Question 1

An account receivable that arose from normal sales activity has a 16-month credit term.This receivable will be classified as a noncurrent asset.

Accepted Answer

A) True 
 B)False

Question 2

Each of the following transactions would be reflected in both the income statement and the statement of cash flows for the current period,except:

Accepted Answer

A) The adjustment of marketable securities to their current market value. 
B) Receipt of dividends earned on investments. 
C) Payment of interest on bonds. 
D) Sale of merchandise for cash. 
A) The adjustment of marketable securities to their current market value. 
B) Receipt of dividends earned on investments. 
C) Payment of interest on bonds. 
D) Sale of merchandise for cash.

Question 3

Cardinal Company's bank statement showed a balance at May 31 of $180,974.The only reconciling items consisted of a large number of outstanding checks totaling $51,847.At May 31,what balance should Cardinal's Cash account show?

Accepted Answer

A) $232,821. 
B) $129,127. 
C) $77,280. 
D) $180,794. 
A) $232,821. 
B) $129,127. 
C) $77,280. 
D) $180,794.

Question 4

Bank reconciliation-classification
Indicate how the following items would be treated in Aladdin's,Inc.'s bank reconciliation.Choose from the following answers:
(a. )Deducted from the balance per accounting records.
(b. )Added to balance per accounting records.
(c. )Deducted from balance per bank statement.
(d. )Added to balance per bank statement.

Accepted Answer

The answer of Bank reconciliation-classification
Indicate how the following items would...

Question 5

The Allowance for Doubtful Accounts will appear on the:

Accepted Answer

A) Income statement. 
B) Balance sheet. 
C) Cash flow statement. 
D) Statement of retained earnings. 
A) Income statement. 
B) Balance sheet. 
C) Cash flow statement. 
D) Statement of retained earnings.

Question 6

The Allowance for Doubtful Accounts is a contra-asset account and appears on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

Industries with relatively high accounts receivable turnover rates include restaurants and hotels.

Accepted Answer

A) True 
 B)False

Question 8

The higher a company's accounts receivable turnover rate,the more liquid the company's receivables.

Accepted Answer

A) True 
 B)False

Question 9

At the start of the current year,Minuteman Corporation had a credit balance in the Allowance for Doubtful Accounts of $1,800.During the year a monthly provision of 2% of sales was made for uncollectible accounts.Sales for the year were $600,000,and $5,600 of accounts receivable were written off as worthless.No recoveries of accounts previously written off were made during the year.The year-end financial statements should show:

Accepted Answer

A) Uncollectible accounts expense of $13,800. 
B) Allowance for Doubtful Accounts with a credit balance of $8,200. 
C) Allowance for Doubtful Accounts with a credit balance of $6,400. 
D) Uncollectible accounts expense of $5,600. 
A) Uncollectible accounts expense of $13,800. 
B) Allowance for Doubtful Accounts with a credit balance of $8,200. 
C) Allowance for Doubtful Accounts with a credit balance of $6,400. 
D) Uncollectible accounts expense of $5,600.

Question 10

Marketable securities are:

Accepted Answer

A) Listed immediately after Inventory on the balance sheet. 
B) Almost as liquid as cash. 
C) Originally recorded at cost less any broker's commission. 
D) Sold for a gain when cash received is less than the cost basis. 
A) Listed immediately after Inventory on the balance sheet. 
B) Almost as liquid as cash. 
C) Originally recorded at cost less any broker's commission. 
D) Sold for a gain when cash received is less than the cost basis.

Question 11

Effective internal control includes all the following steps except:

Accepted Answer

A) The Customer Order department prepares a sales order upon receipt of an order. 
B) The Billing department compares what was shipped with what was ordered and prepares and mails a sales invoice. 
C) The Accounting department receives the checks and the mailroom listing of checks received and prepares the daily bank deposit. 
D) The Accounting department reconciles the bank statement with accounting records. 
A) The Customer Order department prepares a sales order upon receipt of an order. 
B) The Billing department compares what was shipped with what was ordered and prepares and mails a sales invoice. 
C) The Accounting department receives the checks and the mailroom listing of checks received and prepares the daily bank deposit. 
D) The Accounting department reconciles the bank statement with accounting records.

Question 12

Compensating balances are not included in the amount of cash listed on a balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

Upon completion of the bank reconciliation,a journal entry will be required to update the depositor's accounting records.This entry will include a:

Accepted Answer

A) Credit to Cash for $700. 
B) Debit to Cash for $700. 
C) Debit to Cash for $7. 
D) Debit to Bank Service Charge Expense for $7. 
A) Credit to Cash for $700. 
B) Debit to Cash for $700. 
C) Debit to Cash for $7. 
D) Debit to Bank Service Charge Expense for $7.

Question 14

[The following information applies to the questions displayed below.]
Dynamic,Inc.had credit sales of $675,000 for March.Accounts receivable of $6,000 were determined to be worthless and were written off during March.Accounts receivable total $575,000 at March 31.Management feels that based on past experience,approximately 2% of net credit sales will prove to be uncollectible.
-Assuming Dynamic,Inc.uses the direct write-off method of accounting for uncollectible accounts,uncollectible accounts expense for March is:

Accepted Answer

A) $13,500. 
B) $6,000. 
C) $11,500. 
D) $17,500. 
A) $13,500. 
B) $6,000. 
C) $11,500. 
D) $17,500.

Question 15

The Allowance for Doubtful Accounts is called a valuation account,or contra-asset account,and normally has a credit balance.

Accepted Answer

A) True 
 B)False

Question 16

The adjustment of available for sale marketable securities to their current market value affects:

Accepted Answer

A) The balance sheet. 
B) The income statement. 
C) The cash flow statement. 
D) The statement of retained earnings. 
A) The balance sheet. 
B) The income statement. 
C) The cash flow statement. 
D) The statement of retained earnings.

Question 17

The income statement approach used to estimate uncollectible receivables uses a percentage of net sales without considering the current balance in the Allowance account.

Accepted Answer

A) True 
 B)False

Question 18

Joe Costello handles cash receipts from customers and also has responsibility for issuing credit memoranda,writing off uncollectible accounts,and maintaining the accounts receivable records.When customers pay their accounts,Costello occasionally issues a credit memorandum and steals the cash received from the customer.This fraud should come to light if an employee other than Costello:

Accepted Answer

A) Reconciles the bank statement to the accounting records. 
B) Reconciles the accounts receivable subsidiary ledger to the accounts receivable controlling account. 
C) Investigates weekly all accounts written off as uncollectible. 
D) Reconciles credit memoranda for sales returns to returned merchandise accepted by the receiving department. 
A) Reconciles the bank statement to the accounting records. 
B) Reconciles the accounts receivable subsidiary ledger to the accounts receivable controlling account. 
C) Investigates weekly all accounts written off as uncollectible. 
D) Reconciles credit memoranda for sales returns to returned merchandise accepted by the receiving department.

Question 19

When preparing a bank reconciliation,an NSF check will:

Accepted Answer

A) Increase the balance per depositor's records. 
B) Decrease the balance per depositor's records. 
C) Increase the balance per the bank statement. 
D) Decrease the balance per the bank statement. 
A) Increase the balance per depositor's records. 
B) Decrease the balance per depositor's records. 
C) Increase the balance per the bank statement. 
D) Decrease the balance per the bank statement.

Question 20

When reading a bank statement,which reference indicates an increase in the cash balance?

Accepted Answer

A) Debit Memorandum 
B) Credit Memorandum 
C) NSF Check 
D) Service Charge 
A) Debit Memorandum 
B) Credit Memorandum 
C) NSF Check 
D) Service Charge

Exam 7: Financial Assets

An account receivable that arose from normal sales activity has a 16-month credit term.This receivable will be classified as a noncurrent asset.

Each of the following transactions would be reflected in both the income statement and the statement of cash flows for the current period,except:

Cardinal Company's bank statement showed a balance at May 31 of $180,974.The only reconciling items consisted of a large number of outstanding checks totaling $51,847.At May 31,what balance should Cardinal's Cash account show?

The Allowance for Doubtful Accounts will appear on the:

The Allowance for Doubtful Accounts is a contra-asset account and appears on the balance sheet.

Industries with relatively high accounts receivable turnover rates include restaurants and hotels.

The higher a company's accounts receivable turnover rate,the more liquid the company's receivables.

Marketable securities are:

Effective internal control includes all the following steps except:

Compensating balances are not included in the amount of cash listed on a balance sheet.

Upon completion of the bank reconciliation,a journal entry will be required to update the depositor's accounting records.This entry will include a:

The Allowance for Doubtful Accounts is called a valuation account,or contra-asset account,and normally has a credit balance.

The adjustment of available for sale marketable securities to their current market value affects:

The income statement approach used to estimate uncollectible receivables uses a percentage of net sales without considering the current balance in the Allowance account.

When preparing a bank reconciliation,an NSF check will:

When reading a bank statement,which reference indicates an increase in the cash balance?

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters