Accounting Test 3 Chapters 7-10 – Flashcards
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Which of the following bank reconciliation items would not result in an adjusting entry? a)Deposits in transit. b)NSF check of customer. c)Collection of a note by the bank. d)Service charge.
answer
a)Deposits in transit.
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Which of the following items on a bank reconciliation would require an adjusting entry on the company's books? a)Outstanding checks. b)A bank service charge. c)A deposit in transit. d)An error by the bank.
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b)A bank service charge.
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Multiple Choice Question 127 Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: a)Cash Accounts Receivable b)Miscellaneous Expense Accounts Receivable c)No adjusting entry is necessary d)Accounts Receivable Cash
answer
d)Accounts Receivable Cash
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Nilson Company gathered the following reconciling information in preparing its August bank reconciliation: Cash balance per books, 8/31 $21,000 Deposits in transit 900 Notes receivable and interest collected by bank 5,100 Bank charge for check printing 120 Outstanding checks 12,000 NSF check 1,020 The adjusted cash balance per books on August 31 is a)$24,060. b)$24,960. c)$14,760. d)$13,800.
answer
b)$24,960.
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Karlin Company gathered the following reconciling information in preparing its April bank reconciliation: Cash balance per books, 4/30 $13,200 Deposits in transit 1,800 Notes receivable and interest collected by bank 4,440 Bank charge for check printing 150 Outstanding checks 9,000 NSF check 840 The adjusted cash balance per books on April 30 is a)$18,330. b)$16,650. c)$18,450. d)$17,640.
answer
b)$16,650.
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Schwinn Company assembled the following information in completing its March bank reconciliation: Balance per bank $15,280 Outstanding checks $3,100 Deposits in transit $5,000 NSF check $320 Bank service charge $100 Cash balance per books $17,600 As a result of this reconciliation, Schwinn will a)increase its cash account by $220. b)reduce its cash account by $420. c)reduce its cash account by $1,900. d)reduce its cash account by $100.
answer
b)reduce its cash account by $420.
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Which of the following would not be reported on the balance sheet as a cash equivalent? a)Money market fund. b)Commercial paper. c)Treasury bill. d)Restricted cash.
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d)Restricted cash.
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Cash equivalents do not include a)money market accounts. b)commercial paper. c)U.S. Treasury bills. d)long-term investment.
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d)long-term investment.
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Restricted cash should be reported a)always as a noncurrent asset. b)separately on the income statement. c)separately on the balance sheet. d)always as a current asset.
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c)separately on the balance sheet.
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Which of the following is not one of the main factors that contribute to fraudulent activity? a)Financial pressure. b)Rationalization. c)Opportunity. d)Incompatible duties.
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d)Incompatible duties.
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Which one of the following is not an objective of a system of internal controls? a)Enhance the accuracy and reliability of accounting records. b)Fairness of the financial statements. c)Safeguard company assets. d)Reduce the risks of errors.
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b)Fairness of the financial statements.
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All of the following are examples of internal control procedures except a)insistence that employees take vacations. b)using prenumbered documents. c)reconciling the bank statement. d)customer satisfaction surveys.
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d)customer satisfaction surveys.
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Each of the following is a feature of internal control except a)generic design of documents. b)authorization of transactions. c)limited access to assets. d)independent internal verifications.
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a)generic design of documents.
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The principle of establishing responsibility does not include a)independent internal verification. b)authorization of transactions. c)approval of transactions. d)one person being responsible for one task.
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a)independent internal verification.
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An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of a)independent internal verification is violated. b)documentation procedures is violated. c)establishment of responsibility is violated. d)separation of duties is violated.
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d)separation of duties is violated.
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Physical controls to safeguard assets do not include a)safety deposit boxes. b)locked warehouses. c)cashier department supervisors. d)vaults.
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c)cashier department supervisors.
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The reconciliation of the cash register tape with the cash in the register is an example of a)segregation of duties. b)independent internal verification. c)establishment of responsibility. d)other controls.
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b)independent internal verification.
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Which one of the following is not a primary component of an internal control system? a)Risk assessment b)Rationalization c)Information and communication d)Monitoring
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b)Rationalization
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When an account is written off using the allowance method, the a)net accounts receivable will decrease. b)allowance account will increase. c)net accounts receivable will stay the same. d)cash realizable value of total accounts receivable will increase.
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c)net accounts receivable will stay the same.
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The percentage of receivables basis for estimating uncollectible accounts emphasizes a)the relationship between sales and accounts receivable. b)cash realizable value. c)the relationship between accounts receivable and bad debts expense. d)income statement relationships.
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b)cash realizable value.
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Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? a)Bad Debt Expense 8,000 Allowance for Doubtful Accounts 8,000 b)Bad Debt Expense 6,000 Allowance for Doubtful Accounts 6,000 c)Bad Debt Expense 6,000 Accounts Receivable 6,000 d)Bad Debt Expense 8,000 Accounts Receivable 8,000
answer
b)Bad Debt Expense 6,000 Allowance for Doubtful Accounts 6,000
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Using the percentage-of-receivables method for recording bad debts expense, estimated uncollectible accounts are $34,000. If the balance of the Allowance for Doubtful Accounts is $9,000 debit before adjustment what is the amount of bad debt expense for that period? a)$43,000 b)$25,000 c)$34,000 d)$9,000
answer
a)$43,000
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One might infer from a debit balance in Allowance for Doubtful Accounts that a)the direct method is being used. b)Bad Debt Expense has been overestimated. c)a posting error has been made. d)more accounts have been written off than had been estimated.
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d)more accounts have been written off than had been estimated.
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In 2014 the Golic Co. had net credit sales of $600,000. On January 1, 2014, the Allowance for Doubtful Accounts had a credit balance of $15,000. During 2014, $24,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $160,000 what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014? a)$24,000. b)$25,000. c)$31,000. d)$16,000.
answer
b)$25,000.
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The direct write-off method of accounting for bad debts a)does not require estimates of bad debt losses. b)uses an allowance account. c)uses a contra asset account. d)is the preferred method under generally accepted accounting principles.
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a)does not require estimates of bad debt losses.
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Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period? a)To allow the collection department to schedule work for the next accounting period. b)To determine the gross realizable value of accounts receivable. c)The IRS rules require the company to make the estimate. d)To match bad debt expense to the period in which the revenues were earned.
answer
d)To match bad debt expense to the period in which the revenues were earned.
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The interest on a $10,000, 6%, 60-day note receivable is a)$100. b)$200. c)$300. d)$680.
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a)$100.
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Rosen Company receives a $5,000, 3-month, 6% promissory note from Bay Company in settlement of an open accounts receivable. What entry will Rosen Company make upon receiving the note? a)Notes Receivable5,075 Accounts Receivable-Bay Company 5,000 Interest Revenue 75 b)Notes Receivable 5,000 Interest Receivable 75 Accounts Receivable-Bay Company 5,000 Interest Revenue 75 c)Notes Receivable 5,075 Accounts Receivable-Bay Company 5,075 d)Notes Receivable 5,000 Accounts Receivable-Bay Company 5,000
answer
d)Notes Receivable 5,000 Accounts Receivable-Bay Company 5,000
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Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month, 12% interest note. If Young prepares it financial statements as of December 31, 2014, what adjusting entry must it make? a) Notes Receivable 2,000 Interest Revenue 2,000 b)Interest Receivable 2,000 Interest Revenue 2,000 c)Cash 2,000 Interest Revenue 2,000 d)Accounts Receivable 2,000 Interest Receivable 2,000
answer
b)Interest Receivable 2,000 Interest Revenue 2,000
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Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month, 12% interest note. If Young accrued interest at its December 31, 2014 year-end, what entry must it make to record the collection of the note and interest at its maturity date? a)Cash 43,600 Notes Receivable 40,000 Interest Revenue 3,600 b)Cash 43,600 Notes Receivable 40,000 Interest Receivable 2,000 Interest Revenue 1,600 c)Cash 43,600 Notes Receivable 43,600 d)Notes Receivable 40,000 Interest Receivable 2,000 Interest Revenue 1,600 Cash 43,600
answer
b)Cash 43,600 Notes Receivable 40,000 Interest Receivable 2,000 Interest Revenue 1,600
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A high accounts receivable turnover ratio indicates a) customers are making payments very quickly. b)the company's sales are increasing. c)customers are making payments slowly. d)a large proportion of the company's sales are on credit.
answer
a) customers are making payments very quickly.
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All of the following statements are true regarding the average collection period except: a)it is used to assess the effectiveness of a company's credit and collection policies. b)it should generally exceed the credit term period. c)it is a popular variant of the accounts receivable turnover. d)its increase may suggest a decline in the financial health of customers.
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b)it should generally exceed the credit term period
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Simonic Retailers accepted $90,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will include a credit to Sales Revenue of $90,000 and a debit(s) to a)Accounts Receivable $86,400 and Service Charge Expense $3,600. b)Cash $86,400 and Interest Expense $3,600. c)Accounts Receivable $90,000. d)Cash $86,400 and Service Charge Expense $3,600.
answer
d)Cash $86,400 and Service Charge Expense $3,600.
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Which of the following methods will result in the highest depreciation in the first year? a)Sum-of-year's-digits. b)Time valuation. c)Declining-balance. d)Straight-line.
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c)Declining-balance.
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Which of the following methods of computing depreciation is production based? a)Units-of-activity. b)Straight-line. c)Declining-balance. d)None of these answer choices are correct.
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a)Units-of-activity.
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A change in the estimated useful life of equipment requires a)that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. b)that the amount of periodic depreciation be changed in the current year and in future years. c)a retroactive change in the amount of periodic depreciation recognized in previous years. d)that income for the current year be increased.
answer
b)that the amount of periodic depreciation be changed in the current year and in future years.
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Goodwill can be recorded a)only when there is an exchange transaction involving the purchase of an entire business. b)when the company has exceptional management. c)when customers keep returning because they are satisfied with the company's products. d)when the company acquires a good location for its business.
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a)only when there is an exchange transaction involving the purchase of an entire business.
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The cost of an intangible asset with an indefinite life should a)be amortized over 20 years. b)not be amortized. c)be amortized over the life of the creator plus 70 years. d)None of these answer choices are correct.
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b)not be amortized.
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If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting a)a revenue expenditure account. b)Legal Expense. c)the Patent account. d)the Intangible Loss account.
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c)the Patent account.
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Research and development costs a)are capitalized and then amortized over a period not to exceed 20 years. b)are incurred as expenses only when R&D is successful. c)must be expensed when incurred under generally accepted accounting principles. d)should be included in the cost of the patent they relate to.
answer
c)must be expensed when incurred under generally accepted accounting principles.
