ACC Test 2 – Flashcards
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Investments in debt and equity securities acquired principally for the purpose of selling them in the near term and thereby generating profits on short run fluctuations in market prices.
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Trading investment (securities)
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Investments in debt securities acquired with the positive intent and ability to hold them to maturity.
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Held-to-maturity Securities
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Investments in debt and equity securities that do not qualify as one of the other types of investments in these securities.
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Available-for-sale Securities
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Unrealized ( Gain / Loss )? Market value > Cost
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gain
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Unrealized ( Gain / Loss )? Market Value < Cost
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loss
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Classified as current assets for balance sheet purposes. Recorded on the balance sheet at market value. Unrealized gains/losses are reported on the income statement. a) Trading Investment (securities) b) Held-to-maturity Securities c) Available-for-sale Securities
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a
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Classified as long-term assets unless they mature in the coming year, in which case they are classified as current assets. Recorded on the balance sheet at an amount based on cost. a) Trading Investment (securities) b) Held-to-maturity Securities c) Available-for-sale Securities
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b
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Classified as either current or long-term assets depending on the length of time that management intends to hold these securities. Recorded on the balance sheet at market value. Unrealized gains/losses are reported on the balance sheet. a) Trading Investment (securities) b) Held-to-maturity Securities c) Available-for-sale Securities
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c
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Recorded on the balance sheet at market value. Unrealized gains/losses are reported on the income statement. a) Trading Investment (securities) b) Held-to-maturity Securities c) Available-for-sale Securities
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a
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Recorded on the balance sheet at an amount based on cost. a) Trading Investment (securities) b) Held-to-maturity Securities c) Available-for-sale Securities
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b
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Recorded on the balance sheet at market value. Unrealized gains/losses are reported on the balance sheet. a) Trading Investment (securities) b) Held-to-maturity Securities c) Available-for-sale Securities
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c
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Monetary Claims to customer purchases made on account. a) Accounts Payable b) Accounts Receivable c) Notes Payable
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b
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bad debt expense is recorded when the customers' account is determined to be worthless and there is no longer a need for an account balance for that customer. a) Direct Write-off method b) Allowance Method
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a
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records bad debt expense by estimating uncollectible accounts at the end of the accounting period and recording an adjustment. Since the reduction in accounts receivable is an estimate, the specific customer account can't be reduced or adjusted. Instead, a contra-asset account, Allowance for Doubtful Accounts, is used a) Direct Write-off method b) Allowance Method
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b
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There are _______ methods of accounting for uncollectible account expense, doubtful-account expense, or bad debt expense. a) 1 method b) 2 methods c) 3 methods d) 4 methods
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b
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An effective system of internal control has all of the following characteristics except: A. separation of duties B. combination of duties C. competent, reliable, and ethical personnel D. documents and records
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b
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Which of the following does not require a journal entry for a bank reconciliation? A. collection by the bank of a note receivable B. bank service charge C. outstanding checks D. NSF check returned by the bank
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c
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Susan Bingham, a valued employee for more than 20 years, purchases supplies for Mack Company and stores them in a locked room for which she has the key. She is also responsible for distributing these supplies to employees upon request. At the end of the month, Susan takes an inventory of the supplies on hand and notifies the accounting department of the amount for the adjusting entry for supplies used. What (if any) internal control characteristic is missing? A. competent, reliable, and ethical employees B. assignment of responsibilities C. separation of duties D. use of prenumbered documents
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c
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The category of "trading securities" includes A. debt securities but not equity securities. B. equity securities but not debt securities. C. both debt and equity securities. D. neither debt nor equity securities.
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c
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Are unrealized gains and losses included in the calculation of net income for trading securities and available-for-sale securities? Trading securities Available-for-sale securities A. Yes No B. Yes Yes C. No No D. No Yes
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a
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An investment which is properly classified as a trading security was purchased in April of the current year for $20,000. Between April and the end of the current year the market price of the investment dipped as low as $19,500 and reached a high of $26,300. On December 31, its market price was $25,800. At what amount should this investment be reported on the December 31 balance sheet? A. $19,500 C. $25,800 B. $20,000 D. $26,300
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c
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Changes in market value generally are ignored for investments classified as A. available-for-sale securities. C. trading securities. B. held-to-maturity securities. D. both A. and B.
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b
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The journal entry in which Uncollectible Accounts Expense is debited and Allowance for Uncollectible Accounts is credited is A. prepared prior to the time a particular account is actually deemed to be uncollectible. B. needed to report receivables at their net realizable value. C. frequently determined on the basis of a percentage of sales revenue. D. all of the above.
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d
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Under the allowance method, which of the following best describes the journal entry used to write off an uncollectible account receivable? A. Dr. Uncollectible Account Expense Cr. Allowance for Uncollectible Accounts B. Dr. Allowance for Uncollectible Accounts Cr. Accounts Receivable C. Dr. Uncollectible Account Expense Cr. Unearned Revenue D. Dr. Accounts Receivable Cr. Uncollectible Account Expense
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b
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All of the following statements pertaining to the allowance for uncollectible accounts are true, except one. Which of the statements is the false statement? A. The allowance is closed to Retained Earnings at the end of the period. B. The allowance could have either a debit balance or a credit balance before making the related end-of-period adjusting entry. C. The allowance decreases when an account receivable is written off as uncollectible. D. The allowance is used on the balance sheet to report accounts receivable at their net realizable value.
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a
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Which of the following statements is true? A. Bad debt expense should be recorded in the period that the account is written off. B. Bad debt expense should never be recorded. C. Bad debt expense should be recorded in the period that the account receivable would have been collected. D. Bad debt expense should be recorded in the period of the original sale.
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d
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Under the allowance method, the entry to record bad debt expense has what effect on the financial statements? A. Increases expenses and increases owners' equity B. Decreases owners' equity and decreases assets C. Decreases assets and has no effect on net income D. Decreases net income and increases liabilities
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b
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On August 1, 20x1, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. How much interest should Andover accrue on December 31, 20x1? A. $210 C. $175 B. $420 D. some other amount
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c
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On August 1, 20x1, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. If Andover Company fails to make an adjusting entry for the accrued interest, A. net income will be overstated and liabilities will be understated. B. net income will be overstated and assets will be understated. C. net income will be understated and liabilities will be overstated. D. net income will be understated and assets will be understated.
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d
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On August 1, 20x1, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. How much interest does Andover Company expect to collect on the maturity date (April 1, 20x2)? A. $420 C. $105 B. $280 D. some other amount
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b
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On August 1, 20x1, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. Which of the following accounts will be credited in the journal entry on April 1, 20x2, assuming collection in full? A. Interest Receivable C. Interest Revenue B. Note Receivable D. All of the above
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d
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On a statement of cash flows, interest collected on accounts and notes receivable is classified as A. an operating activity. C. a financing activity. B. an investing activity. D. a bribe.
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a
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Cosmos Company receives a two-month, 8%, $1,500 note receivable on December 15. The adjusting entry on December 31 will: A. debit Cash, $20 B. credit Interest Revenue, $5.26 C. debit Interest Revenue, $5.26 D. credit Interest Receivable $20
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b
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Accounts Receivable has a debit balance of $2,300, and the Allowance for Uncollectible Accounts has a credit balance of $220. A specific account of $80 is written off. What is the amount of net receivables (net realizable value) after the write-off? A. $2,080 C. $1,920 B. $2,220 D. $2,160
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a
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Ray Company had the following information relating to credit sales in 20X3: Accounts receivable 12/31/X3 (debit) $ 8,000 Allowance for uncollectible accounts 12/31/X3 (credit) $750 Credit sales during 20X3 $38,000 Cash sales during 20X3 $12,000 Collections from customers on account during 20X3 $41,000 If uncollectible accounts are determined by the percentage-of-sales method to be 2% of credit sales, the uncollectible account expense for 20X3 would be: A. $1,000 C. $750 B. $760 D. $10
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b
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Ray Company had the following information relating to credit sales in 20X3: Accounts receivable 12/31/X3 (debit) $ 8,000 Allowance for uncollectible accounts 12/31/X3 (credit) $750 Credit sales during 20X3 $38,000 Cash sales during 20X3 $12,000 Collections from customers on account during 20X3 $41,000 Using the percentage-of-sales method, what is the new adjusted balance in the Allowance account? A. $750 C. $1,750 B. $760 D. $1,510
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d
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Ray Company had the following information relating to credit sales in 20X3: Accounts receivable 12/31/X3 (debit) $ 8,000 Allowance for uncollectible accounts 12/31/X3 (credit) $750 Credit sales during 20X3 $38,000 Cash sales during 20X3 $12,000 Collections from customers on account during 20X3 $41,000 If uncollectible accounts are determined by the aging-of-receivables method to be $1,140, the uncollectible account expense for 20X3 would be: A. $1,140 C. $390 B. $750 D. $760
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c
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Ray Company had the following information relating to credit sales in 20X3: Accounts receivable 12/31/X3 (debit) $ 8,000 Allowance for uncollectible accounts 12/31/X3 (credit) $750 Credit sales during 20X3 $38,000 Cash sales during 20X3 $12,000 Collections from customers on account during 20X3 $41,000 Using the aging-of-receivables method, the balance of the Allowance account after the adjusting entry would be: A. $1,140 C. $390 B. $1,890 D. $750
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a
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Ray Company had the following information relating to credit sales in 20X3: Accounts receivable 12/31/X3 (debit) $ 8,000 Allowance for uncollectible accounts 12/31/X3 (credit) $750 Credit sales during 20X3 $38,000 Cash sales during 20X3 $12,000 Collections from customers on account during 20X3 $41,000 Assuming the aging-of-receivables method is used, the net realizable value of accounts receivable on the 12/31/X3 balance sheet would be: A. $8,000 C. $6,110 B. $7,250 D. $6,860
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d
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What is the maturity value of a $32,000, 12%, 75-day note? A. $32,000 C. $32,789 B. $35,840 D. $3,840
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c
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If the adjusting entry to accrue interest on a note receivable is omitted, then: A. assets, net income, and stockholders' equity are overstated. B. assets, net income, and stockholders' equity are understated. C. liabilities are understated, net income is overstated, and stockholders' equity is overstated. D. assets are overstated, net income is understated, and stockholders' equity is understated. E. none of the above
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b
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Net Sales are $600,000. Beginning and Ending Accounts Receivable are $52,000 and $38,000, respectively. Calculate days' sales in receivables. A. 32 days C. 43 days B. 23 days D. 27 days
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d
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From the following list of accounts, calculate the quick ratio. Cash ..................................$ 3,000 Accounts Receivable ..............6,000 Inventory ....................................10,000 Prepaid Insurance ......................2,000 Accounts Payable ......................5,000 Salary Payable ......................2,000 Notes Payable (due in 2 years).....8,000 A. 3.0 C. .6 B. 1.3 D. 1.4
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b
