Question 1

Which method of estimating bad debt expense focuses on the faithful representation of the net realizable value of receivables?

Accepted Answer

A)  net method 
B)  allowance method 
C)  aging method 
D)  direct write-off method 
A)  net method 
B)  allowance method 
C)  aging method 
D)  direct write-off method C

Question 2

The operating cycle is the length of time from when a product is sold until the cash is collected.

Accepted Answer

A) True 
 B)False  False

Question 3

Grisson Enterprises provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Currency and coin } & 500 \
\hline \text { First Bank - Checking } & 5,000 \
\hline \text { Second Bank - Checking } & ( 700 ) \
\hline \text { First Bank - Savings* } & 30,000 \
\hline \text { 2-month CD } & 13,000 \
\hline 5 \text { month CD } & 11,000 \
\hline
\end{array}$$ * Restricted fund for bond retirement
Following U.S. GAAP, what is the dollar amount of Cash and Cash Equivalents reported on Grisson's balance sheet?

Accepted Answer

A)  $29,500 
B)  $28,800 
C)  $18,500 
D)  $17,800 
A)  $29,500 
B)  $28,800 
C)  $18,500 
D)  $17,800 C

Question 4

On May 1, 2018, Fitz installed a $498,000 sound system for International Arena. Fitz agreed to accept a $478,000 six-month, noninterest bearing note due on November 1, 2018. Fitz prepares financial statements at the end of every calendar year. Fitz's journal entry to record the collection of the note plus accrued interest on November 1, 2018, will include a ________.

Accepted Answer

A)  credit to Interest Revenue for $478,000 
B)  debit to Interest Revenue for $20,000 
C)  credit to Note Receivable for $498,000 
D)  credit to Note Receivable for $478,000 
A)  credit to Interest Revenue for $478,000 
B)  debit to Interest Revenue for $20,000 
C)  credit to Note Receivable for $498,000 
D)  credit to Note Receivable for $478,000

Question 5

Control procedures to prevent any misappropriation and irregularities in the cash disbursements process include the following except:

Accepted Answer

A)  Whenever possible, to minimize bank transaction fees, most disbursements should be made in the form of cash such as payments from petty cash, coin and currency. 
B)  All cash disbursements, except for immaterial payments made from petty cash, must be made by check. 
C)  Authorization is required for all cash disbursements prior to preparing a check. 
D)  The person preparing the check to pay an invoice must have all the appropriate documentation, including the vendor invoice; the approved purchase order; and the receiving report. 
A)  Whenever possible, to minimize bank transaction fees, most disbursements should be made in the form of cash such as payments from petty cash, coin and currency. 
B)  All cash disbursements, except for immaterial payments made from petty cash, must be made by check. 
C)  Authorization is required for all cash disbursements prior to preparing a check. 
D)  The person preparing the check to pay an invoice must have all the appropriate documentation, including the vendor invoice; the approved purchase order; and the receiving report.

Question 6

Marston Company has outstanding accounts receivable totaling €1.5 million as of December 31 and sales on credit during the year of €24 million. There is also a credit balance of €2,000 in the allowance for doubtful accounts as of December 31. After aging its receivables, the company estimates that 8% of its total outstanding receivables will be uncollectible. What will be the amount of bad debt expense recognized for the year?

Accepted Answer

A)  €2,000 
B)  €120,000 
C)  €122,000 
D)  €118,000 
A)  €2,000 
B)  €120,000 
C)  €122,000 
D)  €118,000

Question 7

The inventory turnover ratio is equal to 365 divided by the number of days of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 8

Popper Enterprises factors $500,000 of its accounts receivable to Third Bank with recourse for a finance charge of 6%. The finance company retains an amount equal to 7% of the accounts receivable for possible adjustments. Third Bank will return the hold back to Popper when it collects the receivables. In addition, the fair value of the recourse liability is estimated at $20,000. What amount of cash would Popper receive as a result of this transaction?

Accepted Answer

A)  $500,000 
B)  $480,000 
C)  $435,000 
D)  $475,000 
A)  $500,000 
B)  $480,000 
C)  $435,000 
D)  $475,000

Question 9

Pledged receivables are collateral for a financing arrangement.

Accepted Answer

A) True 
 B)False

Question 10

The cash operating cycle is equal to (1) days accounts payable outstanding minus (2) days sales outstanding minus (3) days inventory on hand.

Accepted Answer

A) True 
 B)False

Question 11

Lithotech, Inc. had net sales in 2018 of $800,000. At December 31, 2018, before adjusting entries, the balances in selected accounts were: accounts receivable $122,000 debit, and allowance for doubtful accounts $1,200 credit. Lithotech estimates that 2% of its receivables will prove to be uncollectible. What is the net realizable value of the receivables reported on the statement of financial position at December 31, 2018 after adjusting entries?

Accepted Answer

A)  $119,560 
B)  $120,760 
C)  $122,000 
D)  $118,360 
A)  $119,560 
B)  $120,760 
C)  $122,000 
D)  $118,360

Question 12

Teeter Company began 2018 with accounts receivable of $400,000 and an allowance for uncollectible accounts of $29,000 (credit balance). Bad debt expense for the year was $36,000 and the ending balance in the allowance for uncollectible accounts account was $13,000. What was the amount of accounts receivable written off during the year?

Accepted Answer

A)  $16,000 
B)  $52,000 
C)  $452,000 
D)  $416,000 
A)  $16,000 
B)  $52,000 
C)  $452,000 
D)  $416,000

Question 13

Sales discounts are reductions granted to customers to encourage quick invoice payment.

Accepted Answer

A) True 
 B)False

Question 14

What is the balance sheet classification of a bank account whose fund balance is restricted for retirement of bonds that mature in six years?

Accepted Answer

A)  current asset 
B)  noncurrent asset 
C)  current liability 
D)  noncurrent liability 
A)  current asset 
B)  noncurrent asset 
C)  current liability 
D)  noncurrent liability

Question 15

The following company information is available: $$\begin{array} { | l | l | } 
\hline \text { Days sales outstanding } & 30 \
\hline \text { Days sales in inventory } & 18 \
\hline \text { Days accounts payable outstanding } & 23 \
\hline
\end{array}$$
 How long is the company's cash operating cycle?

Accepted Answer

A)  -25 days 
B)  +25 days 
C)  -12 days 
D)  +71 days 
A)  -25 days 
B)  +25 days 
C)  -12 days 
D)  +71 days

Question 16

What is a securitization of receivables? What are advantages and disadvantages of securitization?

Accepted Answer

Securitization refers to a financing tec

Question 17

Under the allowance method, the write-off of an uncollectible account ________.

Accepted Answer

A)  has no effect on the allowance for uncollectible accounts 
B)  has no effect on net income 
C)  increases expenses 
D)  decreases total assets 
A)  has no effect on the allowance for uncollectible accounts 
B)  has no effect on net income 
C)  increases expenses 
D)  decreases total assets

Question 18

Marston Company has outstanding accounts receivable totaling €4.5 million as of December 31 and sales on credit during the year of €20 million. There is also a credit balance of €18,000 in the allowance for doubtful accounts. After aging its receivables, the company estimates that 2% of its receivables will be uncollectible. What will be the balance for the Allowance for Uncollectible Accounts after the year-end adjustment is made to record bad debt expense?

Accepted Answer

A)  €418,000 
B)  €400,000 
C)  €90,000 
D)  €382,000 
A)  €418,000 
B)  €400,000 
C)  €90,000 
D)  €382,000

Question 19

Teeter Company wrote off an account for $15,000 which was subsequently recovered. Record the journal entries upon the recovery.

Accepted Answer

\[\begin{array} { | l | c | c | } 
\hlin

Question 20

The aging of accounts receivable method directly estimates the appropriate balance of the Allowance for Uncollectible Accounts.

Accepted Answer

A) True 
 B)False

Which method of estimating bad debt expense focuses on the faithful representation of the net realizable value of receivables?

The operating cycle is the length of time from when a product is sold until the cash is collected.

Control procedures to prevent any misappropriation and irregularities in the cash disbursements process include the following except:

The inventory turnover ratio is equal to 365 divided by the number of days of inventory on hand.

Pledged receivables are collateral for a financing arrangement.

The cash operating cycle is equal to (1) days accounts payable outstanding minus (2) days sales outstanding minus (3) days inventory on hand.

Sales discounts are reductions granted to customers to encourage quick invoice payment.

What is the balance sheet classification of a bank account whose fund balance is restricted for retirement of bonds that mature in six years?

The following company information is available: Days sales outstanding 30 Days sales in inventory 18 Days accounts payable outstanding 23 How long is the company's cash operating cycle?

What is a securitization of receivables? What are advantages and disadvantages of securitization?

Under the allowance method, the write-off of an uncollectible account ________.

Teeter Company wrote off an account for $15,000 which was subsequently recovered. Record the journal entries upon the recovery.

The aging of accounts receivable method directly estimates the appropriate balance of the Allowance for Uncollectible Accounts.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Exam 9: Short-Term Operating Assets: Cash and Receivables

Which method of estimating bad debt expense focuses on the faithful representation of the net realizable value of receivables?

The operating cycle is the length of time from when a product is sold until the cash is collected.

Control procedures to prevent any misappropriation and irregularities in the cash disbursements process include the following except:

The inventory turnover ratio is equal to 365 divided by the number of days of inventory on hand.

Pledged receivables are collateral for a financing arrangement.

The cash operating cycle is equal to (1) days accounts payable outstanding minus (2) days sales outstanding minus (3) days inventory on hand.

Sales discounts are reductions granted to customers to encourage quick invoice payment.

What is the balance sheet classification of a bank account whose fund balance is restricted for retirement of bonds that mature in six years?

The following company information is available: Days sales outstanding 30 Days sales in inventory 18 Days accounts payable outstanding 23 How long is the company's cash operating cycle?

What is a securitization of receivables? What are advantages and disadvantages of securitization?

Under the allowance method, the write-off of an uncollectible account ________.

Teeter Company wrote off an account for $15,000 which was subsequently recovered. Record the journal entries upon the recovery.

The aging of accounts receivable method directly estimates the appropriate balance of the Allowance for Uncollectible Accounts.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters