Financial Accounting Test 2 (chapter 6 and 7) – Flashcards
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The main principles of internal control include which of the following: A. Establish responsibilities. B. Maintain minimal records. C. Use only computerized systems. D. Bond all employees. E. Require automated sales systems.
answer
A. Establish responsibilities
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A good system of internal control: A. Urges adherence to prescribed managerial policies. B. Insures profitable operations. C. Eliminates the need for an audit. D. Requires the use of noncomputerized systems. E. Is not necessary if the company uses a computerized system.
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A.Urges adherence to prescribed managerial policies.
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A company's internal control system: A. Eliminates the risk of loss. B. Monitors and controls business activities. C. Eliminates human error. D. Eliminates the need for audits. E. Is not necessary in large companies.
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B. Monitors and controls business activities.
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When two clerks share the same cash register, which internal control principle is violated? A. Establish responsibilities B. Maintain adequate records C. Insure assets D. Bond key employees E. Apply technological controls
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A. Establish responsibilities
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Prenumbered printed checks are an example of which internal control principle? A. Technological controls. B. Maintain adequate records. C. Perform regular and independent reviews. D. Establish responsibilities. E. Divide responsibility for related transactions.
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B. Maintain adequate records.
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The impact of technology on internal controls includes which of the following? A. Reduced processing errors. B. Elimination of the need for regular audits. C. Elimination of the need to bond employees. D. More efficient separation of duties. E. Elimination of fraud.
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A. Reduced processing errors.
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Which of the following is the most serious limitation of internal controls? A. Computer error B. Human fraud or human error C. Cost-benefit principle D. Cybercrime E. Management fraud
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B. Human fraud or human error
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Which of the following are risks of e-commerce? A. Firewalls, fraud, and computer viruses. B. Encryption, stolen credit card numbers, and fraud. C. Stolen credit card numbers, computer viruses, and impersonation. D. Computer viruses, encryption, and stolen credit card numbers. E. Impersonation, encryption, and firewalls.
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C. Stolen credit card numbers, computer viruses, and impersonation.
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Cash, not including cash equivalents, includes: A. Postage stamps. B. Coins, currency, and checking accounts. C. IOUs. D. Two-year certificates of deposit. E. Money market funds.
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B. Coins, currency, and checking accounts.
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Cash equivalents: A. Are short-term, highly liquid investments. B. Include six-month CDs C. Include checking accounts. D. Are recorded in petty cash. E. Include money orders.
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A. Are short-term, highly liquid investments.
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Cash equivalents: A. Include savings accounts. B. Include checking accounts. C. Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes. D. Include time deposits. E. Have no immediate value.
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C. Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes.
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A check: A. Involves the writer, the signers, the cashier, and the bank. B. Involves the maker, the payee and the bank. C. Involves the maker and the payee. D. Involves the bookkeeper, the payee, and the bank. E. Involves the signer, the cashier, and the company.
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B. Involves the maker, the payee and the bank.
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A remittance advice is: A. An explanation for a payment by check. B. A bank statement. C. A voucher. D. An EFT. E. A canceled check.
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A. An explanation for a payment by check.
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For which item does a bank NOT issue a debit memorandum? A. To notify a depositor of all withdrawals through an ATM. B. To notify a depositor of a deduction to a depositor's account. C. To notify a depositor of a bounced check. D. To notify a depositor of periodic payments arranged in advance, by a depositor. E. To notify a depositor of a deposit to their account.
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E. To notify a depositor of a deposit to their account.
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Why is it a matter of good internal control to deposit all cash receipts daily and make all payments for goods and services by check? A. When no paper documents are required, there is increased convenience and lower cost B. These actions control the access to cash and create an independent record of all cash activities. C. These procedures result in a more extensive testing of a company's records. D. The Sarbanes-Oxley Act requires these steps be taken by each publicly traded company. E. These procedures allow management to determine if projected cash receipts and disbursements came in over or under budgeted amounts.
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B. These actions control the access to cash and create an independent record of all cash activities.
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The number of days' sales uncollected: A. Is used to evaluate the liquidity of receivables. B. Is calculated by dividing accounts receivable by sales. C. Measures a company's ability to pay its bills on time. D. Measures a company's debt to income. E. Is calculated by dividing sales by accounts receivable.
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A. Is used to evaluate the liquidity of receivables.
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The days' sales uncollected ratio is used to: A. Measure how many days of sales remain until the end of the year. B. Determine the number of days that have passed without collecting on accounts receivable. C. Identify the likelihood of collecting sales on account. D. Estimate how much time is likely to pass before the amount of accounts receivable is collected. E. Measure the amount of layaway sales for a period.
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D. Estimate how much time is likely to pass before the amount of accounts receivable is collected.
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The number of days' sales uncollected is calculated by: A. Dividing accounts receivable by net sales. B. Dividing accounts receivable by net sales and then multiplying by 365. C. Dividing net sales by accounts receivable. D. Dividing net sales by accounts receivable and then multiplying by 365. E. Multiplying net sales by accounts receivable and dividing the result by 365.
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B. Dividing accounts receivable by net sales and then multiplying by 365.
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A company had net sales of $31,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected is equal to: A. 11.7 days B. 23.3 days C. 31.3 days D. 42.5 days E. 46.6 days
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C. 31.3 days
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Mattel had net sales of $4,235 million and ending accounts receivable of $775 million. Days' sales uncollected is equal to: A. 298 days B. 66.8 days C. 19.4 days D. 81.8 days E. 65.2 days
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B. 66.8 days
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85. Which of the following statements is true given the data below? A. Both companies have the same degree of liquidity with regard to their accounts receivable. B. Company A is likely to collect accounts receivable more quickly than Company B. C. Company B is likely to collect accounts receivable more quickly than Company A. D. Company A and Company B will likely collect accounts receivable at the same time. E. It is impossible to estimate how much time it will take for these companies to collect their receivables based on the given information.
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C. Company B is likely to collect accounts receivable more quickly than Company A.
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In year 1 a company had net sales of $50,000 and ending accounts receivable of $2,000. In year 2 this company had net sales of $80,000 and ending accounts receivable of $4,000. Use days' sales uncollected to determine which of the following statements is true:. A. Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days. This measure indicates that the company's liquidity is declining. B. Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days. This measure indicates that the company's liquidity is improving. C. Days' sales uncollected in year 1 is 25 days and in year 2 is 20 days. This measure indicates that the company's liquidity is declining. D. Days' sales uncollected in year 1 is 25 days and in year 2 is 20 days. This measure indicates that the company's liquidity is improving. E. Days' sales uncollected in year 1 is .04 days and in year 2 is .05 days. This measure indicates that the company's liquidity is improving.
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A. Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days. This measure indicates that the company's liquidity is declining.
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An income statement account that is used to record cash overages and cash shortages arising from omitted petty cash receipts and from errors in making change is called the: A. Cash Lost account. B. Bank Reconciliation account. C. Petty Cash account. D. Cash Over and Short account. E. Cash Receivable account.
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D. Cash Over and Short account.
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A set of procedures and approvals that is designed to control cash disbursements and the acceptance of obligations is referred to as a(n): A. Internal cash system B. Petty cash system C. Cash disbursement system D. Voucher system E. Cash control system
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D. Voucher system
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The Cash Over and Short account: A. Is used to record a credit balance in the cash account. B. Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and from missing petty cash receipts. C. Is not necessary in a computerized accounting system. D. Can never have a debit balance. E. Can never have a credit balance.
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B. Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and from missing petty cash receipts.
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A voucher is an internal file that: A. Is prepared after an invoice is received. B. Is used as a substitute for an invoice. C. Is used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded. D. Takes the place of a bank check. E. Is prepared before the company orders goods.
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C. Is used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded.
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Which of the following procedures would weaken the control over cash receipts that arrive through the mail? A. After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent. B. The bank reconciliation is prepared by a person who does not handle cash or record cash receipts. C. For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank. D. The cashier should not also be the record keeper who records the amounts received in the accounting records. E. All of the above are good internal control procedures over cash receipts that arrive through the mail.
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C. For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank.
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At the end of the day, the cash register's record shows $1,250, but the count of cash in the cash register is $1,245. The correct entry to record the cash sales for the day is:
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B.Cash 1,245 Cash Over and Short 5 Sales 1,250
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At the end of the day, the cash register's record shows $1,000 but the count of cash in the register is $1,035. The proper entry to record this excess includes a: A. Credit to Cash for $35. B. Debit to Cash for $35. C. Credit to Cash Over and Short for $35. D. Debit to Cash Over and Short for $35. E. Debit to Petty Cash for $35.
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C. Credit to Cash Over and Short for $35.
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The entry necessary to establish a petty cash fund should include: A. A debit to Cash and a credit to Petty Cash. B. A debit to Cash and a credit to Cash Over and Short. C. A debit to Petty Cash and a credit to Cash. D. A debit to Petty Cash and a credit to Accounts Receivable. E. A debit to Cash and a credit to Petty Cash Over and Short.
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C. A debit to Petty Cash and a credit to Cash.
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The entry to record reimbursement of the petty cash fund for postage expense should include: A. A debit to Postage Expense. B. A debit to Petty Cash. C. A debit to Cash. D. A debit to Cash Short and Over. E. A debit to Supplies.
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A. A debit to Postage Expense.
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When a petty cash fund is in use: A. Expenses paid with petty cash are recorded when the fund is replenished. B. Petty Cash is debited when funds are replenished. C. Petty Cash is credited when funds are replenished. D. Expenses are not recorded. E. Cash is debited when funds are replenished.
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A. Expenses paid with petty cash are recorded when the fund is replenished.
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In reimbursing the petty cash fund: A. Cash is debited. B. Petty Cash is credited. C. Petty Cash is debited. D. Appropriate expense accounts are debited. E. No expenses are recorded.
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D. Appropriate expense accounts are debited.
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Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include: A. A debit to Cash for $377.50. B. A credit to Cash Over and Short for $5.00. C. A debit to Petty Cash for $382.50. D. A credit to Cash for $387.50. E. A debit to Cash for $387.50.
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D. A credit to Cash for $387.50.
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A company plans to decrease a $200 petty cash fund to $75. The current balance in the account includes $45 in receipts and $165 in currency. The entry to reduce the fund will include a: A. Debit to Cash Short and Over for $10. B. Debit to Cash for $90. C. Debit to Miscellaneous Expenses for $35. D. Credit to Petty Cash for $165. E. Credit to Cash for $90.
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B. Debit to Cash for $90.
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A company had $43 missing from petty cash which was not accounted for by petty cash receipts. The correct procedure is to: A. Debit Cash Over and Short for $43. B. Credit Cash Over and Short for $43. C. Debit Petty Cash for $43. D. Credit Petty Cash for $43. E. Credit Cash for $43.
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A. Debit Cash Over and Short for $43.
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An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a (n): A. Internal audit. B. Bank reconciliation. C. Bank audit. D. Trial reconciliation. E. Analysis of debits and credits.
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B. Bank reconciliation.
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On a bank reconciliation, an unrecorded debit memorandum for printing checks is: A. Noted as a memorandum only. B. Added to the book balance of cash. C. Deducted from the book balance of cash. D. Added to the bank balance of cash. E. Deducted from the bank balance of cash.
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C. Deducted from the book balance of cash.
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Outstanding checks refer to checks that have been: A. Written, recorded, sent to payees, and received and paid by the bank. B. Written and not yet recorded in the company books. C. Held as blank checks . D. Written, recorded on the company books, sent to the customer, supplier, or creditor but not yet paid by the bank. E. Issued by the bank.
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D. Written, recorded on the company books, sent to the customer, supplier, or creditor but not yet paid by the bank.
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Which of the following statements best describes how GAAP and IFRS treat cash? A. Accounting definitions for cash are similar for U.S. GAAP and IFRS. B. IFRS are more strict about what is considered cash than GAAP . C. GAAP is more strict about what is considered cash than IFRS. D. IFRS requires a cash balance of at least 10% of total assets; IFRS requires a cash balance of at least 5% of total assets. E. GAAP requires anything other than coins and bills in hand to be classified as cash equivalents while IFRS classifies coins and bills as cash equivalents.
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A. Accounting definitions for cash are similar for U.S. GAAP and IFRS.
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**A check that was outstanding on last period's bank reconciliation was not included with the canceled checks returned by the bank this period. As a result, in preparing this period's reconciliation, the amount of this check should be: A. Added to the book balance of cash. B. Deducted from the book balance of cash. C. Added to the bank balance of cash. D. Deducted from the bank balance of cash. E. Ignored in preparing the period's bank reconciliation.
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D. Deducted from the bank balance of cash.
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A deposit in transit on last period's bank reconciliation is shown as a deposit on the bank statement this period. As a result, in preparing this period's reconciliation, the amount of this deposit should be: A. Added to the book balance of cash. B. Deducted from the book balance of cash. C. Added to the bank balance of cash. D. Deducted from the bank balance of cash. E. Not included as a reconciling item.
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E. Not included as a reconciling item.
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**A company made a bank deposit on September 30 that did not appear on the bank statement dated September 30. In preparing the September 30 bank reconciliation, the company should: A. Deduct the deposit from the bank statement balance. B. Send the bank a debit memorandum. C. Deduct the deposit from the September 30 book balance and add it to the October 1 book balance. D. Add the deposit to the book balance of cash. E. Add the deposit to the bank statement balance.
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E. Add the deposit to the bank statement balance.
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**A company wrote a check on September 30 that did not appear on the bank statement dated September 30. In preparing the September 30 bank reconciliation, the company should: A. Deduct the check from the bank statement balance. B. Send the bank a credit memorandum. C. Deduct the check from the September 30 book balance and add it to the October 1 book balance. D. Add the check to the book balance of cash. E. Add the check to the bank statement balance.
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A. Deduct the check from the bank statement balance.
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In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November's rent was correctly written and drawn for $3,790 but was erroneously entered in the accounting records as $7,390. When reconciling the November bank statement, the company should: A. Deduct $3,600 from the book balance of cash. B. Add $3,700 to the bank statement balance. C. Add $7,390 to the book balance of cash. D. Deduct $3,600 from the bank statement balance. E. Add 3,600 to the book balance of cash.
answer
E. Add 3,600 to the book balance of cash
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In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November's rent was correctly written and drawn for $7,390 but was erroneously entered in the accounting records as $3,790. When reconciling the November bank statement, the company should: A. Deduct $3,600 from the book balance of cash. B. Add $3,600 to the bank statement balance. C. Add $7,390 to the book balance of cash. D. Deduct $3,600 from the bank statement balance. E. Add $3,600 to the book balance of cash.
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A. Deduct $3,600 from the book balance of cash.
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In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $790 but was erroneously entered in the accounting records as $970. The journal entry to adjust the books for the bank reconciliation would include which of the following for this situation? A. $180 decrease to Cash and a $180 decrease to Utility Expense. B. $180 increase to Cash and a $180 decrease to Utility Expense. C. $20 decrease to Cash and a $20 decrease to Utility Expense. D. $20 increase to Cash and a $120 decrease to Utility Expense. E. $970 increase to Cash.
answer
B. $180 increase to Cash and a $180 decrease to Utility Expense.
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In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $970 but was erroneously entered in the accounting records as $790. The journal entry to adjust the books for the bank reconciliation would include which of the following for this situation? A. $180 decrease to Cash and a $180 decrease to Utility Expense. B. $180 increase to Cash and a $180 increase to Utility Expense. C. $180 decrease to Cash and a $180 increase to Utility Expense. D. $180 increase to Cash and a $120 decrease to Utility Expense. E. $970 increase to Cash and a $790 decrease to Utility Expense.
answer
C. $180 decrease to Cash and a $180 increase to Utility Expense.
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A seller of goods or services, which is usually a manufacturer or wholesaler, is known as a: A. Vendor B. Payee C. Vendee D. Creditor E. Debtor
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A. Vendor
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The internal document prepared by a department manager that informs the purchasing department of its needs is the: A. Purchase requisition B. Purchase order C. Invoice D. Receiving report E. Invoice approval
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A. Purchase requisition
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The document that the purchasing department prepares and sends to the vendor to place an order is the: A. Purchase requisition B. Purchase order C. Invoice D. Receiving report E. Invoice approval
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B. Purchase order
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The document that is an itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is the: A. Purchase requisition B. Purchase order C. Invoice D. Receiving report E. Invoice approval
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C. Invoice
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The internal document that is prepared to notify the appropriate persons that ordered goods have been received and describes the quantities and condition of the goods is the A. Purchase requisition B. Purchase order C. Invoice D. Receiving report E. Invoice approval
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D. Receiving report
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The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for approval and payments is the: A. Purchase requisition B. Purchase order C. Invoice D. Receiving report E. Invoice approval
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E. Invoice approval
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Which of the following statements is true regarding the documents in a voucher system? A. All voucher systems are the same. B. Recording a purchase is initiated by an invoice approval. C. A well-designed voucher system will allow department managers to place orders directly with suppliers for control purposes. D. A voucher system is most commonly used in very small companies to make up for the lack of other internal controls. E. A well designed voucher system will eliminate all fraud and error.
answer
B. Recording a purchase is initiated by an invoice approval.
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riple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, credit cash over/short $2.19. If the original amount in petty cash is $320, how much was the credit to cash for the reimbursement? A. $320.00 B. $202.44 C. $37.56 D. $39.75 E. $41.94
answer
C. $37.56
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Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, credit cash over/short $2.19. If the original amount in petty cash is $320, how much is in petty cash before the reimbursement? A. $320.00 B. $282.44 C. $37.56 D. $39.75 E. $41.94
answer
B. $282.44
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Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, debit cash over/short $2.19. If the original amount in petty cash is $320, how much was the credit to cash for the reimbursement? A. $320.00 B. $202.44 C. $37.56 D. $39.75 E. $41.94
answer
E. $41.94
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Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, debit cash over/short $2.19. If the original amount in petty cash is $320, how much is in petty cash before the reimbursement? A. $320.00 B. $202.44 C. $37.56 D. $275.87 E. $257.87
answer
E. $257.87
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Given the following info.... what is the amount to be reimbursed? A. $365.27 B. $289.06 C. $373.79 D. $289.00 E. $450.00
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C. $373.79
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Given the following info.... What is the amount of cash over and short? A. Debit $84.73. B. Credit $84.73. C. Debit $160.94. D. Credit $160.94. E. No cash over or short would be recorded.
answer
A. Debit $84.73.
question
Fluffy Pet Grooming deposits all cash receipts on the day when they are received and all cash payments are made by check. At the close of business on June 30, its Cash account shows a $14,811 debit balance. Fluffy Pet Grooming's June 30 bank statement shows $14,472 on deposit in the bank. Prepare a bank reconciliation for Fluffy Pet Grooming using the following information: What is the adjusted bank balance? A. $14,265 B. $14,745 C. $14,677 D. $14,538 E. $14,877
answer
B. $14,745
question
Fluffy Pet Grooming deposits all cash receipts on the day when they are received and all payments are made by check. At the close of business on June 30, its Cash account shows a $14,811 debit balance. Fluffy Pet Grooming's June 30 bank statement shows $14,472 on deposit in the bank. Prepare a bank reconciliation for Fluffy Pet Grooming using the following information: What is the adjusting journal entry required to record the increase in cash for the adjusted bank balance? A. Debit to cash $2,261 credit to accounts receivable $2,261. B. Credit to accounts receivable $2,261 debit to cash $2,261. C. No adjusting entry is necessary. D. Debit to cash $2,534 credit to accounts receivable $2,534. E. Credit to cash $2,534 credit to accounts receivable $2,534.
answer
C. No adjusting entry is necessary.
question
**The following information is available to reconcile Sleepy Time Bedding's book balance of cash with its bank statement cash balance as of July 31: What is the adjusted book balance? A. $34,485 B. $34,994 C. $28,150 D. $27,025 E. $31,617
answer
A. $34,485
question
The following information is available to reconcile Sleepy Time Bedding's book balance of cash with its bank statement cash balance as of July 31: What is the appropriate journal entry to record the collection made by the bank? A. Debit to cash $9,500 credit to accounts receivable $9,500. B. Credit to accounts receivable $9,500 credit to cash $9,500. C. Debit to cash $9,452 debit to collection expense $48 credit accounts receivable $9,500. D. Debit to cash $9,452 debit to collection expense $48 credit notes receivable $9,500. E. No adjusting entry is necessary
answer
D. Debit to cash $9,452 debit to collection expense $48 credit notes receivable $9,500.
question
What is the net method of recording purchases? A. A purchase is originally recorded at its full amount with any cash discount taken recorded as a reduction to inventory at a later date. B. A purchase is originally recorded at its full amount less any available cash discount. C. A purchase is originally recorded at its full amount plus any available cash discount. D. A purchase is originally recorded at its full amount with any cash discount taken recorded as an increase to inventory at a later date. E. A purchase is originally recorded to a purchase discounts lost account with any cash discount taken recorded as a reduction to inventory at a later date.
answer
C. A purchase is originally recorded at its full amount plus any available cash discount.
question
The Discounts Lost account: A. Is used with the gross method of recording purchases to highlight the value of purchase discounts taken. B. Is used with the gross method of recording purchases to highlight the value of purchase discounts available but not taken. C. Is used to note situations where the accounting department has lost or misplaced paperwork relating to inventory purchases. D. Is used with the net method of recording purchases to highlight the value of purchase discounts taken. E. Is used with the net method of recording purchases to highlight the value of purchase discounts available but not taken.
answer
E. Is used with the net method of recording purchases to highlight the value of purchase discounts available but not taken.
question
A company purchases merchandise on November 2 at a $2,400 invoice price (terms 3/10, n/30) and then pays all amounts owed on November 12. Using perpetual inventory and net purchases methods, what are the proper entries to record these two transactions?
answer
B. Nov. 2 Merchandise Inventory 2,328 Accounts Payable 2,328
question
A company purchases merchandise on November 2 at a $2,400 invoice price (terms 3/10, n/30) and then pays all amounts owed on December 2. Using perpetual inventory and net purchases methods, what are the proper entries to record these two transactions?
answer
. E. Nov. 2 Merchandise Inventory 2,328 Accounts Payable 2,328 Dec. 2 Accounts Payable 2,328 Purchase Discounts Lost 72 Cash 2,400
question
A company purchases merchandise on November 2 at a $2,400 invoice price (terms 3/10, n/30) and then pays all amounts owed on November 12. Using periodic inventory and net purchases methods, what are the proper entries to record these two transactions?
answer
B. Nov. 2 Purchases 2,328 Accounts Payable 2,328 Nov. 11 Accounts Payable 2,328 Cash 2,328
question
A credit sale of $2,500 to a customer would result in: A. A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger. B. A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable ledger. C. A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable ledger. D. A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger. E. A credit to Sales and a credit to the customer's account in the accounts receivable ledger.
answer
A. A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger.
question
Acme Company has an agreement with a major credit card company that calls for cash to be received immediately upon deposit of Acme customers' credit card sales receipts. The credit card company receives 3.5% of card sales as its fee. If Acme has $2,000 in credit card sales, which of the following statements are true? A. Acme debits Cash $2,000. B. Acme debits Cash $1,930. C. Acme debits Accounts Receivable - Credit Card Co $2,000. D. Acme debits Accounts Receivable - Credit Card Co $1,930. E. Acme credits Sales $1,930.
answer
B. Acme debits Cash $1,930.
question
Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true? A. Ace will receive $56,154 cash from Seller Company. B. Seller Company will receive cash $56,154 from Ace. C. Ace will receive $57,300 cash from Seller Company. D. Seller Company will receive $57,300 cash from Ace. E. Ace will pay Seller Company a $1,146 credit card fee.
answer
B. Seller Company will receive cash $56,154 from Ace.
question
CHAPTER 7 A promissory note received from a customer in exchange for an account receivable: A. Is a cash equivalent for the recipient. B. Is an account receivable for the recipient. C. Is a note receivable for the recipient. D. Is a short-term investment for the recipient. E. Is a note payable for the recipient.
answer
C. Is a note receivable for the recipient.
question
The person who signs a note receivable and promises to pay the principal and interest is the: A. Maker B. Payee C. Holder D. Receiver E. Owner
answer
A. Maker
question
The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called: A. Relevance B. Full disclosure C. Evaluation D. Materiality E. Matching
answer
B. Full disclosure
question
A promissory note: A. Is a short-term investment for the maker. B. Is a written promise to pay a specified amount of money at a certain date. C. Is a liability to the payee. D. Is another name for an installment receivable. E. Cannot be used in payment of an account receivable.
answer
B. Is a written promise to pay a specified amount of money at a certain date.
question
The maturity date of a note receivable: A. Is the day of the credit sale. B. Is the day the note was signed. C. Is the day the note is due to be paid. D. Is the date of the first payment. E. Is the last day of the month.
answer
C. Is the day the note is due to be paid.
question
The interest accrued on $3,600 at 7% for 60 days is: A. $36 B. $42 C. $252 D. $180 E. $420
answer
B. $42
question
A 90-day note issued on April 20 has a maturity date of: A. July 17 B. July 18 C. July 19 D. July 20 E. July 21
answer
C. July 19
question
A company receives a 10%, 90-day note for $1,500. The total interest due upon the maturity date is: A. $37.50 B. $150.00 C. $75.00 D. $50.00 E. $87.50
answer
A. $37.50
question
A company receives a 7.5%, six-month note for $8,900. The total interest due on the maturity date is: A. $66,750.00 B. $4,005.00 C. $2,002.50 D. $667.50 E. $333.75
answer
E. $333.75
question
A company receives a 6.2%, 60-day note for $9,650. The total amount of cash due on the maturity date is: A. $598.30 B. $99.72 C. $9,650.00 D. $10,248.30 E. $9,749.72
answer
E. $9,749.72
question
The buyer who pays cash for an account receivable is referred to as a: A. Payor B. Pledgor C. Factor D. Payee E. Pledgee
answer
C. Factor
question
Company sold $10,000 of its accounts receivable and was charged a 2% factoring fee. How should the company record this transaction in the journal?
answer
A.Cash 9,800 Factoring Fee Expense 200 Accounts Receivable 10,0
question
The quality of receivables refers to: A. The creditworthiness of sellers. B. The speed of collection. C. The likelihood of collection without loss. D. Sales turnover. E. The interest rate.
answer
C. The likelihood of collection without loss.
question
The accounts receivable turnover is calculated by: A. Dividing net sales by average accounts receivable. B. Dividing net sales by average accounts receivable and multiplying by 365. C. Dividing average accounts receivable by net sales. D. Dividing average accounts receivable by net sales and multiplying by 365. E. Dividing net income by average accounts receivable.
answer
A. Dividing net sales by average accounts receivable.
question
A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period? A. 0.20 B. 5.00 C. 20.0 D. 73.0 E. 1,825
answer
B. 5.00
question
Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is: A. 0.90 B. 10.1 C. 36.1 D. 50.0 E. 3,686
answer
B. 10.1
question
Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coca-Cola's turnover was 9.3 for this year and 9.3 for last year. These results imply that: A. Coke has the better turnover for both years. B. Pepsi has the better turnover for both years. C. Coke's turnover is improving. D. Coke's credit policies are too loose. E. Coke is collecting its receivables more quickly than Pepsi in both years.
answer
B. Pepsi has the better turnover for both years.
question
A company had an accounts receivable turnover ratio of 12 and net sales of $744,000 for a given period. What was the average amount of accounts receivables for this period? A. $8,928,000 B. $62,000 C. $4,380 D. $169.86 E. Average accounts receivable cannot be determined from this information
answer
B. $62,000
question
A company had an accounts receivable turnover ratio of 8 and net sales of $600,000 for a given period. What was the average accounts receivable amount for this period? A. $4,800,000. B. $2,919.99. C. $205.48. D. $75,000. E. Average accounts receivable cannot be determined from this information.
answer
D. $75,000.
question
The matching principle requires: A. That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user. B. The use of the direct write-off method for bad debts. C. The use of the allowance method of accounting for bad debts. D. That bad debts be disclosed in the financial statements. E. That bad debts not be written off.
answer
C. The use of the allowance method of accounting for bad debts.
question
The materiality constraint: A. States that an amount can be ignored if its effect on financial statements is unimportant to the user's business decisions. B. Requires use of the allowance method for bad debts. C. Requires use of the direct write-off method. D. States that bad debts not be written off. E. Requires that expenses be reported in the same period as the sales they helped produce.
answer
A. States that an amount can be ignored if its effect on financial statements is unimportant to the user's business decisions.
question
If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: A. An increase in the expenses of the current period . B. A reduction in current assets. C. A reduction in equity. D. No effect on the expenses of the current period. E. A reduction in current liabilities.
answer
D. No effect on the expenses of the current period.
question
On October 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts? A. Decrease in net income; no effect on total assets. B. No effect on net income; no effect on total assets. C. Decrease in net income; decrease in total assets. D. Increase in net income; no effect on total assets. E. No effect on net income; decrease in total assets.
answer
B. No effect on net income; no effect on total assets.
question
Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. On July 10, Newton received a check for the full amount of $3,000 from Best. On July 10, the entry or entries Newton makes to record the recovery of the bad debt is:
answer
A. Accounts Receivable - P. Best 3,000 Allowance for Doubtful Accounts 3,000 Cash 3,000 Accounts Receivable - P. Best 3,000
question
According to GAAP, the amount of bad debt expense can be estimated by: A. Only the percent of sales method. B. Only the percent of accounts receivable method. C. Only by the aging of accounts receivable method. D. Only by the percent of sales method or the percent of accounts receivable method. E. Bad debt expense can be estimated by the percent of sales method, the percent of accounts receivable method, or by the aging of accounts receivable method.
answer
E. Bad debt expense can be estimated by the percent of sales method, the percent of accounts receivable method, or by the aging of accounts receivable method.
question
. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: A. Direct write-off method. B. Aging of accounts receivable method. C. Percent of sales method. D. Aging of investments method. E. Percent of accounts receivable method.
answer
B. Aging of accounts receivable method.
question
An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the: A. Allowance method of accounting for bad debts. B. Aging of notes receivable. C. Adjustment method for uncollectible debts. D. Direct write-off method of accounting for bad debts. E. Cash basis method of accounting for bad debts.
answer
A. Allowance method of accounting for bad debts.
question
*On December 31 of the current year, a company's unadjusted trial balance included the following: Accounts Receivable, debit balance of $97,250; Allowance for Doubtful Accounts, credit balance of $951. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible? A. $951 B. $3,992 C. $4,884 D. $5,835 E. $6,786
answer
C. $4,884
question
*On December 31 of the current year, a company's unadjusted trial balance included the following: Accounts Receivable, debit balance of $88,790; Allowance for Doubtful Accounts, credit balance of $1,245. What amount should be debited to Bad Debts Expense, assuming 4% of outstanding accounts receivable at the end of the current year are considered uncollectible? A. $1,245.00 B. $3,551.60 C. $4,796.60 D. $2,306.60 E. $87,545.00
answer
D. $2,306.60
question
A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
answer
C. Bad Debt Expense 15,925 Allowance for Doubtful Accounts 15,925
question
A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $245,000 debit Allowance for uncollectible accounts 300 credit Net Sales 900,000 credit All sales are made on credit. Based on past experience, the company estimates 0.5% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? A. $925 B. $1,225 C. $4,200 D. $4,500 E. $45,000
answer
D. $4,500
question
A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $39,375 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $3,285. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
answer
A.Bad Debt Expense 36,090 Allowance for Doubtful Accounts 36,090
question
Electron borrowed $75,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a: A. Debit to Notes Receivable for $75,000. B. Debit to Accounts Receivable for $75,000. C. Credit to Notes Receivable for $75,000. D. Debit Notes Payable for $75,000. E. Credit to Sales for $75,000.
answer
A. Debit to Notes Receivable for $75,000.
question
*The amount due on the date of maturity for a $6,000, 60-day, 8%, note receivable is: A. $6,000 B. $6,480 C. $5,520 D. $6,080 E. $5,920
answer
D. $6,080
question
When the maker of a note honors a note this indicates that the note is: A. Signed B. Paid in full C. Guaranteed D. Notarized E. Cosigned
answer
B. Paid in full
question
Failure by a promissory note's maker to pay the amount due at maturity is known as: A. Protesting a note B. Closing a note C. Dishonoring a note D. Discounting a note E. Depreciating a note
answer
C. Dishonoring a note
question
Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day, 10% promissory note for the $5,000. TechCom's journal entry to record the sales portion of the transaction is:
answer
B
question
Mix Recording Studios purchased $7,800 in electronic components from TechCom. Mix Recording Studios signed a 60-day, 10% promissory note for $7,800. TechCom's journal entry to record the sales portion of the transaction is:
answer
C
question
Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?
answer
D
question
Teller, a calendar year company, purchased merchandise from TechCom on October 17 of the current year. TechCom accepted Teller's $4,800, 90-day, 10% note as payment. What entry should TechCom make on January 15 of the next year when the note is paid, assuming an adjusting entry for interest was made for interest on December 31?
answer
D
question
Temper Company has credit sales of $3.10 million for year 2013. Temper estimates that .9% of the credit sales will not be collected. On December 31, 2013, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222. Assuming the company uses the percent of sales method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry? A. $25,246.40 B. $27,468.40 C. $23,024.40 D. $27,900.00 E. $24,420.40
answer
D. $27,900.00
question
Vine Company began operations on January 1, 2013. During its first year, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows: A. $18,644.90 B. $38,621.20 C. $19,783.80 D. $19,221.20 E. $19,400.20
answer
B. $38,621.20
question
What is the accounts receivable turnover ratio for 2013? A. 6.41 B. 4.97 C. 6.72 D. 5.40 E. 6.56
answer
E. 6.56
question
What is the accounts receivable turnover ratio for 2012? A. 6.41 B. 4.97 C. 6.72 D. 5.40 E. 5.20
answer
D. 5.40
question
On August 1, 2013, Ace Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $123,965. The note is due in 90 days and has an interest rate of 8%. What would be the total amount collected at the maturity date? A. $123,965.00 B. $2,479.30 C. $126,444.30 D. $121,485.70 E. $133,882.20
answer
C. $126,444.30
question
On November 15, 2013, Betty Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $138,460. The note is due in 90 days and has an interest rate of 7.5%. What would be the amount required for the December 31, 2013, adjusting journal entry? A. $35,913.06 B. $34,615.00 C. $10,384.50 D. $1,298.06 E. $2,596.13
answer
D. $1,298.06
