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Accounting 201 Test #2 Chapter #5

question

Net sales for the current period were $114,000 and average receivables were $96,250. What is the amount of day’s sales in receivables? a. 233 days b. 266 days c. 308 days d. 416 days
answer

c. 308 days
question

A company has $40,000 in cash, $75,000 in short-term investments, $263,000 in net current receivables, and $110,000 in inventory. The total current liabilities of the firm are $305,000. The quick ratio of the company is: a. 0.63. b. 1.24. c. 1.60. d. 1.76.
answer

b. 1.24
question

When a company receives a cash dividend from a trading investment, the journal entry includes: a. a debit to cash and credit to dividend revenue. b. a debit to dividend revenue and credit to cash. c. a debit to cash and credit to trading investment. d. none of these.
answer

a. a debit to cash and credit to dividend revenue
question

The ABC Company is preparing its financial statements on December 31. During the year, they purchased IBM stock for $20,000. On December 31, the market value of the stock is $8,000. The journal entry on December 31 will include a: a. debit to unrealized gain for $12,000. b. debit to unrealized loss for $8,000. c. debit to unrealized loss for $12,000. d. debit to realized loss for $12,000.
answer

c. debit to unrealized loss for $12,000
question

When a company sells a trading investment, the gain or loss on the sale is reported in the: a. revenues section of the income statement. b. short-term investments section of the balance sheet. c. other revenue, gains, and losses section of the balance sheet. d. other revenue, gains, and losses section of the income statement.
answer

d. other revenue, gains, and losses section of the income statement
question

Trading securities purchased in 2010 for $85,000 were valued at $80,000 on December 31, 2010. The securities were sold at the beginning of 2011 for $83,000. The 2011 income statement should report a(n): a. realized loss of $2,000. b. realized gain of $3,000. c. unrealized loss of $5,000 and a realized gain of $3,000. d. unrealized gain recovered of $3,000.
answer

b. realized gain of $3,000
question

During the current year, The Hampton Company purchased 200 shares of Hilton stock for $15,000 as a short-term investment. At the end of the year, the market value of the stock was $11,000. The Hampton Company’s financial statements for the current year will show: a. an unrealized loss of $4,000 on the income statement and short-term investments of $15,000 on the balance sheet. b. an unrealized gain of $4,000 on the income statement and short-term investments of $11,000 on the balance sheet. c. an unrealized loss of $4,000 on the income statement and short-term investments of $11,000 on the balance sheet. d. all of these.
answer

c. an unrealized loss of $4,000 on the income statement and short-term investments of $11,000 on the balance sheet.
question

The net realizable value of accounts receivable is: a. the difference between accounts receivable and its contra asset account. b. the difference between accounts receivable and uncollectible-account expense. c. the amount of accounts receivable that the company expects to collect. d. both the difference between accounts receivable and its contra asset account and the amount of accounts receivable that the company expects to collect.
answer

d. both the difference between accounts receivable and its contra asset account and the amount of accounts receivable that the company expects to collect.
question

Which account shows the amount of accounts receivable that the business does NOT expect to collect? a. Sales Returns and Allowances b. Unearned Accounts Receivable c. Allowance for Uncollectible Accounts d. Uncollectible Accounts Expense
answer

c. Allowance for the Uncollectible Accounts
question

The entry to write off an account under the allowance method for estimating uncollectible accounts: a. reduces total assets. b. reduces net income. c. has no effect on total assets or net income. d. increases net income.
answer

c. has no effect on total assets or net income
question

Under the allowance method, the entry to record the bad debts estimate includes a debit to: a. Accounts Receivable and a credit to Allowance for Uncollectible Accounts. b. Allowance for Uncollectible Accounts and a credit to Uncollectible-Account Expense. c. Allowance for Uncollectible Accounts and a credit to Accounts Receivable. d. Uncollectible-Account Expense and credit to Allowance for Uncollectible Accounts.
answer

d. Uncollectible-Account Expense and credit to Allowance for Uncollectible Accounts
question

To record estimated bad debts under the direct write-off method: a. debit Allowance for Uncollectible Accounts and credit Accounts Receivable. b. debit Accounts Receivable and credit Allowance for Uncollectible Accounts. c. debit Uncollectible Accounts Expense and credit Allowance for Uncollectible Accounts. d. you do need require a journal entry.
answer

d. you do need require a journal entry
question

A debit balance in the Allowance for Uncollectible Accounts: Select one: a. cannot occur. b. is the normal balance. c. occurs when the actual bad debt write-offs are less that what was estimated. d. occurs when the actual bad debt write-offs are greater than what was estimated.
answer

d. occurs when the actual bad debt write-offs are greater than what was estimated
question

Using the aging-of-receivables method to estimate uncollectibles, Avidity Corporation estimates that $3,550 of its accounts receivable will be uncollectible. Prior to adjustment, the Allowance for Uncollectible Accounts has a credit balance of $800. Uncollectible account expense to be reported on the income statement is: a. $4,350. b. $3,550. c. $2,750. d. $800.
answer

c. $2,750
question

Bigg and Talle Corporation uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $5,000,000, and management estimates 2% will be uncollectible. Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $16,000. The amount of expense reported on the income statement will be: a. $116,000. b. $100,000. c. $ 84,000. d. $ 16,000.
answer

b. $100,000
question

The order of liquidity of current assets is: a. cash and cash-equivalents, accounts receivable, short-term investments. b. short-term investments, cash and cash equivalents, accounts receivable. c. cash and cash-equivalents, short-term investments, accounts receivable. d. cash and cash-equivalents, short-term investments, prepaid expenses.
answer

c. cash and cash-equivalents, short-term investments, accounts receivable
question

The numerator in the calculation of the quick ratio includes which of the following items? a. Total current assets b. Total current assets less inventory only c. Total current assets less prepaid expenses only d. The sum of cash, short-term investments, and net current receivables
answer

d. The sum of cash, short-term investments, and net current receivables
question

The three categories of short-term investments are: a. trading, accounts receivable and cash. b. trading, available-for-sale and held for sale. c. trading, available-for-sale and held-to-maturity. d. current, trading and short-term.
answer

c. trading, available-for-sale and held-to-maturity
question

Unrealized gains and losses occur when: a. the investment is sold. b. the cost of the investment differs from the current market value. c. the investment has not been sold. d. both the cost of the investment differs from the current market value and the investment has not been sold occur.
answer

d. both the cost of the investment differs from the current market value and the investment has not been sold occur
question

Trading securities purchased for $400,000 were valued at $410,000 at the end of the year. The adjusting entry to record this difference included a credit to: a. Retained Earnings. b. Unrealized Gain on Investments. c. Short-term Investments. d. none of the accounts. No adjusting entry is required.
answer

b. Unrealized Gain on Investments
question

Chauky’s Catering accepted a bank-issued credit card in payment of a $4,000 sales transaction. Chauky’s bank charges 3% to process the transaction. The journal entry to record the sales transaction will include: a. a credit to Sales Revenue for $3,880. b. a debit to Cash for $4,000. c. a debit to Financing Expense for $120. d. all of these.
answer

c. a debit to Financing Expense for $120
question

Which of the following statement is TRUE? a. Trading investments can be current or long-term assets. b. Investments fall into three categories-trading, available-for-sale, and held for sale. c. Trading investments are always long-term. d. Trading investments are always current assets.
answer

d. Trading investments are always current assets
question

The order of current assets on the balance sheet is: a. cash, accounts receivable, short-term investments. b. cash, inventory, accounts receivable. c. cash, short-term investments, accounts receivable. d. short-term investments, cash, accounts receivable.
answer

c. cash, short-term investments, accounts receivable
question

Barts Industries, Inc., has $30,000 in cash, $15,000 in short-term investments, $75,000 in net current receivables, and $12,000 in prepaid expenses. The total current liabilities of the firm are $90,000. Barts Industries’ current ratio is: a. 1.47. b. 1.71. c. 0.64. d. 1.33.
answer

a. 1.47
question

Realized gains and losses occur when: a. the investment is sold. b. the cost of the investment differs from the current market value. c. the investment has not been sold. d. both the cost of the investment differs from the current market value and the investment has not been sold occur.
answer

a. the investment is sold