Question 1

Dividend revenue and interest revenue are reported in the income statement as a component of a company's net income.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not an example of internal control over cash?

Accepted Answer

A) Preparation of a cash budget 
B) Daily deposits of cash receipts at the bank 
C) Combining the functions of signing checks with the approval of expenditures 
D) Preparation of bank reconciliation 
A) Preparation of a cash budget 
B) Daily deposits of cash receipts at the bank 
C) Combining the functions of signing checks with the approval of expenditures 
D) Preparation of bank reconciliation

Question 3

Effective internal control over accounts receivable ensures:

Accepted Answer

A) That credit is only extended to customers that meet the company's credit standards. 
B) That an approved factor is used when the company sells its accounts receivable. 
C) There is an accurate accounting for cash receipts,cash disbursements,and cash balances. 
D) The availability of adequate cash for conducting business operations. 
A) That credit is only extended to customers that meet the company's credit standards. 
B) That an approved factor is used when the company sells its accounts receivable. 
C) There is an accurate accounting for cash receipts,cash disbursements,and cash balances. 
D) The availability of adequate cash for conducting business operations.

Question 4

Cash management
(a. )What is meant by the term "cash management"?
(b. )Identify at least three basic objectives of effective cash management.

Accepted Answer

(a)The term cash management refers to pl

Question 5

Under the allowance method,when a receivable that had been previously written off is collected:

Accepted Answer

A) Net income is increased. 
B) Net assets are increased. 
C) Neither net income nor net assets are affected. 
D) Both net assets and net income are increased. 
A) Net income is increased. 
B) Net assets are increased. 
C) Neither net income nor net assets are affected. 
D) Both net assets and net income are increased.

Question 6

Deposits in transit would not appear on a company's bank reconciliation but would appear on the company's bank statement.

Accepted Answer

A) True 
 B)False

Question 7

Accounts receivable are classified as current assets:

Accepted Answer

A) Only if convertible into cash within 60 days or sooner. 
B) Only if the allowance method is used to estimate the uncollectible accounts. 
C) Only if convertible into cash within one year. 
D) Whenever the accounts receivable arise from "normal" sales of merchandise to customers,regardless of the credit terms. 
A) Only if convertible into cash within 60 days or sooner. 
B) Only if the allowance method is used to estimate the uncollectible accounts. 
C) Only if convertible into cash within one year. 
D) Whenever the accounts receivable arise from "normal" sales of merchandise to customers,regardless of the credit terms.

Question 8

Deegan Industries has an accounts receivable turnover rate of 8.Which of the following statements is not true?

Accepted Answer

A) Deegan's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5. 
B) Deegan waits approximately 46 days to make collections of its credit sales.(Use 365 days in a year. ) 
C) Deegan writes off accounts receivable as uncollectible if they are over 45 days old. 
D) Deegan's net credit sales are about eight times the amount of its average accounts receivable. 
A) Deegan's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5. 
B) Deegan waits approximately 46 days to make collections of its credit sales.(Use 365 days in a year. ) 
C) Deegan writes off accounts receivable as uncollectible if they are over 45 days old. 
D) Deegan's net credit sales are about eight times the amount of its average accounts receivable.

Question 9

The Kansas Company makes credit sales to customers who use bank credit cards (such as Visa or MasterCard)as well as to customers who use non-bank credit cards (such as American Express or Diner's Club).In this situation:

Accepted Answer

A) Sales to customers using bank credit cards are recorded as cash sales. 
B) Regardless of the type of credit card used by the customer,Kansas records a receivable from the credit card company when a credit sale is made. 
C) Regardless of the type of credit card used by the customer,Kansas estimates uncollectible accounts related to these credit sales using the allowance method. 
D) The fees charged by the credit card company reduce the dollar amount of sales recorded. 
A) Sales to customers using bank credit cards are recorded as cash sales. 
B) Regardless of the type of credit card used by the customer,Kansas records a receivable from the credit card company when a credit sale is made. 
C) Regardless of the type of credit card used by the customer,Kansas estimates uncollectible accounts related to these credit sales using the allowance method. 
D) The fees charged by the credit card company reduce the dollar amount of sales recorded.

Question 10

When the direct write-off method is used to recognize uncollectible accounts expense,an Allowance for Doubtful Accounts is not required.

Accepted Answer

A) True 
 B)False

Question 11

An unrealized holding gain on available for sale securities will increase shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 12

At December 31,2018,Laconia Industries' portfolio of investments in available for sale marketable securities consisted of the following:   (a. )Illustrate the presentation of marketable securities and unrealized holding gain (or loss)in Laconia's financial statements at December 31,2018.Indicate the financial statement and section in which each item appears.
(b. )Assume that on March 15,2019,Laconia made the following sales of securities:
(1)Sold 5,000 shares of its investment in Crown,Inc. ,at a price of $20 per share.
(2)Sold 1,000 shares of its investment in Plastic Dots at a price of $45 per share.
Compute the gain or loss recognized in Laconia's 2019 income statement for each sale:
(1).Sale of 5,000 shares of Crown: $________Gain/Loss
(2).Sale of 1,000 shares of Plastic Dots: $________Gain/Loss
(c. )At December 31,2019,the market values of these stocks are: Crown,$21 per share;Plastic Dots,$42 per share.Complete the following schedule showing cost and current market value of securities owned by Laconia at the end of 2019.   (d. )Illustrate the presentation of marketable securities and unrealized holding gain (or loss)in Laconia's financial statements at December 31,2019.(Follow same format as in part a. )

Accepted Answer

The answer of At December 31,2018,Laconia Industries' portfolio of investments...

Question 13

[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 income statement approach (an allowance method)to account for uncollectible accounts,uncollectible accounts expense for March is:

Accepted Answer

A) $11,500. 
B) $17,500. 
C) $19,500. 
D) $13,500. 
A) $11,500. 
B) $17,500. 
C) $19,500. 
D) $13,500.

Question 14

When short-term investments appear in the balance sheet at their current market values,it is an exception to the ________ principle.

Accepted Answer

A) Revenue recognition 
B) Matching 
C) Cost 
D) Relevance 
A) Revenue recognition 
B) Matching 
C) Cost 
D) Relevance

Question 15

Effective internal control over accounts receivable ensures all of the following except:

Accepted Answer

A) All shipments of goods during the period are recorded. 
B) The sale transaction is recorded for the correct dollar amount. 
C) That cash collections from customers are promptly deposited. 
D) The availability of adequate cash for conducting business operations. 
A) All shipments of goods during the period are recorded. 
B) The sale transaction is recorded for the correct dollar amount. 
C) That cash collections from customers are promptly deposited. 
D) The availability of adequate cash for conducting business operations.

Question 16

Bank reconciliation
(A. )You are required to complete the June 30 bank reconciliation for Silver Company using the following information and as per the given format:     (B. )Give in general journal form the entry or entries necessary to correct Silver's accounting records as of June 30.(Explanations may be omitted;one compound journal entry is acceptable. )

Accepted Answer

The answer of Bank reconciliation
(A. )You are required to complete...

Question 17

Which of the following does not contribute toward achieving internal control over cash?

Accepted Answer

A) The practice of making small cash disbursements directly from the current day's cash receipts 
B) The preparation of cash budgets 
C) The use of a petty cash fund 
D) The practice of approving every expenditure before the cash disbursement is made 
A) The practice of making small cash disbursements directly from the current day's cash receipts 
B) The preparation of cash budgets 
C) The use of a petty cash fund 
D) The practice of approving every expenditure before the cash disbursement is made

Question 18

The balance shown on a bank statement is always less than the month-end balance of a company's cash account in the general ledger.

Accepted Answer

A) True 
 B)False

Question 19

With a line of credit,a liability arises:

Accepted Answer

A) As soon as the line is created. 
B) As soon as any money is borrowed. 
C) Upon repayment of the debt. 
D) At the maturity date. 
A) As soon as the line is created. 
B) As soon as any money is borrowed. 
C) Upon repayment of the debt. 
D) At the maturity date.

Question 20

A basic characteristic of all marketable securities is that they can be purchased or sold quickly and easily at quoted market prices.

Accepted Answer

A) True 
 B)False

Exam 7: Financial Assets

Dividend revenue and interest revenue are reported in the income statement as a component of a company's net income.

Which of the following is not an example of internal control over cash?

Effective internal control over accounts receivable ensures:

Cash management (a. )What is meant by the term "cash management"? (b. )Identify at least three basic objectives of effective cash management.

Under the allowance method,when a receivable that had been previously written off is collected:

Deposits in transit would not appear on a company's bank reconciliation but would appear on the company's bank statement.

Accounts receivable are classified as current assets:

Deegan Industries has an accounts receivable turnover rate of 8.Which of the following statements is not true?

The Kansas Company makes credit sales to customers who use bank credit cards (such as Visa or MasterCard)as well as to customers who use non-bank credit cards (such as American Express or Diner's Club).In this situation:

When the direct write-off method is used to recognize uncollectible accounts expense,an Allowance for Doubtful Accounts is not required.

An unrealized holding gain on available for sale securities will increase shareholders' equity.

When short-term investments appear in the balance sheet at their current market values,it is an exception to the ________ principle.

Effective internal control over accounts receivable ensures all of the following except:

Which of the following does not contribute toward achieving internal control over cash?

The balance shown on a bank statement is always less than the month-end balance of a company's cash account in the general ledger.

With a line of credit,a liability arises:

A basic characteristic of all marketable securities is that they can be purchased or sold quickly and easily at quoted market prices.

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