Question 1

Which of the following related to sales on credit is known with certainty at the balance sheet date?

Accepted Answer

A) The gross amount of accounts receivable. 
B) The amount of bad debts. 
C) The returns of goods. 
D) The discounts customers take when paying their accounts. 
A) The gross amount of accounts receivable. 
B) The amount of bad debts. 
C) The returns of goods. 
D) The discounts customers take when paying their accounts.

Question 2

You have borrowed $20,000 from your parents to pay for your education.You are going to pay them back in 8 years.They are charging you 2% interest on the loan.The total amount that you will have to pay them in 8 years is closest to:

Accepted Answer

A) $21,600. 
B) $23,200. 
C) $23,328. 
D) $23,433. 
A) $21,600. 
B) $23,200. 
C) $23,328. 
D) $23,433.

Question 3

Which method of estimating the bad debt expense requires the preparation of an aging of accounts receivable?

Accepted Answer

A) The percentage-of-receivables method 
B) The percentage-of-credit-sales method 
C) The direct writeoff method 
D) The allowance for uncollectibles method 
A) The percentage-of-receivables method 
B) The percentage-of-credit-sales method 
C) The direct writeoff method 
D) The allowance for uncollectibles method

Question 4

A company owes 2 more payments of $15,000 each on an instalment purchase they made for a piece of equipment.One payment is due tomorrow and the last one a year from now.The company is going to offer the equipment manufacturer one lump-sum payment tomorrow for both payments.If interest rates are 8% compounded semi-annually, the amount the company should offer to pay tomorrow is closest to:

Accepted Answer

A) $28,227. 
B) $28,868. 
C) $28,888. 
D) $30,000. 
A) $28,227. 
B) $28,868. 
C) $28,888. 
D) $30,000.

Question 5

St.John's Inc.reported accounts receivable on January 1, 2013, of $500,000 and on December 31, 2013, of $550,000.Sales for the year were $4,000,000.What is their average collection period of accounts receivable for the year?

Accepted Answer

A) 42 days 
B) 45 days 
C) 48 days 
D) 50 days 
A) 42 days 
B) 45 days 
C) 48 days 
D) 50 days

Question 6

Which of the following is not reflected in IFRS prepared financial statements?

Accepted Answer

A) Purchasing power changes 
B) Foreign exchange rate changes 
C) The time value of money 
D) The nominal dollar 
A) Purchasing power changes 
B) Foreign exchange rate changes 
C) The time value of money 
D) The nominal dollar

Question 7

Company A sells $500 of merchandise on account to Company B and offers credit terms of thirty days with a 2% discount if Co.B pays within ten days.If Company B takes advantage of the discount offered, what is the amount Company B will pay?

Accepted Answer

A) $410. 
B) $490. 
C) $470. 
D) $500. 
A) $410. 
B) $490. 
C) $470. 
D) $500.

Question 8

A company has borrowed money at discount; that is, they will not pay any interest on it during the 5 years when the loan is outstanding.If interest rates are 8% and the total repayment will be $50,000, the amount they will receive now from the bank is closest to:

Accepted Answer

A) $33,841. 
B) $34,029. 
C) $46,000. 
D) $50,000. 
A) $33,841. 
B) $34,029. 
C) $46,000. 
D) $50,000.

Question 9

Which of the following is the correct formula for calculating the future value of an amount invested (A) at an interest rate of r, for n periods?

Accepted Answer

A) (1 + r) x n x A 
B) (1 + r)n x A 
C) r x n x A 
D) (1 + n)r x A 
A) (1 + r) x n x A 
B) (1 + r)n x A 
C) r x n x A 
D) (1 + n)r x A

Question 10

A company has the following current assets and current liabilities (all figures in '000s): $$\begin{array} { l r } 
\text { Cash and accounts receivable } & \$ 1,000 \
\text { Inventory and prepaid expenses } & 1,000 \
\text { Current liabilities } & 1,500
\end{array}$$ The company is concerned about not looking liquid enough and is considering borrowing $500,000 from the bank to buy short-term highly liquid investments.What would be the effect on their current ratio and quick ratio? $\begin{array}{ll}&\text { Current } & \text { Quick } \
&\text { Ratio } & \text { Ratio }\
A.&\text { Increase } & \text { Increase } \
B.&\text { Increase } & \text { Decrease } \
C.&\text { Decrease } & \text { Increase } \
D.&\text { Decrease } & \text { Decrease }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 11

On December 31, 2014, Fraser Co.sold cars to Center City for its transit system for $5,000,000.Center City is going to pay the amount in full in 5 years, on January 2, 2020.They are not going to pay any interest during the 5 years or at the end.The current rate of interest on similar loans is 10%.
Required:
A) How much revenue would Fraser record for the sale on December 31, 2014?
B) What will be the amount and classification of the receivable on the December 31, 2014 balance sheet? C) What will be the financing income from the sale over the time that the receivable is outstanding?
D) How much interest revenue will be recorded in 2015?
E) What will be the amount and classification of the receivable on the December 31, 2019 balance sheet?

Accepted Answer

A) 5,000,000 (1/1.10)⁵

Question 12

Kamloops Corp.has several years of declining results.The Board of Directors hired new management to turn the company around and have offered the new management a bonus based on the increase in net income in their first full year of operation.The new management team took over in the middle of the 2013 fiscal year.Which of the following could management implement to ensure that they get the largest bonus possible?

Accepted Answer

A) Decrease the allowance for uncollectibles from 5% of credit sales to 3% only for 2013. 
B) Decrease the allowance for uncollectibles from 5% of credit sales to 3%, starting in 2014. 
C) Increase the allowance for uncollectibles from 3% of credit sales to 5% starting in 2014. 
D) Increase the allowance for uncollectibles from 3% of credit sales to 5% only for 2013. 
A) Decrease the allowance for uncollectibles from 5% of credit sales to 3% only for 2013. 
B) Decrease the allowance for uncollectibles from 5% of credit sales to 3%, starting in 2014. 
C) Increase the allowance for uncollectibles from 3% of credit sales to 5% starting in 2014. 
D) Increase the allowance for uncollectibles from 3% of credit sales to 5% only for 2013.

Question 13

If management thought that the current year's net income was going to be higher than next year's and wanted to create a hidden reserve, which of the following actions could they take?

Accepted Answer

A) Overestimate the allowance for uncollectibles in the current year. 
B) Underestimate the allowance for uncollectibles in the current year. 
C) Overestimate the allowance for uncollectibles in the next year. 
D) Underestimate the allowance for uncollectibles in the next year. 
A) Overestimate the allowance for uncollectibles in the current year. 
B) Underestimate the allowance for uncollectibles in the current year. 
C) Overestimate the allowance for uncollectibles in the next year. 
D) Underestimate the allowance for uncollectibles in the next year.

Question 14

Which of the following is the strictest test of a company's liquidity?

Accepted Answer

A) Current ratio 
B) Quick ratio 
C) Debt-to-equity 
D) Cash from operations 
A) Current ratio 
B) Quick ratio 
C) Debt-to-equity 
D) Cash from operations

Question 15

You invest $1,000 in an interest paying account.At the end of the first year you have $1,050, and at the end of the second year you have $1,102.50.This is an example of which of the following concepts?

Accepted Answer

A) Compound interest 
B) Simple interest 
C) Present value 
D) Changes in purchasing power 
A) Compound interest 
B) Simple interest 
C) Present value 
D) Changes in purchasing power

Question 16

Cash management is a balancing act for companies.Explain the problems associated with having too much or too little cash.What are the tools available to management to help them achieve the correct balance?

Accepted Answer

If a company has too little cash on hand

Question 17

If the company makes the following journal entry to record bad debt expense, which method of accounting for bad debts is it using? Dr. Bad debt expense$\quad$$\quad$xxx
Cr. Accounts receivable$\quad$$\quad$xxx

Accepted Answer

A) Direct writeoff method 
B) Allowance method 
C) Net realizable value method 
D) Bad debt expense method 
A) Direct writeoff method 
B) Allowance method 
C) Net realizable value method 
D) Bad debt expense method

Question 18

Rand Construction Inc uses the aging method to estimate bad debts.During 2014, before recording its adjusting entries, the firm wrote off $2,000 of accounts receivable, leaving a $400 credit in its allowance for doubtful accounts.After the write-offs, based on historical experience and a careful review of the company's receivables, the company's accountant prepared the following aging schedule: $$\begin{array} { l r r } 
\text { Age } & \text { Amount } & \text { Estimated uncollectible } \
\hline \text { Not past due } & \$ 40,000 & 2 \% \
1 - 30 \text { days overdue } & 18,000 & 6 \% \
\text { Over 30 days } & 4,000 & 20 \%
\end{array}$$ Required:
A) What is the bad debt expense for 2014?
B) After recording the bad debt expense what is the final balance in the allowance for doubtful accounts? C) At what amount would the accounts receivable be shown on the balance sheet?

Accepted Answer

A) Amount to be in allowance:

Question 19

The collection of a $500 account with the 2 percent discount will result in a:

Accepted Answer

A) Debit to Sales Discounts for $10. 
B) Debit to Accounts Receivable for $490. 
C) Credit to Cash for $490. 
D) Credit to Accounts Receivable for $490 
A) Debit to Sales Discounts for $10. 
B) Debit to Accounts Receivable for $490. 
C) Credit to Cash for $490. 
D) Credit to Accounts Receivable for $490

Question 20

A company invested $50,000 for two years at a rate of 8% compounded semi-annually.The amount of interest they earned over the period is closest to:

Accepted Answer

A) $4,000. 
B) $8,000. 
C) $8,493. 
D) $9,120. 
A) $4,000. 
B) $8,000. 
C) $8,493. 
D) $9,120.

Which of the following related to sales on credit is known with certainty at the balance sheet date?

You have borrowed $20,000 from your parents to pay for your education.You are going to pay them back in 8 years.They are charging you 2% interest on the loan.The total amount that you will have to pay them in 8 years is closest to:

Which method of estimating the bad debt expense requires the preparation of an aging of accounts receivable?

St.John's Inc.reported accounts receivable on January 1, 2013, of $500,000 and on December 31, 2013, of $550,000.Sales for the year were $4,000,000.What is their average collection period of accounts receivable for the year?

Which of the following is not reflected in IFRS prepared financial statements?

Company A sells $500 of merchandise on account to Company B and offers credit terms of thirty days with a 2% discount if Co.B pays within ten days.If Company B takes advantage of the discount offered, what is the amount Company B will pay?

A company has borrowed money at discount; that is, they will not pay any interest on it during the 5 years when the loan is outstanding.If interest rates are 8% and the total repayment will be $50,000, the amount they will receive now from the bank is closest to:

Which of the following is the correct formula for calculating the future value of an amount invested (A) at an interest rate of r, for n periods?

If management thought that the current year's net income was going to be higher than next year's and wanted to create a hidden reserve, which of the following actions could they take?

Which of the following is the strictest test of a company's liquidity?

You invest $1,000 in an interest paying account.At the end of the first year you have $1,050, and at the end of the second year you have $1,102.50.This is an example of which of the following concepts?

Cash management is a balancing act for companies.Explain the problems associated with having too much or too little cash.What are the tools available to management to help them achieve the correct balance?

If the company makes the following journal entry to record bad debt expense, which method of accounting for bad debts is it using? Dr. Bad debt expense $\quad$ $\quad$ xxx Cr. Accounts receivable $\quad$ $\quad$ xxx

The collection of a $500 account with the 2 percent discount will result in a:

A company invested $50,000 for two years at a rate of 8% compounded semi-annually.The amount of interest they earned over the period is closest to:

The Accounting Environment: What Is Accounting and Why Is It Done

Financial Statements: a Window on an Entity

The Accounting Cycle

Income Measurement and the Objectives of Financial Reporting

Cash Flow, Profitability, and the Cash Flow Statement

Inventory

Capital Assets

Liabilities

Owners Equity

Investments in Other Companies

Analyzing and Interpreting Financial Statements

Filters

Exam 6: Cash, Receivables, and the Time Value of Money

Which of the following related to sales on credit is known with certainty at the balance sheet date?

You have borrowed $20,000 from your parents to pay for your education.You are going to pay them back in 8 years.They are charging you 2% interest on the loan.The total amount that you will have to pay them in 8 years is closest to:

Which method of estimating the bad debt expense requires the preparation of an aging of accounts receivable?

St.John's Inc.reported accounts receivable on January 1, 2013, of $500,000 and on December 31, 2013, of $550,000.Sales for the year were $4,000,000.What is their average collection period of accounts receivable for the year?

Which of the following is not reflected in IFRS prepared financial statements?

Company A sells $500 of merchandise on account to Company B and offers credit terms of thirty days with a 2% discount if Co.B pays within ten days.If Company B takes advantage of the discount offered, what is the amount Company B will pay?

A company has borrowed money at discount; that is, they will not pay any interest on it during the 5 years when the loan is outstanding.If interest rates are 8% and the total repayment will be $50,000, the amount they will receive now from the bank is closest to:

Which of the following is the correct formula for calculating the future value of an amount invested (A) at an interest rate of r, for n periods?

If management thought that the current year's net income was going to be higher than next year's and wanted to create a hidden reserve, which of the following actions could they take?

Which of the following is the strictest test of a company's liquidity?

You invest $1,000 in an interest paying account.At the end of the first year you have $1,050, and at the end of the second year you have $1,102.50.This is an example of which of the following concepts?

Cash management is a balancing act for companies.Explain the problems associated with having too much or too little cash.What are the tools available to management to help them achieve the correct balance?

If the company makes the following journal entry to record bad debt expense, which method of accounting for bad debts is it using? Dr. Bad debt expense \quad\quad xxx Cr. Accounts receivable \quad\quad xxx

The collection of a $500 account with the 2 percent discount will result in a:

A company invested $50,000 for two years at a rate of 8% compounded semi-annually.The amount of interest they earned over the period is closest to:

The Accounting Environment: What Is Accounting and Why Is It Done

Financial Statements: a Window on an Entity

The Accounting Cycle

Income Measurement and the Objectives of Financial Reporting

Cash Flow, Profitability, and the Cash Flow Statement

Inventory

Capital Assets

Liabilities

Owners Equity

Investments in Other Companies

Analyzing and Interpreting Financial Statements

Filters

If the company makes the following journal entry to record bad debt expense, which method of accounting for bad debts is it using? Dr. Bad debt expense $\quad$ $\quad$ xxx Cr. Accounts receivable $\quad$ $\quad$ xxx