Question 1

How does a note receivable differ from an account receivable?

Accepted Answer

A note receivable is a written agreement

Question 2

When the market interest rate on a short-term note receivable is greater than the stated rate,________.

Accepted Answer

A) the present value of the note is greater than its stated value 
B) the present value of the note is less than its stated value 
C) the stated value of the note is greater than its face value 
D) the stated value of the note is less than its face value 
A) the present value of the note is greater than its stated value 
B) the present value of the note is less than its stated value 
C) the stated value of the note is greater than its face value 
D) the stated value of the note is less than its face value

Question 3

What type of account is Discount on Note Receivable?

Accepted Answer

A) revenue 
B) contra-revenue 
C) asset 
D) contra-asset 
A) revenue 
B) contra-revenue 
C) asset 
D) contra-asset

Question 4

What is a cash equivalent?

Accepted Answer

A) reclassification of a cash amount that is restricted from use in the current operating cycle 
B) negative cash balance that occurs when a company writes a check in an amount that exceeds the account balance 
C) short-term liquid investment with original maturity of three months or less 
D) minimum cash balance required to be maintained by a credit agreement 
A) reclassification of a cash amount that is restricted from use in the current operating cycle 
B) negative cash balance that occurs when a company writes a check in an amount that exceeds the account balance 
C) short-term liquid investment with original maturity of three months or less 
D) minimum cash balance required to be maintained by a credit agreement

Question 5

Factored receivables have been sold to another company.

Accepted Answer

A) True 
 B)False

Question 6

Wull Associates sold a piece of equipment to Coral Company on April 1,2016,for $800,000.Wull agreed to accept a 9-month note with 8% interest (current market rate)due on its maturity date,December 31,2016.Wull's journal entry to record the receipt of the note on April 1,2016,will include a ________.

Accepted Answer

A) credit to Cash for $800,000 
B) debit Cash for $800,000 
C) credit Note Receivable for $800,000 
D) debit Note Receivable for $800,000 
A) credit to Cash for $800,000 
B) debit Cash for $800,000 
C) credit Note Receivable for $800,000 
D) debit Note Receivable for $800,000

Question 7

On December 31,2016,Perly Company performed environmental consulting services for Brocade Corporation.Brocade was short of cash,so Perly agreed to accept a $300,000 noninterest-bearing note due on December 31,2018.Brocade is somewhat of a credit risk and Perly determines that 10% is an appropriate market rate.
a.Prepare the journal entry to record the receipt of the note on December 31,2016.
b.Prepare the adjusting entry on December 31,2017.
c.Prepare the journal entry to record the receipt of the payment on December 31,2018.

Accepted Answer

@#IMG-DLM& 
 Computation of present value of note:

Question 8

The balance-sheet value of the asset Accounts Receivable represents the amount of cash the company is expected to collect from its customers.

Accepted Answer

A) True 
 B)False

Question 9

Why are the objectives of the allowance method of accounting for uncollectible receivables?

Accepted Answer

There are two key objectives related to

Question 10

The percentage-of-sales method directly estimates the appropriate balance of the Allowance for Uncollectible Accounts.

Accepted Answer

A) True 
 B)False

Question 11

Under the gross method of recording accounts receivable,a customer must pay the gross amount of the invoice.

Accepted Answer

A) True 
 B)False

Question 12

Which method of estimating bad debt expense focuses on balance sheet relationships?

Accepted Answer

A) net method 
B) allowance method 
C) aging method 
D) percentage-of-sales method 
A) net method 
B) allowance method 
C) aging method 
D) percentage-of-sales method

Question 13

What is the normal journal entry for recording bad debt expense?

Accepted Answer

A) debit Bad Debt Expense,credit Allowance for Uncollectible Accounts 
B) debit Allowance for Uncollectible Accounts,credit Bad Debt Expense 
C) debit Bad Debt Expense,credit Accounts Receivable 
D) debit Accounts Receivable,credit Bad Debt Expense 
A) debit Bad Debt Expense,credit Allowance for Uncollectible Accounts 
B) debit Allowance for Uncollectible Accounts,credit Bad Debt Expense 
C) debit Bad Debt Expense,credit Accounts Receivable 
D) debit Accounts Receivable,credit Bad Debt Expense

Question 14

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 15

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?

Accepted Answer

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) Accounts receivable is debited for the gross amount of cash received from customers. 
D) Accounts receivable is credited for the net amount of cash received from customers. 
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) Accounts receivable is debited for the gross amount of cash received from customers. 
D) Accounts receivable is credited for the net amount of cash received from customers.

Question 16

What is the company's operating cycle?

Accepted Answer

A) 24 days 
B) 46 days 
C) 70 days 
D) 365 days 
A) 24 days 
B) 46 days 
C) 70 days 
D) 365 days

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

To be recognized as a sale under IFRS,factored receivables do not have to be isolated.

Accepted Answer

A) True 
 B)False

Question 19

What disclosures are required concerning accounts receivable?

Accepted Answer

The disclosures for receivables include

Question 20

Cash equivalents are short-term,highly liquid investments with original maturities of one year or less.

Accepted Answer

A) True 
 B)False

Exam 10: Short-Term Operating Assets: Cash and Receivables

How does a note receivable differ from an account receivable?

When the market interest rate on a short-term note receivable is greater than the stated rate,________.

What type of account is Discount on Note Receivable?

What is a cash equivalent?

Factored receivables have been sold to another company.

The balance-sheet value of the asset Accounts Receivable represents the amount of cash the company is expected to collect from its customers.

Why are the objectives of the allowance method of accounting for uncollectible receivables?

The percentage-of-sales method directly estimates the appropriate balance of the Allowance for Uncollectible Accounts.

Under the gross method of recording accounts receivable,a customer must pay the gross amount of the invoice.

Which method of estimating bad debt expense focuses on balance sheet relationships?

What is the normal journal entry for recording bad debt expense?

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

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?

What is the company's operating cycle?

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

To be recognized as a sale under IFRS,factored receivables do not have to be isolated.

What disclosures are required concerning accounts receivable?

Cash equivalents are short-term,highly liquid investments with original maturities of one year or less.

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

OL: Revenue Recognition

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

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