Exam 7: Financial Assets

In preparing the bank reconciliation,certain transactions recorded by the depositor may not have been recorded by the bank.Which of the following is an example of this type of transaction?

The purpose of establishing a petty cash fund is to:

The maker of a note is the party to whom payment is to be made.

A major purpose of using an Allowance for Doubtful Accounts is to recognize uncollectible accounts expense in the same accounting period as the related sales that caused the expense.

[The following information applies to the questions displayed below.] On June 1,2018,Jensen Company acquired an 8%,ten-month note receivable from a customer in settlement of an existing account receivable of $130,000.Interest and principal are due at maturity. -Jensen's entry to record the collection of this note at maturity includes a:

The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments.This item:

[The following information applies to the questions displayed below.] At the end of January,the unadjusted trial balance of Windsor,Inc.included the following accounts: -Windsor uses the income statement approach in estimating uncollectible accounts expense,and uncollectible accounts expense is estimated to be 2% of credit sales.What is the amount of uncollectible accounts expense recognized in Windsor's income statement for January?

[The following information applies to the questions displayed below.] On November 1,2017,Salem Corporation sold land priced at $900,000 in exchange for a 6%,six-month note receivable. -The journal entry made by Salem to record this transaction on November 1,2017,includes:

An example of good internal control over cash is to have the person responsible for physically handling all cash perform the bank statement reconciliations.

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

The term cash equivalent refers to:

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

[The following information applies to the questions displayed below.] On October 12,2017,Neptune Corporation invested $700,000 in short-term available-for-sale marketable securities.The market value of this investment was $730,000 at December 31,2017,but had slipped to $725,000 by December 31,2018. -In financial statements prepared on December 31,2017,Neptune Corporation reports:

If the allowance method is used,the recovery of an account receivable previously written-off results in a gain being recorded on the income statement.

When the account Allowance for Doubtful Accounts is used,writing off of an uncollectible accounts receivable will:

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.

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.

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 following information applies to the questions displayed below.] At the end of January,the unadjusted trial balance of Windsor,Inc.included the following accounts: -Windsor uses the income statement approach in estimating uncollectible accounts expense,and uncollectible accounts expense is estimated to be 2% of credit sales.The net realizable value of Windsor's accounts receivable in the January 31 balance sheet is: