Recognizes the cost of the transfer over the term of the related loan 
B)  Recognizes an immediate loss or expense and removes the receivables from the books 
C)  Records a payable to factor for expected sales adjustments 
D)  Does not record sales adjustments on the factored receivables 
A)  Recognizes the cost of the transfer over the term of the related loan 
B)  Recognizes an immediate loss or expense and removes the receivables from the books 
C)  Records a payable to factor for expected sales adjustments 
D)  Does not record sales adjustments on the factored receivables

Question 14

X borrows money from the bank by signing a non-interest-bearing $1,000 note payable due at the end of one year. The going rate of interest for notes of this type is 9 percent.
How much cash did X receive? $_______________________.

Accepted Answer

$1,000 × (

Question 15

When a firm (assignor) assigns part of its accounts receivable as collateral for a loan:

Accepted Answer

A)  The assignor relinquishes control over the receivables 
B)  The transaction is essentially the same as factoring without recourse 
C)  The assigned accounts are reclassified as a separate account within total accounts receivable 
D)  The loan is offset against the assigned accounts receivable in the assignor's balance sheet 
A)  The assignor relinquishes control over the receivables 
B)  The transaction is essentially the same as factoring without recourse 
C)  The assigned accounts are reclassified as a separate account within total accounts receivable 
D)  The loan is offset against the assigned accounts receivable in the assignor's balance sheet

Question 16

The 12/31/13 unadjusted trial balance of a company disclosed the following balances: $\begin{array} { | l | l | l | } 
\hline \text { Accounts receivable } & \$ 200,000 & \
\hline \text { Allowance for doubtful accounts } & 1,000 & \mathrm { Cr } . \
\hline \text { Sales } & & \
\hline
\end{array}$Additionally, the firm has given up trying to collect on $5,000 of its accounts receivable but has not yet recorded the write-off entry. The firm does not use the direct write off method to estimate bad debt expense.
(a) Provide the entry for the write-off of the receivable.
(b) If the firm uses the percentage of sales allowance method for recording bad debt expense, and has experienced an average 6% rate of non-collection based on sales, provide the entry to record bad debt expense for 2013.
(c) Assume that after the firm recorded the $5,000 of write-offs, it determined that 18% of its remaining accounts receivable will be uncollectible under the aging method. Provide the entry to record bad debt expense.

Accepted Answer

@#IMG-DLM&
 $39,100

Question 17

At the end of the accounting year, December 31, 2004, a company had a petty cash fund balance of $600, a chequing account balance of $34,000 in Bank A, an overdraft of $800 with Bank B, and $4,000 in customer payments in the form of money orders. Assuming no other differences between the company books and the bank balances, what cash amount should the company report on its 2004 balance sheet?

Accepted Answer

A)  $37,200 
B)  $37,800 
C)  $38,600 
D)  $38,800 
A)  $37,200 
B)  $37,800 
C)  $38,600 
D)  $38,800

Question 18

The estimation of bad debt expense by using a percentage of credit sales produces the same results, as an aging of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 19

At year-end, the following balances appeared on the ledger of a company prior to adjusting and closing it books. $\begin{array}{|l|l|}
\hline \text { Accounts receivable } & \$ 110,500 \
\hline \text { Notes receivable } & 6,500 \
\hline \text { Allowance for doubtful accounts (credit) } & 520 \\hline \text { Sales revenue } & 400,400(1 / 2 \text { on credit }) \
\hline \text { Sales returns and allowances } & 10,400(1 / 2 \text { on credit }) \
\hline \text { Advances to company officers } & 19,500 \
\hline
\end{array}$ All receivables arose out of sales transactions except the advances to officers. The company's president estimated that 2 percent of outstanding customer receivables would not be collected. The controller believed that three-quarters of one percent of net credit sales would result in bad debts. How much should be debited to bad debt expense if:
(a) The president's estimate prevails? $__________________.
(b) The controller's view is accepted? $__________________.

Accepted Answer

(a) [($110,500 + $6,

Question 20

Company M assigned a receivable from AB to the XY Finance Company on a "non-notification" basis. On this basis:

Accepted Answer

A)  XY need not tell M when AB makes payment to M. 
B)  AB will make payment to M. 
C)  AB need not make further contact with M about the payment situation. 
D)  M need not tell XY when AB makes payment to M. 
A)  XY need not tell M when AB makes payment to M. 
B)  AB will make payment to M. 
C)  AB need not make further contact with M about the payment situation. 
D)  M need not tell XY when AB makes payment to M.

The "adjusted or correct cash balance" in a bank reconciliation is always equal to the bank balance plus all deposits in transit.

The members of which of the following pairs of methods of accounts receivable financing are most similar?

Cash, as defined for financial reporting purposes, includes currency, coin, and deposits at commercial banks, which are available for immediate use.

Transaction costs arising from the purchase of amortized cost or FVOCI investments may be capitalized to the investment account or expensed.

A company received two one-year notes in payment for merchandise sold. One note had a face amount of $6,000 and was interest-bearing at an annual rate of 18 percent. The other note had a face amount of $7,080 and was non-interest-bearing (its implied interest rate was 18 percent).

When accounts receivable are factored without recourse, what account does the transferor credit?

Loans and receivable with a view to sale in the long-term would be accounted for using Fair Value through Profit or Loss (FVTPL).

The time value of money is measured by the excess of resources received, or paid over the amount of resources lent or borrowed at a different date.

On September 16, 2013, a corporation sold to a bank, a customer's 18 percent, 60-day note, dated August 31, 2013, with a face amount of $3,000. The bank discounted the note at 15 percent. The cash received by the corporation was (assume 360 days per year):

Which of the following would be classified as a trade receivable?

When receivables are factored with recourse and recorded as a loan, the transferor generally

X borrows money from the bank by signing a non-interest-bearing $1,000 note payable due at the end of one year. The going rate of interest for notes of this type is 9 percent. How much cash did X receive? $_______________________.

When a firm (assignor) assigns part of its accounts receivable as collateral for a loan:

The estimation of bad debt expense by using a percentage of credit sales produces the same results, as an aging of accounts receivable.

Company M assigned a receivable from AB to the XY Finance Company on a "non-notification" basis. On this basis:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 7: Financial Assets: Cash and Receivables

The "adjusted or correct cash balance" in a bank reconciliation is always equal to the bank balance plus all deposits in transit.

The members of which of the following pairs of methods of accounts receivable financing are most similar?

Cash, as defined for financial reporting purposes, includes currency, coin, and deposits at commercial banks, which are available for immediate use.

Transaction costs arising from the purchase of amortized cost or FVOCI investments may be capitalized to the investment account or expensed.

A company received two one-year notes in payment for merchandise sold. One note had a face amount of $6,000 and was interest-bearing at an annual rate of 18 percent. The other note had a face amount of $7,080 and was non-interest-bearing (its implied interest rate was 18 percent).

When accounts receivable are factored without recourse, what account does the transferor credit?

Loans and receivable with a view to sale in the long-term would be accounted for using Fair Value through Profit or Loss (FVTPL).

The time value of money is measured by the excess of resources received, or paid over the amount of resources lent or borrowed at a different date.

On September 16, 2013, a corporation sold to a bank, a customer's 18 percent, 60-day note, dated August 31, 2013, with a face amount of $3,000. The bank discounted the note at 15 percent. The cash received by the corporation was (assume 360 days per year):

Which of the following would be classified as a trade receivable?

When receivables are factored with recourse and recorded as a loan, the transferor generally

X borrows money from the bank by signing a non-interest-bearing $1,000 note payable due at the end of one year. The going rate of interest for notes of this type is 9 percent. How much cash did X receive? $_______________________.

When a firm (assignor) assigns part of its accounts receivable as collateral for a loan:

The estimation of bad debt expense by using a percentage of credit sales produces the same results, as an aging of accounts receivable.

Company M assigned a receivable from AB to the XY Finance Company on a "non-notification" basis. On this basis:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters