Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

Credit card discounts are reported as operating expenses on an income statement.

When preparing the monthly bank reconciliation, the accountant for Farris Corporation discovered that a check correctly written to one of Farris' suppliers for $159 had been incorrectly recorded in the books as $195. Which of the following statements is correct with respect to the bank reconciliation process?

If the accounts receivable turnover ratio increases, the number of days it takes to collect the receivables also increases.

On June 1, 2014, Concorde Company sold merchandise on credit at an invoice price of $1,000; terms 2/10, n/30. Required: Prepare the journal entries to record the following: A. To record the sale. B. Assumption A: To record collection on June 28, 2014. C. Assumption B: To record collection on June 9, 2014.

When preparing the statement of cash flows, the reason that net sales revenue is adjusted for the change in accounts receivables is to convert net sales to cash collected from customers, since accounts receivable represents sales revenue not collected from customers at the beginning and end of the accounting year.

Which of the following statements is false?

Cash equivalents such as treasury bills are reported as investments on the balance sheet.

Burke Company has just received its June 30 bank statement from Urban Bank. The bank statement and the cash account per the books, summarized below, are to be reconciled for the month of June. Required: A. Prepare the June 30 bank reconciliation. B. Prepare the journal entries that should be made in the accounts of Burke Company as a result of the bank reconciliation.

The cash records and the bank statement of Frankel Company showed the following at the end of February 2014: Outstanding checks as of the beginning of February 2014, $8,000; checks written by Frankel Company according to its books during February 2014, $50,000; and checks cleared by the bank during February 2014, $54,000. How much were the outstanding checks at the end of February 2014?

Which of the following does not correctly describe the following journal entry? Cash Credit card discount Accounts receivable

Which of the following correctly describes the effect of a sales discount?

Linetech Company's bank statement showed an ending balance of $8,000. Items appearing in the bank reconciliation included: outstanding checks, $500; deposits in transit, $1,000; bank service charges, $50; and Driver Company's $250 check erroneously deducted from Linetech's bank account by the bank. How much is the correct cash balance at the end of the month?

A. What are "cash equivalents"? B. Specifically where would cash equivalents appear on the financial statements?

On January 1, American Company's allowance for doubtful accounts had a credit balance of $3,000. The balance in the Accounts Receivable account on that date was $75,000. On January 2, prior to any credit sales, a $500 account from National Company was deemed to be uncollectible and written off. Required: A. Compute the net realizable value of American's receivables on January 1. B. Prepare the journal entry American would record on January 2 related to the write-off of National's account. C. Compute the net realizable value of American's receivables on January 2, immediately following the write-off of National's account.

When using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet at the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will

Which of the following statements does not correctly describe the allowance for doubtful accounts balance?

Which of the following statements pertaining to bank reconciliations is false?

Determine the effect of the following transactions on the financial statement components identified. Code your answers as follows: A: If the transaction results in an increase in the financial statement component. B: If the transaction results in a decrease in the financial statement component. C. If the transaction does not affect the financial statement component. Transaction 1: The adjusting entry to record bad debt expense was made. Gross profit_____ Current assets_____ Stockholders' equity_____ Transaction 2: An account receivable was collected for which the customer took advantage of a 2% discount and remitted the payment less the discount. Net sales_____ Gross Profit_____ Current assets_____

A company is thinking of borrowing money at an 18% annual interest rate in order to pay a $30,000 invoice within the discount period. The invoice terms are 2/10, n/30. They should borrow the money because they will have a net savings of 19.2%.

Gross profit is calculated as gross sales less cost of sales.