Question 1

An operating cycle

Accepted Answer

A)  is twelve months or less in length. 
B)  is the average time required for a company to collect its receivables. 
C)  is used to determine current assets when the operating cycle is longer than one year. 
D)  begins with inventory and ends with cash. 
A)  is twelve months or less in length. 
B)  is the average time required for a company to collect its receivables. 
C)  is used to determine current assets when the operating cycle is longer than one year. 
D)  begins with inventory and ends with cash.

Question 2

Which of the following accounts is not affected when an account receivable written off as uncollectible is unexpectedly collected?

Accepted Answer

A)  Cash 
B)  Accounts Receivable 
C)  Bad Debt Expense 
D)  Allowance for Bad Debts 
A)  Cash 
B)  Accounts Receivable 
C)  Bad Debt Expense 
D)  Allowance for Bad Debts

Question 3

If the cash balance shown in a company's accounting records is less than the correct cash balance,and neither the company nor the bank has made any errors,there must be

Accepted Answer

A)  outstanding checks. 
B)  deposits in transit. 
C)  deposits credited by the bank but not yet recorded by the company. 
D)  bank charges not yet recorded by the company. 
A)  outstanding checks. 
B)  deposits in transit. 
C)  deposits credited by the bank but not yet recorded by the company. 
D)  bank charges not yet recorded by the company.

Question 4

Sandy Corporation uses the allowance method of accounting for uncollectible accounts.During 2014,Sandy had charged $80,000 to Bad Debt Expense,and wrote off accounts receivable of $90,000 as uncollectible.What was the amount of the decrease in working capital as a result of these entries?

Accepted Answer

A)  $0 
B)  $90,000 
C)  $80,000 
D)  $10,000 
A)  $0 
B)  $90,000 
C)  $80,000 
D)  $10,000

Question 5

Which of the following is one of the two steps of the 2-step test for derecognition of receivables stated in IAS 39,International Accounting Standard 39,"Financial Instruments: Recognition and Measurement"?

Accepted Answer

A)  The transferred assets have been isolated from the transferor such that the transferor and its creditors cannot access the assets. 
B)  The transferee has the right to pledge or exchange the transferred assets. 
C)  If the receivable transfer does not involve the transfer of substantially all the risks and rewards of ownership,then test to determine if the transferor maintains effective control over the assets through either an agreement to repurchase the assets before their maturity,or by the ability to cause the transferee to return specific assets. 
D)  Determine whether the receivable transfer involves a transfer of substantially all the risks and rewards of ownership of the receivable and,if so,account for the transfer as a sale of the receivable. 
A)  The transferred assets have been isolated from the transferor such that the transferor and its creditors cannot access the assets. 
B)  The transferee has the right to pledge or exchange the transferred assets. 
C)  If the receivable transfer does not involve the transfer of substantially all the risks and rewards of ownership,then test to determine if the transferor maintains effective control over the assets through either an agreement to repurchase the assets before their maturity,or by the ability to cause the transferee to return specific assets. 
D)  Determine whether the receivable transfer involves a transfer of substantially all the risks and rewards of ownership of the receivable and,if so,account for the transfer as a sale of the receivable.

Question 6

The amount reported as "Cash" on a company's balance sheet normally should exclude

Accepted Answer

A)  postdated checks that are payable to the company. 
B)  cash in a payroll account. 
C)  undelivered checks written and signed by the company. 
D)  petty cash. 
A)  postdated checks that are payable to the company. 
B)  cash in a payroll account. 
C)  undelivered checks written and signed by the company. 
D)  petty cash.

Question 7

Which one of the following statements is NOT correct?

Accepted Answer

A)  The accounting function should be separated from the custodianship of a company's assets. 
B)  Certain clerical personnel in a company should be rotated among various jobs. 
C)  A company's personnel should be given well-defined responsibilities. 
D)  The responsibility of receiving merchandise and paying for it usually should be given to one person. 
A)  The accounting function should be separated from the custodianship of a company's assets. 
B)  Certain clerical personnel in a company should be rotated among various jobs. 
C)  A company's personnel should be given well-defined responsibilities. 
D)  The responsibility of receiving merchandise and paying for it usually should be given to one person.

Question 8

Which of the following would NOT be classified as cash?

Accepted Answer

A)  Personal checks 
B)  Travelers' checks 
C)  Cashiers' checks 
D)  Postdated checks 
A)  Personal checks 
B)  Travelers' checks 
C)  Cashiers' checks 
D)  Postdated checks

Question 9

Lawson Corporation's checkbook balance on December 31,2014,was $8,000.In addition,Lawson held the following items in its safe on December 31:   The proper amount to be shown as cash on Lawson's balance sheet at December 31,2014,is

Accepted Answer

A)  $7,600. 
B)  $8,000. 
C)  $8,600. 
D)  $9,750. 
A)  $7,600. 
B)  $8,000. 
C)  $8,600. 
D)  $9,750.

Question 10

On December 1,2014,Laramie Company received a $10,000,60-day,6% note from a customer.On December 31,2014,the company discounted the note at the bank.The bank's discount rate is 9%.What were the proceeds that Barnes received from the discounting of the note?

Accepted Answer

A)  $10,024.25 
B)  $9,700.00 
C)  $9,924.25 
D)  $10,050.00 
A)  $10,024.25 
B)  $9,700.00 
C)  $9,924.25 
D)  $10,050.00

Question 11

From inception of operations to December 31,2013,Centaur Corporation provided for uncollectible accounts receivable under the allowance method: Provisions were made monthly at 2 percent of credit sales;bad debts written off were charged to the allowance account;recoveries of bad debts previously written off were credited to the allowance account;and no year-end adjustments to the allowance account were made.Centaur's usual credit terms are net 30 days.
The credit balance in the allowance for doubtful accounts was $260,000 at January 1,2014.During 2014,credit sales totaled $18,000,000,interim provisions for doubtful accounts were made at 2 percent of credit sales,$180,000 of bad debts were written off,and recoveries of accounts previously written off amounted to $30,000.Centaur installed a computer system in November 2014 and an aging of accounts receivable was prepared for the first time as of December 31,2014.A summary of the aging is as follows:
   Based on the review of collectibility of the account balances in the "prior to January 1,2014" aging category,additional receivables totaling $120,000 were written off as of December 31,2014.Effective with the year ended December 31,2014,Centaur adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

Accepted Answer

The answer of From inception of operations to December 31,2013,Centaur...

Question 12

A debit balance in the Allowance for Doubtful Accounts

Accepted Answer

A)  should never occur. 
B)  is always the result of management not providing a large enough allowance in order to manage earnings. 
C)  may occur before the end-of-period adjustment for uncollectibles. 
D)  may exist even after the end-of-period adjustment for uncollectibles. 
A)  should never occur. 
B)  is always the result of management not providing a large enough allowance in order to manage earnings. 
C)  may occur before the end-of-period adjustment for uncollectibles. 
D)  may exist even after the end-of-period adjustment for uncollectibles.

Question 13

The following information is from the records of Sumter,Inc.for the year ended December 31,2014.   If the basis for estimating bad debts is 1 percent of net sales,the correct amount of doubtful accounts expense for 2014 is

Accepted Answer

A)  $22,800. 
B)  $23,200. 
C)  $28,880. 
D)  $34,880. 
A)  $22,800. 
B)  $23,200. 
C)  $28,880. 
D)  $34,880.

Question 14

What is the accounting principle underlying the recognition of an estimated liability for warranties in the period of product sale?

Accepted Answer

A)  Matching 
B)  Materiality 
C)  Full Disclosure 
D)  Conservatism 
A)  Matching 
B)  Materiality 
C)  Full Disclosure 
D)  Conservatism

Question 15

Which of the following is NOT a basic characteristic of a system of cash control?

Accepted Answer

A)  Use of a voucher system 
B)  Combined responsibility for handling and recording cash 
C)  Daily deposit of all cash received 
D)  Internal audits at irregular intervals 
A)  Use of a voucher system 
B)  Combined responsibility for handling and recording cash 
C)  Daily deposit of all cash received 
D)  Internal audits at irregular intervals

Question 16

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

Accepted Answer

A)  direct write-off. 
B)  specific accounts determined to be uncollectible. 
C)  credit sales. 
D)  aging the trade receivable accounts. 
A)  direct write-off. 
B)  specific accounts determined to be uncollectible. 
C)  credit sales. 
D)  aging the trade receivable accounts.

Question 17

The FASB specified in Statement No.140 three conditions that must be met if a transfer of receivables is to accounted for as a sale.Which of the following is not one of the three conditions specified?

Accepted Answer

A)  The transferred assets have been isolated from the transferor. 
B)  The transferor's obligation under the recourse provisions can be reasonably estimated. 
C)  The transferee has the right to pledge or exchange the transferred assets. 
D)  The transferor does not maintain effective control over the assets through an agreement to repurchase the assets before their maturity. 
A)  The transferred assets have been isolated from the transferor. 
B)  The transferor's obligation under the recourse provisions can be reasonably estimated. 
C)  The transferee has the right to pledge or exchange the transferred assets. 
D)  The transferor does not maintain effective control over the assets through an agreement to repurchase the assets before their maturity.

Question 18

Abe Company sold merchandise on credit to Bee Company for $1,000 on July 1,with terms of 2/10,net /30.On July 6,Bee returned $200 worth of merchandise claiming the materials were defective.On July 8,Abe received a payment from Bee and credited Accounts Receivable for $350.On July 24,Bee Company paid the remaining balance on its account.
-See Abe Company information above.How much was the total Sales Discounts given to Bee during July?

Accepted Answer

A)  $7 
B)  $0 
C)  $441 
D)  $2,441 
A)  $7 
B)  $0 
C)  $441 
D)  $2,441

Question 19

If the balance shown on a company's bank statement is less than the correct cash balance,and neither the company nor the bank has made any errors,there must be

Accepted Answer

A)  deposits credited by the bank but not yet recorded by the company. 
B)  outstanding checks. 
C)  bank charges not yet recorded by the company. 
D)  deposits in transit. 
A)  deposits credited by the bank but not yet recorded by the company. 
B)  outstanding checks. 
C)  bank charges not yet recorded by the company. 
D)  deposits in transit.

Question 20

When comparing the allowance method of accounting for bad debts with the direct write-off method,which of the following is true?

Accepted Answer

A)  The direct write-off method is exact and also better illustrates the matching principle. 
B)  The allowance method is less exact but it better illustrates the matching principle. 
C)  The direct write-off method is theoretically superior. 
D)  The direct write-off method requires two separate entries to write off an uncollectible account. 
A)  The direct write-off method is exact and also better illustrates the matching principle. 
B)  The allowance method is less exact but it better illustrates the matching principle. 
C)  The direct write-off method is theoretically superior. 
D)  The direct write-off method requires two separate entries to write off an uncollectible account.

Exam 7: The Revenuereceivablescash Cycle

An operating cycle

Which of the following accounts is not affected when an account receivable written off as uncollectible is unexpectedly collected?

If the cash balance shown in a company's accounting records is less than the correct cash balance,and neither the company nor the bank has made any errors,there must be

Sandy Corporation uses the allowance method of accounting for uncollectible accounts.During 2014,Sandy had charged $80,000 to Bad Debt Expense,and wrote off accounts receivable of $90,000 as uncollectible.What was the amount of the decrease in working capital as a result of these entries?

Which of the following is one of the two steps of the 2-step test for derecognition of receivables stated in IAS 39,International Accounting Standard 39,"Financial Instruments: Recognition and Measurement"?

The amount reported as "Cash" on a company's balance sheet normally should exclude

Which one of the following statements is NOT correct?

Which of the following would NOT be classified as cash?

Lawson Corporation's checkbook balance on December 31,2014,was $8,000.In addition,Lawson held the following items in its safe on December 31: The proper amount to be shown as cash on Lawson's balance sheet at December 31,2014,is

On December 1,2014,Laramie Company received a $10,000,60-day,6% note from a customer.On December 31,2014,the company discounted the note at the bank.The bank's discount rate is 9%.What were the proceeds that Barnes received from the discounting of the note?

A debit balance in the Allowance for Doubtful Accounts

The following information is from the records of Sumter,Inc.for the year ended December 31,2014. If the basis for estimating bad debts is 1 percent of net sales,the correct amount of doubtful accounts expense for 2014 is

What is the accounting principle underlying the recognition of an estimated liability for warranties in the period of product sale?

Which of the following is NOT a basic characteristic of a system of cash control?

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

The FASB specified in Statement No.140 three conditions that must be met if a transfer of receivables is to accounted for as a sale.Which of the following is not one of the three conditions specified?

If the balance shown on a company's bank statement is less than the correct cash balance,and neither the company nor the bank has made any errors,there must be

When comparing the allowance method of accounting for bad debts with the direct write-off method,which of the following is true?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

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