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| 1 | |
Which of the following might be classified as a cash equivalent? |
| | A) | Cash in a checking account. |
| | B) | 30-day treasury bill. |
| | C) | Money orders waiting to be deposited. |
| | D) | 120-day treasury bill. |
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| 2 | |
An internal control system is designed to do all but which of the following? |
| | A) | Promote operational efficiency. |
| | B) | Safeguard assets. |
| | C) | Encourage adherence to company policies. |
| | D) | Assure the promotion of the most qualified employees. |
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| 3 | |
Which of the following is true about cash reporting under IFRS? |
| | A) | Cash accounts are typically viewed as investments, with overdrafts treated as unrealized losses. |
| | B) | Overdrafts in one cash account can typically be offset against positive balance in other cash accounts. |
| | C) | Overdrafts are typically treated as current liabilities, regardless of the existence of other cash accounts. |
| | D) | Cash accounts are typically viewed as immaterial. |
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| 4 | |
A company uses the gross method to account for cash discounts offered to its customers. If payment is made before the discount period expires, which of the following is correct? |
| | A) | Sales discounts is debited for the amount of discounts taken by customers. |
| | B) | Sales discounts is credited for the amount of discounts taken by customers. |
| | C) | Interest expense is debited for the amount of discounts taken by customers. |
| | D) | Accounts receivable is credited for the amount of discounts taken by customers. |
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| 5 | |
Allister Company does not use the allowance method to account for bad debts and instead any bad debts that do arise are written off as bad debt expense. What problem might this create if bad debts are material? |
| | A) | Receivables likely will be understated. |
| | B) | No problems are created. |
| | C) | Receivables likely will be overstated. |
| | D) | The matching principle is violated when the write-off occurs in the same period that the receivable is initially recorded. |
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| 6 | |
Jasper Company uses the allowance method to account for bad debts. During 2016, the company recorded bad debt expense of $9,000 and wrote off as uncollectible accounts receivable totaling $5,000. These transactions caused a decrease in working capital (current assets minus current liabilities) of: |
| | A) | $7,000 |
| | B) | $5,000 |
| | C) | $9,000 |
| | D) | $14,000 |
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| 7 | |
The Reingold Hat Company uses the allowance method to account for bad debts. During 2016, the company recorded $800,000 in credit sales. At the end of 2016, account balances were: Accounts receivable, $120,000; Allowance for uncollectible accounts, $3,000 (credit). If bad debt expense is estimated to be 3% of credit sales, the appropriate adjusting entry will include a debit to bad debt expense of: |
| | A) | Zero. |
| | B) | $27,000 |
| | C) | $21,000 |
| | D) | $24,000 |
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| 8 | |
Enchill Company accrues bad debt expense during the year at an amount equal to 3% of credit sales. At the end of the year, a journal entry adjusts the allowance for uncollectible accounts to a desired amount based on an aging of accounts receivable. At the beginning of 2016, the allowance account had a credit balance of $18,000. During 2016, credit sales totaled $480,000 and receivables of $14,000 were written off. The year-end aging indicated that a $21,000 allowance for uncollectible accounts was required. Enchill's bad debt expense for 2016 would be: |
| | A) | $17,000 |
| | B) | $2,600 |
| | C) | $21,000 |
| | D) | $14,400 |
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| 9 | |
Harmon Sporting Goods received a $60,000, 6-month, 10% note from a customer. Four months after receiving the note, it was discounted at a local bank at a 12% discount rate. The cash proceeds received by Harmon were: |
| | A) | $63,000 |
| | B) | $64,680 |
| | C) | $61,740 |
| | D) | $67,200 |
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| 10 | |
At the end of June, the Marquess Company factored $200,000 in accounts receivable with Homemark Finance. The transfer is made without recourse. Homemark charges a fee of 3% of receivables factored. During July, $150,000 of the factored receivables are collected. What amount of loss on sale of receivables would Marquess record in June? |
| | A) | $6,000 |
| | B) | $4,500 |
| | C) | $1,500 |
| | D) | Zero. |
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| 11 | |
In question 10, if the transfer were made with recourse but is still accounted for as a sale, what amount of loss on sale of receivables would the company record in June assuming the estimated recourse liability is $2,000? |
| | A) | $6,500 |
| | B) | $8,000 |
| | C) | $4,000 |
| | D) | Zero. |
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| 12 | |
Which of the following is true regarding accounting for transfers of receivables under IFRS? |
| | A) | Transfers of receivables can never be treated as a sale of receivables |
| | B) | Transfers of receivables can never be treated as a secured borrowing |
| | C) | Whether the risks and rewards of ownership have been transferred is sometimes the key factor for determining how to account for a transfer of receivables. |
| | D) | none of the above are true. |
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| 13 | |
The following data are available for the Hunting Balloon Company: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1061248/Chapter07_13.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (35.0K)</a>]]>
The accounts receivable turnover ratio for the current year is: |
| | A) | 8.00 |
| | B) | 10.71 |
| | C) | 10.00 |
| | D) | 9.375 |
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| 14 | |
This question is based on Appendix 7-A The replenishment of a petty cash fund might include which of the following? |
| | A) | A debit to cash. |
| | B) | A debit to petty cash. |
| | C) | A debit to office supplies expense. |
| | D) | A credit to petty cash. |
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| 15 | |
This question is based on Appendix 7-A In a bank reconciliation, deposits outstanding are: |
| | A) | Subtracted from the bank balance. |
| | B) | Added to the book balance. |
| | C) | Added to the bank balance. |
| | D) | Subtracted from the book balance. |
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| 16 | |
This question is based on Appendix 7-A In a bank reconciliation, NSF checks are: |
| | A) | Subtracted from the bank balance. |
| | B) | Added to the book balance. |
| | C) | Added to the bank balance. |
| | D) | Subtracted from the book balance. |
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| 17 | |
This question is based on Appendix 7-A Alvin Electronics is in the process of reconciling its bank account for the month of November. The following information is available: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1061248/Chapter07_17.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (47.0K)</a>]]>
What should be the corrected cash balance at the end of November? |
| | A) | $6,870 |
| | B) | $7,140 |
| | C) | $6,835 |
| | D) | $7,105 |
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| 18 | |
This question is based on Appendix 7-B Which of the following is NOT true about accounting for a troubled debt restructuring? |
| | A) | If a receivable becomes impaired, it is remeasured at the discounted present value of currently expected cash flows. |
| | B) | If a receivable is remeasured, the discount rate is based on the loan's original effective rate. |
| | C) | If a receivable is continued, but with modified terms, no loss is typically recorded. |
| | D) | Sometimes receivables are settled outright at the time of a restructuring. |
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