Question 1

The bookkeeper prepared a check for $68 but accidentally recorded it as $86.When preparing the bank reconciliation,this should be corrected by:

Accepted Answer

A) Adding $18 to the bank balance. 
B) Subtracting $18 from the bank balance. 
C) Adding $18 to the book balance. 
D) Subtracting $18 from the book balance. 
A) Adding $18 to the bank balance. 
B) Subtracting $18 from the bank balance. 
C) Adding $18 to the book balance. 
D) Subtracting $18 from the book balance.

Question 2

If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense:

Accepted Answer

A) No valuation allowance will be required. 
B) The relationship between revenue and expenses is being stressed more than the valuation of receivables at the balance sheet date. 
C) The existing balance in the Allowance for Doubtful Accounts will be increased sufficiently to equal the probable loss indicated by the percentage of net sales computation. 
D) Any past-due accounts will be listed as a separate item in the balance sheet. 
A) No valuation allowance will be required. 
B) The relationship between revenue and expenses is being stressed more than the valuation of receivables at the balance sheet date. 
C) The existing balance in the Allowance for Doubtful Accounts will be increased sufficiently to equal the probable loss indicated by the percentage of net sales computation. 
D) Any past-due accounts will be listed as a separate item in the balance sheet.

Question 3

Uncollectible accounts
(a.)What is an uncollectible account? Explain how a business suffers losses from uncollectible accounts.
(b.)"A competent credit manager should set credit policies so as to avoid any and all losses from uncollectible accounts." Is this statement accurate? Explain your answer.

Accepted Answer

(a)An uncollectible account is an accoun

Question 4

The accounts receivable turnover rate for Baldwin Corporation is 8,and for Basinger Company the turnover rate is 10.These statistics indicate that:

Accepted Answer

A) Basinger collects its accounts receivable within 10 days on average; Baldwin collects its accounts receivable in 8 days on average. 
B) Basinger writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company. 
C) Basinger collects its accounts receivable faster than does Baldwin Company. 
D) Basinger makes on average 10 credit sales annually to each of its customers,while Baldwin makes 8 credit sales to each customer. 
A) Basinger collects its accounts receivable within 10 days on average; Baldwin collects its accounts receivable in 8 days on average. 
B) Basinger writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company. 
C) Basinger collects its accounts receivable faster than does Baldwin Company. 
D) Basinger makes on average 10 credit sales annually to each of its customers,while Baldwin makes 8 credit sales to each customer.

Question 5

Effective internal control over receivables is designed to ensure that customers' payments are promptly deposited.

Accepted Answer

A) True 
 B)False

Question 6

Internal control over cash transactions
Listed below are seven errors or problems that might occur in the processing of cash transactions.Also shown is a separate list of internal control procedures.Indicate the internal control procedure that should prevent the error or problem from occurring.If none of the control procedures would effectively prevent the error,place an X in the space provided.
Possible Error or Problem
_______ 1.A purchase invoice was paid even though the merchandise was never received.
_______ 2.An employee issued a credit memorandum for a nonexistent sales return in order to conceal his theft of the amount received in payment of an account receivable.
_______ 3.Management is unaware that blank checks are being issued for unauthorized expenditures by the official designated to sign checks.
_______ 4.A salesclerk collects the full selling price from a customer but rings up the sale at less than actual price and pockets the difference.
_______ 5.Several days' cash receipts are lost in a fire.
_______ 6.A new employee often gives customers an incorrect amount of change.
_______ 7.No one has discovered that amounts deposited in the company's bank account by the cashier over the last few years are frequently smaller than amounts forwarded to him from the mailroom or sales department.
Internal Control Procedures
(a.)Periodic reconciliation of bank statements to accounting records.
(b.)Use of a Cash Over and Short account.
(c.)Adequate separation of duties.
(d.)Use of pre-numbered sales tickets.
(e.)Depositing each day's cash receipts intact in the bank.
(f.)Use of electronic cash registers equipped with optical scanners to read magnetically coded labels on merchandise.
(g.)Immediate preparation of a control listing when cash is received and the comparison of this listing with bank deposits.
(h.)Cancellation of paid vouchers.
(i.)Requirement that a voucher be prepared as advance authorization of every cash disbursement.

Accepted Answer

The answer of Internal control over cash transactions
Listed below are...

Question 7

The Allowance for Doubtful Accounts should be listed on the balance sheet as a current liability.

Accepted Answer

A) True 
 B)False

Question 8

The purpose of the fair value adjustment for securities classified as "available-for-sale" is:

Accepted Answer

A) To adjust the valuation of a company's investment to current market value. 
B) To recognize the proper amount of gain or loss on fluctuations in the market value of these securities in the current period income statement. 
C) To adjust a corporation's capital stock account to reflect the current market value of the outstanding capital stock. 
D) To compute the amount of taxes payable on unrealized gains and losses. 
A) To adjust the valuation of a company's investment to current market value. 
B) To recognize the proper amount of gain or loss on fluctuations in the market value of these securities in the current period income statement. 
C) To adjust a corporation's capital stock account to reflect the current market value of the outstanding capital stock. 
D) To compute the amount of taxes payable on unrealized gains and losses.

Question 9

To "write-off" an account receivable is to reduce the balance of the customer's account to zero.

Accepted Answer

A) True 
 B)False

Question 10

Assuming a 365 day year,Gore Industries calculated an average of 53 days to collect its accounts receivable in 2015.During 2015,Gore's accounts receivable turnover rate:

Accepted Answer

A) Was approximately 6.89. 
B) Was equal to 53 times its average accounts receivable. 
C) Was approximately 0.15. 
D) Can't be determined from this information alone. 
A) Was approximately 6.89. 
B) Was equal to 53 times its average accounts receivable. 
C) Was approximately 0.15. 
D) Can't be determined from this information alone.

Question 11

Dorfmann Industries has an accounts receivable turnover rate of 12.Which of the following statements is not true?

Accepted Answer

A) Dorfmann's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 8. 
B) Dorfmann waits approximately 30 days to make collections of its credit sales.(Use 365 days in a year.) 
C) Dorfmann writes off accounts receivable as uncollectible if they are over 30 days old. 
D) Dorfmann's net credit sales are about twelve times the amount of its average accounts receivable. 
A) Dorfmann's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 8. 
B) Dorfmann waits approximately 30 days to make collections of its credit sales.(Use 365 days in a year.) 
C) Dorfmann writes off accounts receivable as uncollectible if they are over 30 days old. 
D) Dorfmann's net credit sales are about twelve times the amount of its average accounts receivable.

Question 12

Factoring allows a business to obtain immediate cash instead of waiting to collect the account receivable.

Accepted Answer

A) True 
 B)False

Question 13

Bert had accounts receivable of $280,000 and an allowance for doubtful accounts of $10,800 just before writing off as worthless an account receivable from Ernie Company of $1,600.After writing off this receivable what would be the balance in Bert's Allowance for Doubtful Accounts?

Accepted Answer

A) $10,800 credit balance. 
B) $12,400 credit balance. 
C) $9,200 credit balance. 
D) $9,200 debit balance. 
A) $10,800 credit balance. 
B) $12,400 credit balance. 
C) $9,200 credit balance. 
D) $9,200 debit balance.

Question 14

The first step in a bank reconciliation is to update the depositor's accounting records for any deposits in transit.

Accepted Answer

A) True 
 B)False

Question 15

Fisher Corporation invested $320,000 cash in available-for-sale marketable securities in early December.On December 31,the quoted market price for these securities is $337,000.Which of the following statements is correct?

Accepted Answer

A) Fisher's December income statement includes a $17,000 gain on investments. 
B) If Fisher sells these investments on January 2 for $300,000,it will report a loss of $37,000. 
C) Fisher's December 31 balance sheet reports marketable securities at $320,000 and an unrealized holding gain on investments of $17,000. 
D) Fisher's December 31 balance sheet reports marketable securities at $337,000 and an unrealized holding gain on investments of $17,000. 
A) Fisher's December income statement includes a $17,000 gain on investments. 
B) If Fisher sells these investments on January 2 for $300,000,it will report a loss of $37,000. 
C) Fisher's December 31 balance sheet reports marketable securities at $320,000 and an unrealized holding gain on investments of $17,000. 
D) Fisher's December 31 balance sheet reports marketable securities at $337,000 and an unrealized holding gain on investments of $17,000.

Question 16

Investments in available for sale marketable securities:

Accepted Answer

A) Only include investments in the capital stock of publicly traded corporations. 
B) May be reported in the balance sheet at market values lower than cost,but never at values in excess of original cost. 
C) Are adjusted to current market value at the end of each accounting period. 
D) Are carried in the accounting records at current market values,and therefore do not generate gains or losses when sold at market values. 
A) Only include investments in the capital stock of publicly traded corporations. 
B) May be reported in the balance sheet at market values lower than cost,but never at values in excess of original cost. 
C) Are adjusted to current market value at the end of each accounting period. 
D) Are carried in the accounting records at current market values,and therefore do not generate gains or losses when sold at market values.

Question 17

As of December 31,2015,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 31,2015,balance sheet as "Cash and cash equivalents"?

Accepted Answer

A) $53,200. 
B) $70,120. 
C) $130,120. 
D) $113,200. 
A) $53,200. 
B) $70,120. 
C) $130,120. 
D) $113,200.

Question 18

A bank statement shows a balance of $8,445 at June 30.The bank reconciliation is prepared and includes outstanding checks of $2,790,deposits in transit of $1,350,and a bank service charge of $30.Among the paid checks returned by the bank was check no.900 in the amount of $600,which the company had erroneously recorded in the accounting records as $60.The "adjusted cash balance" at June 30 is:

Accepted Answer

A) $6,975. 
B) $6,465. 
C) $7,005. 
D) $7,575. 
A) $6,975. 
B) $6,465. 
C) $7,005. 
D) $7,575.

Question 19

Which of the following transactions will appear in the bank statement but generally not have been recorded by the depositor?

Accepted Answer

A) Outstanding checks. 
B) Service charges. 
C) Deposits in transit. 
D) Both outstanding checks and deposits in transit. 
A) Outstanding checks. 
B) Service charges. 
C) Deposits in transit. 
D) Both outstanding checks and deposits in transit.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 7: Financial Assets

The bookkeeper prepared a check for $68 but accidentally recorded it as $86.When preparing the bank reconciliation,this should be corrected by:

If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense:

Uncollectible accounts (a.)What is an uncollectible account? Explain how a business suffers losses from uncollectible accounts. (b.)"A competent credit manager should set credit policies so as to avoid any and all losses from uncollectible accounts." Is this statement accurate? Explain your answer.

The accounts receivable turnover rate for Baldwin Corporation is 8,and for Basinger Company the turnover rate is 10.These statistics indicate that:

Effective internal control over receivables is designed to ensure that customers' payments are promptly deposited.

The Allowance for Doubtful Accounts should be listed on the balance sheet as a current liability.

The purpose of the fair value adjustment for securities classified as "available-for-sale" is:

To "write-off" an account receivable is to reduce the balance of the customer's account to zero.

Assuming a 365 day year,Gore Industries calculated an average of 53 days to collect its accounts receivable in 2015.During 2015,Gore's accounts receivable turnover rate:

Dorfmann Industries has an accounts receivable turnover rate of 12.Which of the following statements is not true?

Factoring allows a business to obtain immediate cash instead of waiting to collect the account receivable.

Bert had accounts receivable of $280,000 and an allowance for doubtful accounts of $10,800 just before writing off as worthless an account receivable from Ernie Company of $1,600.After writing off this receivable what would be the balance in Bert's Allowance for Doubtful Accounts?

The first step in a bank reconciliation is to update the depositor's accounting records for any deposits in transit.

Fisher Corporation invested $320,000 cash in available-for-sale marketable securities in early December.On December 31,the quoted market price for these securities is $337,000.Which of the following statements is correct?

Investments in available for sale marketable securities:

As of December 31,2015,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 31,2015,balance sheet as "Cash and cash equivalents"?

Which of the following transactions will appear in the bank statement but generally not have been recorded by the depositor?

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

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values

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