Question 1

A company's operating cycle may be described as

Accepted Answer

A) the period of time that is typically required for a company to convert cash into inventory and inventory into cash. 
B) the period of time from the beginning of operations until a company liquidates all of its assets. 
C) always a one-year time period. 
D) a cycle that is distinguished at the discretion of the Board of Directors on a daily basis. 
A) the period of time that is typically required for a company to convert cash into inventory and inventory into cash. 
B) the period of time from the beginning of operations until a company liquidates all of its assets. 
C) always a one-year time period. 
D) a cycle that is distinguished at the discretion of the Board of Directors on a daily basis.

Question 2

A company has a significant debit or credit accumulation in the preadjustment balance of allowance for doubtful accounts over several periods.
Required:
(1) What would this indicate?
(2) How can users detect the source of this problem?

Accepted Answer

(1) This may indicate that the estimates

Question 3

Hedging is used to

Accepted Answer

A) reduce risks associated with holding receivables denominated in foreign currencies. 
B) calculate the current ratio for multinational companies. 
C) translate foreign currency into U.S.dollars. 
D) 'window dress' uncollectible accounts. 
A) reduce risks associated with holding receivables denominated in foreign currencies. 
B) calculate the current ratio for multinational companies. 
C) translate foreign currency into U.S.dollars. 
D) 'window dress' uncollectible accounts.

Question 4

A compensating balance is

Accepted Answer

A) cash held by a foreign government. 
B) a balance maintained by the company to pay the employees' payroll. 
C) a minimum cash balance that must be maintained on deposit. 
D) items which are not cash, but equivalent to cash. 
A) cash held by a foreign government. 
B) a balance maintained by the company to pay the employees' payroll. 
C) a minimum cash balance that must be maintained on deposit. 
D) items which are not cash, but equivalent to cash.

Question 5

How would the current ratio be affected if Ryan paid off its wages and taxes?

Accepted Answer

Before: $7,100/$6,300 = 1.13
A

Question 6

Cash may consist of

Accepted Answer

A) coin and currency, loans to employees, and money orders. 
B) petty cash, officer imprest accounts, and employee savings accounts. 
C) money orders, postage stamps, and currency. 
D) checking accounts, savings accounts, and bank drafts. 
A) coin and currency, loans to employees, and money orders. 
B) petty cash, officer imprest accounts, and employee savings accounts. 
C) money orders, postage stamps, and currency. 
D) checking accounts, savings accounts, and bank drafts.

Question 7

If a company with a current ratio of 2.0 pays $2,000 of its salaries payable, then its current ratio will

Accepted Answer

A) change, but not enough information is provided to determine if it will increase or decrease. 
B) decrease. 
C) remain the same. 
D) increase. 
A) change, but not enough information is provided to determine if it will increase or decrease. 
B) decrease. 
C) remain the same. 
D) increase.

Question 8

The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2017. All sales are on account.
Accounts and related balances at December 31, 2017 before adjustment:
$\begin{array}{lrr}
& \text { Debit } & \text { Credit } \
\text { Accounts receivable } & \$ 46,000 & \
\text { Allowance for doubtful accounts } & & \$680\
\text { Sales (all on account) } & & 500,000 \
\text { Sales returns } & 3.000 &
\end{array}$

Aging Schedule of Accounts Receivable:
$\begin{array}{l|r|r}
\text { Age } & \text { Amount } & \% \text { Uncollectible } \
\hline 0 \text {-30 days } & \$ 14,000 & 5 \% \
30-60 \text { days } & 20,000 & 8 \% \
\text { Over } 60 \text { days } & 12,000 & 12 \%
\end{array}$
If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the Allowance for Doubtful Accounts balance at December 31, 2017?

Accepted Answer

A) $3,000 
B) $4,280 
C) $2,920 
D) $3,740 
A) $3,000 
B) $4,280 
C) $2,920 
D) $3,740

Question 9

The following information concerning the current assets and current liabilities of
Mason Company at December 31, 2017, is presented below.
$\begin{array}{lrr}
\text { Current Assets }\
\text { Cash } & & \$ 6,700 \
\text { Accounts Receivable } & \$ 7,900 & \
\text { Less Allowance } & \underline{ (70) }& 7,830 \
\text { Inventory } & & 2,270 \
\text { Prepaid expenses } & & \underline{500} \
\text { Total }& & \underline{\$17,300}\
\
\text { Current Liabilities }\
\text { Accounts payable } && \$ 9,000 \
\text { Wages payable } && 500 \
\text { Taxes payable } & &200 \
\text { Rent payable } & &1,600 \
\text { Notes payable } &&\underline{ 2,000} \
\text { Total } &&\underline{ \$ 13,300}
\end{array}$
Based on this information, how would the quick ratio be affected if Mason purchased $1,300 of inventory on account?

Accepted Answer

A) The quick ratio would decrease from 1.30 to 1.21. 
B) The quick ratio would not change. 
C) The quick ratio would decrease from 1.09 to 1.00. 
D) The quick ratio would decrease from 1.09 to 1.21. 
A) The quick ratio would decrease from 1.30 to 1.21. 
B) The quick ratio would not change. 
C) The quick ratio would decrease from 1.09 to 1.00. 
D) The quick ratio would decrease from 1.09 to 1.21.

Question 10

Why is the timing of recording a receivable important?

Accepted Answer

The timing of recording a receivable is

Question 11

The following information is provided for Garland Inc. Answer the questions that follow.
 $\begin{array}{lrr}
  \text {Balance Sheet}&2017&2016\
  \text { Cash and cash equivalents } &\$98,000&\$114,000\
 \text {Accounts Receivables, less allowance for doubtful  } &\
 \text { \text { accounts of } \$ 3.000 \text { (2017) and } \$ 1,800 \text { (2016) } } &165,000&132,000\
\end{array}$
 
A. How much is the balance in the Accounts Receivable account at December 31, 2017?
B. What is the amount of the Net Realizable Value of the receivables at December 31, 2017?

Accepted Answer

A. $165,00

Question 12

Managers must understand how transactions affect working capital

Accepted Answer

A) because GAAP does not allow companies with weak working capital to obtain loans. 
B) because lenders often use this to assess a company's ability to meet current obligations. 
C) so that management can avoid transactions that increase working capital. 
D) in anticipation of meeting creditors guidelines before issuing new stock. 
A) because GAAP does not allow companies with weak working capital to obtain loans. 
B) because lenders often use this to assess a company's ability to meet current obligations. 
C) so that management can avoid transactions that increase working capital. 
D) in anticipation of meeting creditors guidelines before issuing new stock.

Question 13

Current assets are assets which

Accepted Answer

A) can be used immediately to retire liabilities. 
B) are newly acquired. 
C) have been converted into cash in the previous year. 
D) are intended to be converted into cash within one year. 
A) can be used immediately to retire liabilities. 
B) are newly acquired. 
C) have been converted into cash in the previous year. 
D) are intended to be converted into cash within one year.

Question 14

Maradonna Co. uses an aging schedule of accounts receivable in estimating its bad debt expense. The total estimate, which appears on the aging schedule, will be equal to

Accepted Answer

A) the amount of bad debt expense on the company's income statement. 
B) the debit balance required in the allowance account prior to the recognition of bad debt expense. 
C) the increase in bad debt expense as a result of the estimate. 
D) the credit balance required in the allowance account after the recognition of bad debt expense. 
A) the amount of bad debt expense on the company's income statement. 
B) the debit balance required in the allowance account prior to the recognition of bad debt expense. 
C) the increase in bad debt expense as a result of the estimate. 
D) the credit balance required in the allowance account after the recognition of bad debt expense.

Question 15

The balances of the allowance for doubtful accounts on the balance sheets dated December 31 of 2017 and 2016 were $2,000 and $7,000, respectively. During 2017, bad debt expense was $12,000. What is the amount of accounts receivable that were written off as uncollectible during 2017?

Accepted Answer

A) $22,000 
B) $8,000 
C) $17,000 
D) $2,000 
A) $22,000 
B) $8,000 
C) $17,000 
D) $2,000

Question 16

What effect does 'window dressing' have on the solvency of a company?

Accepted Answer

Managers who have discretion over the ac

Question 17

How would the quick ratio be affected if Ryan purchased $500 of inventory on account?

Accepted Answer

Before: ($1,700 + $2,830)/$6,3

Question 18

If a company uses the allowance method to account for bad debts, the company's owners' equity will decrease

Accepted Answer

A) at the end of the accounting period when an adjusting entry to estimate bad debts is recorded. 
B) on the date a customer's account is determined to be uncollectible. 
C) when the accounts receivable amount becomes past due. 
D) on the date a customer's account is written off. 
A) at the end of the accounting period when an adjusting entry to estimate bad debts is recorded. 
B) on the date a customer's account is determined to be uncollectible. 
C) when the accounts receivable amount becomes past due. 
D) on the date a customer's account is written off.

Question 19

Briefly describe hedging.

Accepted Answer

Hedging is commonly practiced to reduce

Question 20

An exchange rate

Accepted Answer

A) is the cash amount received from a customer who takes advantage of a cash discount. 
B) is the value of one currency in terms of another currency. 
C) seldom varies from one accounting period to the next. 
D) is ignored by multinational companies. 
A) is the cash amount received from a customer who takes advantage of a cash discount. 
B) is the value of one currency in terms of another currency. 
C) seldom varies from one accounting period to the next. 
D) is ignored by multinational companies.

A company's operating cycle may be described as

A company has a significant debit or credit accumulation in the preadjustment balance of allowance for doubtful accounts over several periods. Required: (1) What would this indicate? (2) How can users detect the source of this problem?

Hedging is used to

A compensating balance is

How would the current ratio be affected if Ryan paid off its wages and taxes?

Cash may consist of

If a company with a current ratio of 2.0 pays $2,000 of its salaries payable, then its current ratio will

Why is the timing of recording a receivable important?

Managers must understand how transactions affect working capital

Current assets are assets which

Maradonna Co. uses an aging schedule of accounts receivable in estimating its bad debt expense. The total estimate, which appears on the aging schedule, will be equal to

The balances of the allowance for doubtful accounts on the balance sheets dated December 31 of 2017 and 2016 were $2,000 and $7,000, respectively. During 2017, bad debt expense was $12,000. What is the amount of accounts receivable that were written off as uncollectible during 2017?

What effect does 'window dressing' have on the solvency of a company?

How would the quick ratio be affected if Ryan purchased $500 of inventory on account?

If a company uses the allowance method to account for bad debts, the company's owners' equity will decrease

Briefly describe hedging.

An exchange rate

Financial Accounting and Its Economic Context

A Closer Look at the Financial Statements

The Measurement Fundamentals of Financial Accounting

The Mechanics of Financial Accounting

Using Financial Statement Information

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Long-Term Liabilities: Notes, Bonds, and Leases

Stockholders Equity

The Complete Income Statement

The Statement of Cash Flows

The Time Value of Money

Filters

Exam 6: The Current Asset Classification, Cash, and Accounts Receivable

A company's operating cycle may be described as

A company has a significant debit or credit accumulation in the preadjustment balance of allowance for doubtful accounts over several periods. Required: (1) What would this indicate? (2) How can users detect the source of this problem?

Hedging is used to

A compensating balance is

How would the current ratio be affected if Ryan paid off its wages and taxes?

Cash may consist of

If a company with a current ratio of 2.0 pays $2,000 of its salaries payable, then its current ratio will

Why is the timing of recording a receivable important?

Managers must understand how transactions affect working capital

Current assets are assets which

Maradonna Co. uses an aging schedule of accounts receivable in estimating its bad debt expense. The total estimate, which appears on the aging schedule, will be equal to

The balances of the allowance for doubtful accounts on the balance sheets dated December 31 of 2017 and 2016 were $2,000 and $7,000, respectively. During 2017, bad debt expense was $12,000. What is the amount of accounts receivable that were written off as uncollectible during 2017?

What effect does 'window dressing' have on the solvency of a company?

How would the quick ratio be affected if Ryan purchased $500 of inventory on account?

If a company uses the allowance method to account for bad debts, the company's owners' equity will decrease

Briefly describe hedging.

An exchange rate

Financial Accounting and Its Economic Context

A Closer Look at the Financial Statements

The Measurement Fundamentals of Financial Accounting

The Mechanics of Financial Accounting

Using Financial Statement Information

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Long-Term Liabilities: Notes, Bonds, and Leases

Stockholders Equity

The Complete Income Statement

The Statement of Cash Flows

The Time Value of Money

Filters