Question 1

Asset-backed commercial paper may or may not be considered a cash equivalent, depending on the term and risk profile of these investments.

Accepted Answer

A) True 
 B)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. What amount of sales adjustments will be recorded by Entel?

Accepted Answer

A)  $12,000 
B)  $13,000 
C)  $14,000 
D)  $1,000 
A)  $12,000 
B)  $13,000 
C)  $14,000 
D)  $1,000

Question 3

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. What is the factor's net income from this factoring arrangement?

Accepted Answer

A)  $20,000 
B)  $6,000 
C)  $19,000 
D)  $7,000 
E)  $18,000 
A)  $20,000 
B)  $6,000 
C)  $19,000 
D)  $7,000 
E)  $18,000

Question 4

The allowance method for estimating and reporting bad debt expense:

Accepted Answer

A)  Demonstrates a practical application of the full-disclosure principle. 
B)  Generally recognizes gains and losses on bad debts in the period when the related account receivable is removed from the accounting records. 
C)  Is optional under GAAP for all retail companies. 
D)  Generally adheres to the matching principle better than the specific write-off method. 
A)  Demonstrates a practical application of the full-disclosure principle. 
B)  Generally recognizes gains and losses on bad debts in the period when the related account receivable is removed from the accounting records. 
C)  Is optional under GAAP for all retail companies. 
D)  Generally adheres to the matching principle better than the specific write-off method.

Question 5

When accounts receivable are factored with recourse and are accounted for as a loan, 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 6

If the estimate of bad debt expense is made on the basis of net realizable value of the accounts receivable, the balance of the account, "Allowance for Doubtful Accounts," is adjusted so that the adjusted balance reflects the computed amount needed to value the receivables.

Accepted Answer

A) True 
 B)False

Question 7

Bad debt losses on accounts receivable:

Accepted Answer

A)  Include cash and trade discounts forfeited. 
B)  Are reported as unusual items if collected a number of years after their write-off. 
C)  Are considered a normal business expense under the matching principle. 
D)  Can be reported in all situations by using either the allowance method or the specific write off method. 
A)  Include cash and trade discounts forfeited. 
B)  Are reported as unusual items if collected a number of years after their write-off. 
C)  Are considered a normal business expense under the matching principle. 
D)  Can be reported in all situations by using either the allowance method or the specific write off method.

Question 8

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

Accepted Answer

A)  direct write off. 
B)  percentage of credit sales. 
C)  the balance in the trade receivable accounts. 
D)  aging the trade receivable accounts. 
A)  direct write off. 
B)  percentage of credit sales. 
C)  the balance in the trade receivable accounts. 
D)  aging the trade receivable accounts.

Question 9

Using the same rate of annual interest over the same total time period, quarterly compounding will result in a larger accumulated amount than will monthly compounding.

Accepted Answer

A) True 
 B)False

Question 10

Collateral securities are assets of the borrower that the secured lender can seize if the note goes into default.

Accepted Answer

A) True 
 B)False

Question 11

A company is preparing the bank reconciliation for the month of May. The cash records indicate that cheques amounting to $15,000 were written during May and deposits were $21,000. The bank reconciliation of April showed outstanding cheques of $1,000 and deposits in transit of $2,000. The bank statement for May showed that total cheques cleared amounted to $14,500. Therefore, outstanding cheques at the end of May amounted to $____________.

Accepted Answer

The answer of A company is preparing the bank reconciliation...

Question 12

The cash account and bank statement for ABC Company for the month of October were as follows: $\begin{array} { | l | l | l | } 
\hline  { \text { CASH ACCOUNT* } } \
\hline \text { Bal. Sept. 30 } & 11,000 & \text { Cheques } \
\hline \text { Deposits } & 30,000 & \
\hline
\end{array}$Other data for September:
Sept. 30 cash on hand, $500
Sept. 30 outstanding checks, $900
Sept. 30 deposits in transit, $1,400
October 31 cash on hand, $480.
BANK STATEMENT SUMMARIZED** $\begin{array} { | l | l | } 
\hline \text { Balance, Sept. } 30 & \$ 10,000 \
\hline \text { Deposits } & 21,400 \
\hline \text { Cheques } & ( 20,900 ) \
\hline \text { Note collected for ABC including 10\% interest } & 1,100 \
\hline
\end{array}$
Returned cheque-previously
deposited cheque from customer $\begin{array} { | l | l | } 
\hline \text { BAD (NSF returned) } & ( 50 ) \
\hline \text { Bank charges for services } & ( 30 ) \
\hline \text { Balance, Oct. } 31 & \$ 11,520 \
\hline
\end{array}$ Required:
(a) Complete a bank reconciliation in all respects (note-you must compute the outstanding cheques and unrecorded deposits on October 31):
(b) Give all journal entries that should be made based upon your bank reconciliation.

Accepted Answer

@#IMG-DLM& *$30,000 + $1,400 - $21,400 =

Question 13

Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.

Accepted Answer

A) True 
 B)False

Question 14

Total sales for the period amounted to $100,000, of which 60 percent was on credit. The unadjusted trial balance showed Accounts receivable of $20,000 and the Allowance for doubtful accounts reflected a $500 credit balance (before the write off of a bad account of $100). The bad debt experience ratio based on the ending balance in accounts receivable is 3 percent. Bad debt expense for the period should be reported as $_____________________.

Accepted Answer

$20,000 - $100 = $19

Question 15

If the estimate of bad debt expense is made on the basis of net credit sales every period, this will result in a valuation of accounts receivable that approximates its net realizable at every balance sheet date.

Accepted Answer

A) True 
 B)False

Question 16

The reported net carrying amount of a non-interest-bearing note payable recorded on a gross basis will increase as time goes by.

Accepted Answer

A) True 
 B)False

Question 17

A company uses the allowance method of accounting for bad debt. During 2001, an important customer became bankrupt and a related receivable of $6,400 was deemed uncollectible. The 2001 entry to record this event would be: $$\begin{array} { | l | l | l | l | } 
\hline 1 &\text { Bad debt expense } & 6,400 & \
\hline &\text { A llowance tor doubtful accounts } & & 6,400 \
\hline 2 &\text { Loss on receivable } & 6,400 & \
\hline &\text { Accounts receivable } & & 6,400 \
\hline 3& \text { Bad debt expense } & 6,400 & \
\hline& \text { Accounts receiv able } & & 6,400 \
\hline 4 &\text { Loss on receivable } & 6,400 & \
\hline &\text { Allowance tor doubtful accounts } & & 6,400 \
\hline 5& \text { Allowance tor doubtful accounts } & 6,400 & \
\hline &\text { Accounts receivable } & & 6,400 \
\hline
\end{array}$$

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
E)  Choice 5 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
E)  Choice 5

Question 18

The credit sales method will provide a more realistic estimate of the realizable value of a company's accounts receivable than would the aging method.

Accepted Answer

A) True 
 B)False

Question 19

The impairment model for financial instruments under ASPE is the same as under IFRS.

Accepted Answer

A) True 
 B)False

Question 20

If the same percentage is used, an estimate of bad debt expense based upon credit sales rather than total sales will likely be more in conformity with the matching principle.

Accepted Answer

A) True 
 B)False

Asset-backed commercial paper may or may not be considered a cash equivalent, depending on the term and risk profile of these investments.

The allowance method for estimating and reporting bad debt expense:

When accounts receivable are factored with recourse and are accounted for as a loan, what account does the transferor credit?

If the estimate of bad debt expense is made on the basis of net realizable value of the accounts receivable, the balance of the account, "Allowance for Doubtful Accounts," is adjusted so that the adjusted balance reflects the computed amount needed to value the receivables.

Bad debt losses on accounts receivable:

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

Using the same rate of annual interest over the same total time period, quarterly compounding will result in a larger accumulated amount than will monthly compounding.

Collateral securities are assets of the borrower that the secured lender can seize if the note goes into default.

Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.

If the estimate of bad debt expense is made on the basis of net credit sales every period, this will result in a valuation of accounts receivable that approximates its net realizable at every balance sheet date.

The reported net carrying amount of a non-interest-bearing note payable recorded on a gross basis will increase as time goes by.

The credit sales method will provide a more realistic estimate of the realizable value of a company's accounts receivable than would the aging method.

The impairment model for financial instruments under ASPE is the same as under IFRS.

If the same percentage is used, an estimate of bad debt expense based upon credit sales rather than total sales will likely be more in conformity with the matching principle.

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

Asset-backed commercial paper may or may not be considered a cash equivalent, depending on the term and risk profile of these investments.

The allowance method for estimating and reporting bad debt expense:

When accounts receivable are factored with recourse and are accounted for as a loan, what account does the transferor credit?

If the estimate of bad debt expense is made on the basis of net realizable value of the accounts receivable, the balance of the account, "Allowance for Doubtful Accounts," is adjusted so that the adjusted balance reflects the computed amount needed to value the receivables.

Bad debt losses on accounts receivable:

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

Using the same rate of annual interest over the same total time period, quarterly compounding will result in a larger accumulated amount than will monthly compounding.

Collateral securities are assets of the borrower that the secured lender can seize if the note goes into default.

Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.

If the estimate of bad debt expense is made on the basis of net credit sales every period, this will result in a valuation of accounts receivable that approximates its net realizable at every balance sheet date.

The reported net carrying amount of a non-interest-bearing note payable recorded on a gross basis will increase as time goes by.

The credit sales method will provide a more realistic estimate of the realizable value of a company's accounts receivable than would the aging method.

The impairment model for financial instruments under ASPE is the same as under IFRS.

If the same percentage is used, an estimate of bad debt expense based upon credit sales rather than total sales will likely be more in conformity with the matching principle.

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