Question 1

You have been provided with the following information for XYZ Corporation and its bank,ABC Trust Company.
From the Bank Statement at the end of May 2002: $\begin{array}{|l|r|}
\hline \text { Ending balance } & \$ 30,399.00 \
\hline \text { Bank charges } & 26.10 \
\hline \text { NSF cheque } & 5.400 .00 \
\hline \text { Interest collected on a note for the company by the bank } & 635.10\\hline 
\end{array}$ From the cash records of the company at the end of May 2002:  Outstanding cheques:  Additional information:
Error on cheque No.12.The cheque was correctly drawn for $882.00,but was shown as $828.00 on the bank statement.
(a) Based on the information above,prepare a bank reconciliation.
(b) Show any adjusting entries that would have to be shown on the books of XYZ Corporation.

Accepted Answer

The answer of You have been provided with the following...

Question 2

At the end of the accounting year,December 31,2004,a company had a petty cash fund balance of $600,a chequing account balance of $34,000 in Bank A,an overdraft of $800 with Bank B,and $4,000 in customer payments in the form of money orders.Assuming no other differences between the company books and the bank balances,what cash amount should the company report on its 2004 balance sheet?

Accepted Answer

A) $37,200 
B) $37,800 
C) $38,600 
D) $38,800

Question 3

Asset-backed commercial paper may or may not be considered a cash equivalent,depending on the term and risk profile of these investments.

Accepted Answer

A) True 
 B)False

Question 4

In reconciling the bank balance with the book cash balance,which of the following would not cause the bank balance shown on the bank statement to be lower than the unadjusted book balance?

Accepted Answer

A) Cash on hand at the company 
B) NSF cheques from a customer, as reported on the bank statement 
C) Interest credited to the account by the bank 
D) Deposits in transit

Question 5

When the allowance method of recognizing bad debt expense is used,the typical write off of a specific customer's account:

Accepted Answer

A) decreases net income. 
B) decreases current assets. 
C) decreases working capital. 
D) has no effect on net income.

Question 6

A company reported the following items for the year 2007:  The December 31,2007 (end of the reporting period) adjusting entry for Bad Debt and Doubtful Accounts should be for the amount of,assuming:
CASE A: The average experience loss rate on credit sales is 1/2 of 1 percent.$___________________.
CASE B: The average experience loss rate on the year-end balance in accounts receivable is 2 percent.$________________.

Accepted Answer

The answer of A company reported the following items for...

Question 7

When accounts receivable are factored without recourse,what account does the transferor credit?

Accepted Answer

A) Accounts receivable 
B) Sales 
C) Liability 
D) Accounts receivable assigned

Question 8

The cash accounts and bank statement for a company for the month of September reflected the following amounts:    $\begin{array}{|l|l|}
\hline \text { Bal } & 125\\hline 
\end{array}$ BANK STATEMENT SUMMARIZED**  Other related data:
Outstanding cheques at end of August totalled $70.
Unrecorded deposits at end of August totalled $600.
Required:
(a) Prepare a bank reconciliation for the month of September.Show all computations.Cash reported on the balance sheet should be $____________________.

Accepted Answer

The answer of The cash accounts and bank statement for...

Question 9

Entel Inc.factored $100,000 of its accounts receivable without recourse with a factor and received $80,000.Of the $20,000 difference,$8,000 was the financing fee and the remainder was held back for sales adjustments.The firm and the factor agree to share equally the cost of any sales adjustments exceeding $12,000.Actual sales adjustments amounted to $14,000; the remaining amount of receivables was collected. What amount of sales adjustments will be recorded by Entel?

Accepted Answer

A) $12,000 
B) $13,000 
C) $14,000 
D) $1,000

Question 10

Long-term debt investments held for their contractual cash flows would be accounted for using Fair Value through Profit or Loss (FVTPL).

Accepted Answer

A) True 
 B)False

Question 11

The bookkeeper for a small book store prepared an unadjusted trial balance as shown below:  Prepare the appropriate entries indicated below.Each item is independent.
(a) Record bad debt expense,assuming company experience indicates that 40 percent of sales are on account and 2 percent of net credit sales prove uncollectible.
(b) Record bad debt expense if an aging schedule indicates that $10 of the receivable at the end of this year will not be collected.
(c) Record bad debt expense if company policy requires the allowance for doubtful accounts be maintained at 5 percent of total trade receivables.
(d) In April,four accounts totalling $5 were in excess of 90 days old and were determined by the collection department to be uncollectible.
(e) In May of the year,one of the accounts written off in (d) was paid in full in the amount of $2.

Accepted Answer

The answer of The bookkeeper for a small book store...

Question 12

A note receivable is said to be impaired if there is some uncertainty with regards to the collection of all or part of the note.

Accepted Answer

A) True 
 B)False

Question 13

A company received two one-year notes in payment for merchandise sold.One note had a face amount of $6,000 and was interest-bearing at an annual rate of 18 percent.The other note had a face amount of $7,080 and was non-interest-bearing (its implied interest rate was 18 percent).

Accepted Answer

A) The total amount of cash ultimately to be received will be more for the interest-bearing note. 
B) Both notes will cause the same total interest to be recognized. 
C) The amount of interest revenue, which should be recognized, is more for the interest-bearing note. 
D) The amount, which should be credited to sales revenue, is more for the non-interest-bearing note. 
E) The non-interest-bearing note shows a higher book value immediately after the sale.

Question 14

The 12/31/13 unadjusted trial balance of a company disclosed the following balances:  Additionally,the firm has given up trying to collect on $5,000 of its accounts receivable but has not yet recorded the write-off entry.The firm does not use the direct write off method to estimate bad debt expense.
(a) Provide the entry for the write-off of the receivable.
(b) If the firm uses the percentage of sales allowance method for recording bad debt expense,and has experienced an average 6% rate of non collection based on sales,provide the entry to record bad debt expense for 2013.
(c) Assume that after the firm recorded the $5,000 of write-offs,it determined that 18% of its remaining accounts receivable will be uncollectible under the aging method.Provide the entry to record bad debt expense.

Accepted Answer

The answer of The 12/31/13 unadjusted trial balance of a...

Question 15

When accounts receivable are factored with recourse and are accounted for as a sale,what account does the transferor credit?

Accepted Answer

A) Accounts receivable 
B) Sales 
C) Liability 
D) Accounts receivable assigned

Question 16

The members of which of the following pairs of methods of accounts receivable financing are most similar?

Accepted Answer

A) Assignment of accounts receivable, factoring of accounts receivable without recourse 
B) Factoring of accounts receivable with recourse accounted for as a loan, factoring of accounts receivable with recourse accounted for as a sale 
C) Factoring of accounts receivable without recourse, factoring of accounts receivable with recourse accounted for as a sale 
D) Factoring of accounts receivable without recourse, factoring of accounts receivable with recourse accounted for as a loan

Question 17

Entel Inc.factored $100,000 of its accounts receivable without recourse with a factor and received $80,000.Of the $20,000 difference,$8,000 was the financing fee and the remainder was held back for sales adjustments.The firm and the factor agree to share equally the cost of any sales adjustments exceeding $12,000.Actual sales adjustments amounted to $14,000; the remaining amount of receivables was collected. What is the factor's net income from this factoring arrangement?

Accepted Answer

A) $20,000 
B) $6,000 
C) $19,000 
D) $7,000 
E) $18,000

Question 18

If a customer's cheque that has been deposited is returned with the bank statement marked "insufficient funds (NSF)," it would appear on the bank reconciliation as a deduction from the ending bank balance of the company.

Accepted Answer

A) True 
 B)False

Question 19

In preparing its bank reconciliation for the month of March 2001,a company has available the following information:  What should be the correct balance of cash at March 31,2001?

Accepted Answer

A) $35,250 
B) $36,250 
C) $36,300 
D) $36,550

Question 20

The Direct Write-off method of accounting is conceptually inferior to other methods since it does not match bad debt expense to revenues.

Accepted Answer

A) True 
 B)False

Exam 7: Financial Assets: Cash and Receivables

Asset-backed commercial paper may or may not be considered a cash equivalent,depending on the term and risk profile of these investments.

In reconciling the bank balance with the book cash balance,which of the following would not cause the bank balance shown on the bank statement to be lower than the unadjusted book balance?

When the allowance method of recognizing bad debt expense is used,the typical write off of a specific customer's account:

When accounts receivable are factored without recourse,what account does the transferor credit?

Long-term debt investments held for their contractual cash flows would be accounted for using Fair Value through Profit or Loss (FVTPL).

A note receivable is said to be impaired if there is some uncertainty with regards to the collection of all or part of the note.

A company received two one-year notes in payment for merchandise sold.One note had a face amount of $6,000 and was interest-bearing at an annual rate of 18 percent.The other note had a face amount of $7,080 and was non-interest-bearing (its implied interest rate was 18 percent) .

When accounts receivable are factored with recourse and are accounted for as a sale,what account does the transferor credit?

The members of which of the following pairs of methods of accounts receivable financing are most similar?

If a customer's cheque that has been deposited is returned with the bank statement marked "insufficient funds (NSF)," it would appear on the bank reconciliation as a deduction from the ending bank balance of the company.

In preparing its bank reconciliation for the month of March 2001,a company has available the following information: What should be the correct balance of cash at March 31,2001?

The Direct Write-off method of accounting is conceptually inferior to other methods since it does not match bad debt expense to revenues.