Question 1

When receivables are factored with recourse and recorded as a sale, 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 2

Short-term payables may include a current maturity of a long-term liability that arises when the next payment on such a debt will be made out of current assets.

Accepted Answer

A) True 
 B)False

Question 3

When financial instruments that are designated as FVOCI are expected to be sold, a gain or loss for the difference between the amortized cost and fair values will be made to OCI.

Accepted Answer

A) True 
 B)False

Question 4

The records of a corporation provided the following information at the end of the current reporting year, December 31, 2002: $$\begin{array} { | l | l | } 
\hline \text { Cash short } & \$ 50 \
\hline \text { Petty cash (on hand) } & 300 \
\hline \text { Certificates of deposit } & 30,000 \
\hline \text { Savings account balance } & 17,800 \
\hline \text { Money orders trom customers } & 500 \
\hline \text { Chequing account balance (reconciled balance; does not include any other items listed) } & 11,720 \
\hline \text { Postage stamps on hand } & 104 \
\hline \text { Uncashed tax retund cheque } & 916 \
\hline \text { Uncashed certitied cheque (from c ustomer) } & 400 \
\hline
\end{array}$$ The amount that the corporation should report for cash on its 2002 balance sheet is:

Accepted Answer

A)  $61,586 
B)  $31,636 
C)  $31,586 
D)  $13,836 
E)  $13,786 
A)  $61,586 
B)  $31,636 
C)  $31,586 
D)  $13,836 
E)  $13,786

Question 5

Long-term debt investments held for their contractual cash flows would be accounted for using Fair Value through Profit or Loss (FVTPL).

Accepted Answer

A) True 
 B)False

Question 6

A company held a one-year, $3,000, 8 percent interest-bearing note receivable. After holding it for 2 months, the company discounted (sold) it to the bank at 10 percent. Give the entry to record the sale of the note. Assume interest revenue is not recorded before the note is discounted. $\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & 2,970 & & \
\hline \text { Interest Expense } & & 30 & \
\hline \text { Note receivable } & & & 3,000 \
\hline
\end{array}$

Accepted Answer

$3,000 + ($3,000 ×.0

Question 7

During 2001, a corporation recorded sales as follows: Cash sales, $300,000, and credit sales, $150,000. At 12/31/01, before the adjusting entries, Accounts receivable showed a debit balance of $90,000 and Allowance for Doubtful Accounts showed a credit balance of $600.
Required:
(a) Assuming a bad debt of $150 is to be written off, give the journal entry on 12/31/01.
(b) Give the adjusting entry for bad debt expense at 12/31/01, assuming bad debt losses are estimated to be 1 percent of credit sales.
(c) Give the adjusting entry for bad debt expense at 12/31/01, assuming instead that bad debt losses are estimated to be 2 percent of the balance in the Accounts receivable account (take transaction (a) into account).

Accepted Answer

@#IMG-DLM&
($90,000 - $150) × 2% = $1,79

Question 8

When a specific bad debt is written off as uncollectible, and subsequently collected in full, there is no effect to the income statement.

Accepted Answer

A) True 
 B)False

Question 9

In the assignment of accounts receivable, the right of a third party to demand payment from the transferor of the receivables if they prove uncollectible is referred to as recourse.

Accepted Answer

A) True 
 B)False

Question 10

A note receivable is said to be impaired if there is some uncertainty with regards to the collection of all or part of the note.

Accepted Answer

A) True 
 B)False

Question 11

In preparing its bank reconciliation for the month of March 2001, a company has available the following information: $$\begin{array} { | l | l | } 
\hline \text { Balance as per bank statement } 3 / 31 / 2001 & \$ 36,050 \
\hline \text { Deposit in transit, } 3 / 31 / 2001 & 6,250 \
\hline \text { Outstanding cheques, } 3 / 31 / 2001 & 5,750 \
\hline \text { Credit erroneously recorded by bank in the firm's account } 3 / 12 / 2001 & 250 \
\hline \text { Bank senice charges tor March } & 50 \
\hline
\end{array}$$ What should be the correct balance of cash at March 31, 2001?

Accepted Answer

A)  $35,250 
B)  $36,250 
C)  $36,300 
D)  $36,550 
A)  $35,250 
B)  $36,250 
C)  $36,300 
D)  $36,550

Question 12

Computing bad debt expense by estimating the net realizable value of accounts receivable (ageing approach):

Accepted Answer

A)  Emphasizes the income statement rather than the balance sheet. 
B)  Causes an adjustment to the allowance account, which produces a balance in the account equal to the total estimated uncollectible amount. 
C)  Produces a bad debt expense amount that is close to uncollectible current credit sales. 
D)  Is based primarily on the cost principle. 
A)  Emphasizes the income statement rather than the balance sheet. 
B)  Causes an adjustment to the allowance account, which produces a balance in the account equal to the total estimated uncollectible amount. 
C)  Produces a bad debt expense amount that is close to uncollectible current credit sales. 
D)  Is based primarily on the cost principle.

Question 13

A non-interest-bearing note receivable:

Accepted Answer

A)  Causes no interest revenue to be recorded. 
B)  Includes a specified principal amount plus specified interest. 
C)  Includes a specified principal amount but an unspecified interest amount. 
D)  Includes an unspecified principal amount and an unspecified interest amount. 
A)  Causes no interest revenue to be recorded. 
B)  Includes a specified principal amount plus specified interest. 
C)  Includes a specified principal amount but an unspecified interest amount. 
D)  Includes an unspecified principal amount and an unspecified interest amount.

Question 14

Separation of responsibilities is essential in the control procedures for both cash inflows and cash outflows.

Accepted Answer

A) True 
 B)False

Question 15

Simple interest usually is computed on an annual basis but it can also be compounded semi-annually, quarterly, or even daily.

Accepted Answer

A) True 
 B)False

Question 16

Choose the correct statement about recording the discounting (with recourse) of a customer's four-month note with a financial institution. Assume the note is held for a month before it is discounted.

Accepted Answer

A)  The notes receivable discounted account represents both a contra-notes receivable and a contingent liability. 
B)  There is only one way to disclose the contingent liability. 
C)  The gain or loss on discounting equals the difference between the proceeds and the face value of the note. 
D)  The financial institution bases its discount (fee) on the face value of the note. 
A)  The notes receivable discounted account represents both a contra-notes receivable and a contingent liability. 
B)  There is only one way to disclose the contingent liability. 
C)  The gain or loss on discounting equals the difference between the proceeds and the face value of the note. 
D)  The financial institution bases its discount (fee) on the face value of the note.

Question 17

A company has $9,000 on deposit in Bank A and is overdrawn $4,000 with Bank C; the company should report a cash balance of:

Accepted Answer

A)  $4,000 
B)  $5,000 
C)  $9,000 
D)  $13,000 
A)  $4,000 
B)  $5,000 
C)  $9,000 
D)  $13,000

Question 18

When the allowance method of recognizing bad debt expense is used, the typical write off of a specific customer's account:

Accepted Answer

A)  decreases net income. 
B)  decreases current assets. 
C)  decreases working capital. 
D)  has no effect on net income. 
A)  decreases net income. 
B)  decreases current assets. 
C)  decreases working capital. 
D)  has no effect on net income.

Question 19

Cash held by a foreign subsidiary that is not readily available to the parent must not be included with cash and cash equivalents on the consolidated Statement of Financial Position.

Accepted Answer

A) True 
 B)False

Question 20

A company that receives cash in an amount less than the face amount of a non-interest-bearing note payable should record the note at its discounted present value.

Accepted Answer

A) True 
 B)False

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

Short-term payables may include a current maturity of a long-term liability that arises when the next payment on such a debt will be made out of current assets.

When financial instruments that are designated as FVOCI are expected to be sold, a gain or loss for the difference between the amortized cost and fair values will be made to OCI.

Long-term debt investments held for their contractual cash flows would be accounted for using Fair Value through Profit or Loss (FVTPL).

When a specific bad debt is written off as uncollectible, and subsequently collected in full, there is no effect to the income statement.

In the assignment of accounts receivable, the right of a third party to demand payment from the transferor of the receivables if they prove uncollectible is referred to as recourse.

A note receivable is said to be impaired if there is some uncertainty with regards to the collection of all or part of the note.

Computing bad debt expense by estimating the net realizable value of accounts receivable (ageing approach):

A non-interest-bearing note receivable:

Separation of responsibilities is essential in the control procedures for both cash inflows and cash outflows.

Simple interest usually is computed on an annual basis but it can also be compounded semi-annually, quarterly, or even daily.

Choose the correct statement about recording the discounting (with recourse) of a customer's four-month note with a financial institution. Assume the note is held for a month before it is discounted.

A company has $9,000 on deposit in Bank A and is overdrawn $4,000 with Bank C; the company should report a cash balance of:

When the allowance method of recognizing bad debt expense is used, the typical write off of a specific customer's account:

Cash held by a foreign subsidiary that is not readily available to the parent must not be included with cash and cash equivalents on the consolidated Statement of Financial Position.

A company that receives cash in an amount less than the face amount of a non-interest-bearing note payable should record the note at its discounted present value.

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

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

Short-term payables may include a current maturity of a long-term liability that arises when the next payment on such a debt will be made out of current assets.

When financial instruments that are designated as FVOCI are expected to be sold, a gain or loss for the difference between the amortized cost and fair values will be made to OCI.

Long-term debt investments held for their contractual cash flows would be accounted for using Fair Value through Profit or Loss (FVTPL).

When a specific bad debt is written off as uncollectible, and subsequently collected in full, there is no effect to the income statement.

In the assignment of accounts receivable, the right of a third party to demand payment from the transferor of the receivables if they prove uncollectible is referred to as recourse.

A note receivable is said to be impaired if there is some uncertainty with regards to the collection of all or part of the note.

Computing bad debt expense by estimating the net realizable value of accounts receivable (ageing approach):

A non-interest-bearing note receivable:

Separation of responsibilities is essential in the control procedures for both cash inflows and cash outflows.

Simple interest usually is computed on an annual basis but it can also be compounded semi-annually, quarterly, or even daily.

Choose the correct statement about recording the discounting (with recourse) of a customer's four-month note with a financial institution. Assume the note is held for a month before it is discounted.

A company has $9,000 on deposit in Bank A and is overdrawn $4,000 with Bank C; the company should report a cash balance of:

When the allowance method of recognizing bad debt expense is used, the typical write off of a specific customer's account:

Cash held by a foreign subsidiary that is not readily available to the parent must not be included with cash and cash equivalents on the consolidated Statement of Financial Position.

A company that receives cash in an amount less than the face amount of a non-interest-bearing note payable should record the note at its discounted present value.

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