Question 1

What is the term used for doubtful or disputed accounts,which are partly or totally uncollectible?

Accepted Answer

A)  Bad debts 
B)  Valuation allowance 
C)  Provision expense 
D)  Debtor accounts 
A)  Bad debts 
B)  Valuation allowance 
C)  Provision expense 
D)  Debtor accounts A

Question 2

What is (are)the advantage(s)to the seller of notes receivable?

Accepted Answer

A)  A note is a contract and thus offers a higher level of guarantee of payment to the seller than a simple combination 'order,delivery,acknowledgment of receipt plus invoice'. 
B)  A note is a regular financial instrument and thus can be endorsed over to a third party. 
C)  A note is a negotiable credit instrument.The seller can sell a note to a financial institution before its maturity date. 
D)  All of the above 
A)  A note is a contract and thus offers a higher level of guarantee of payment to the seller than a simple combination 'order,delivery,acknowledgment of receipt plus invoice'. 
B)  A note is a regular financial instrument and thus can be endorsed over to a third party. 
C)  A note is a negotiable credit instrument.The seller can sell a note to a financial institution before its maturity date. 
D)  All of the above D

Question 3

Which of the following statements is false?

Accepted Answer

A)  Uncollectible accounts must be written off. 
B)  A claim is considered as uncollectible when the debtor is not solvent. 
C)  Uncollectible accounts are not reported in the financial statements. 
D)  The write off of the uncollectible accounts generates a bad debt expense in the income statement. 
A)  Uncollectible accounts must be written off. 
B)  A claim is considered as uncollectible when the debtor is not solvent. 
C)  Uncollectible accounts are not reported in the financial statements. 
D)  The write off of the uncollectible accounts generates a bad debt expense in the income statement. C

Question 4

What is the name of the written document in which a person or business promises to pay a given amount to a third party on a specified date?

Accepted Answer

A)  A draft 
B)  A promissory note 
C)  A bill of exchange 
D)  None of these 
A)  A draft 
B)  A promissory note 
C)  A bill of exchange 
D)  None of these

Question 5

The valuation of the uncollectibility risk constitutes one of the tools managers use to manage their earnings.

Accepted Answer

A) True 
 B)False

Question 6

How is the figure for 'average days of sales' calculated?

Accepted Answer

A)  (Average net accounts receivable/Net sales)× 365 days 
B)  (Average net accounts receivable × Net sales)/365 days 
C)  (Average net accounts receivable/Net sales)/180 days 
D)  (Average net accounts receivable/Net sales)× 180 days 
A)  (Average net accounts receivable/Net sales)× 365 days 
B)  (Average net accounts receivable × Net sales)/365 days 
C)  (Average net accounts receivable/Net sales)/180 days 
D)  (Average net accounts receivable/Net sales)× 180 days

Question 7

Generally,the uncollectibility risk is evaluated and an allowance for uncollectibles is recorded as a provision.What is this method called?

Accepted Answer

A)  Provision method 
B)  Allowance method 
C)  Prudent method 
D)  None of the above 
A)  Provision method 
B)  Allowance method 
C)  Prudent method 
D)  None of the above

Question 8

Which method is used for reporting current investments in the financial statements?

Accepted Answer

A)  Current investments (gross - at cost)
3,500
Less provision for potential loss
-200
Current investments (net)
3,300 
B)  Gross value
Provisions
Net value
Current investments
3,500
200
3,300 
C)  Current investments (net of provision for potential loss: 200)
3,300 
D)  All of these. 
A)  Current investments (gross - at cost)
3,500
Less provision for potential loss
-200
Current investments (net)
3,300 
B)  Gross value
Provisions
Net value
Current investments
3,500
200
3,300 
C)  Current investments (net of provision for potential loss: 200)
3,300 
D)  All of these.

Question 9

Notes can be discounted;the accounts receivable represented by notes are taken out of the assets at the time of discounting.However,this can still represent:

Accepted Answer

A)  A potential gain 
B)  A latent liability 
C)  A fictive asset 
D)  None of these 
A)  A potential gain 
B)  A latent liability 
C)  A fictive asset 
D)  None of these

Question 10

Held-to-maturity investments are valued at fair value through profit or loss in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following items is not a type of accounts receivable reported in the financial statements?

Accepted Answer

A)  Doubtful accounts receivable 
B)  Disputed accounts receivable 
C)  Uncollectible accounts receivable 
D)  Overdue accounts receivable 
A)  Doubtful accounts receivable 
B)  Disputed accounts receivable 
C)  Uncollectible accounts receivable 
D)  Overdue accounts receivable

Question 12

The more a receivable exceeds the contractual credit terms,the less likely it is to be uncollectible.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following items is not a financial asset?

Accepted Answer

A)  Receivables 
B)  Cash and cash equivalents 
C)  Current investments 
D)  Property,plant and equipment 
A)  Receivables 
B)  Cash and cash equivalents 
C)  Current investments 
D)  Property,plant and equipment

Question 14

What does the credit policy of a firm impact?

Accepted Answer

A)  Sales revenue 
B)  The level of receivables 
C)  The length of the cash collection cycle 
D)  All of these 
A)  Sales revenue 
B)  The level of receivables 
C)  The length of the cash collection cycle 
D)  All of these

Question 15

What is the name of the accounting document in which the total amount of accounts receivable is split by customer?

Accepted Answer

A)  General ledger 
B)  Subsidiary ledger 
C)  Sale ledger 
D)  Trial balance 
A)  General ledger 
B)  Subsidiary ledger 
C)  Sale ledger 
D)  Trial balance

Question 16

It is necessary to know the amount of discounted notes in order to compute the average days of sale in a financial statement analysis.

Accepted Answer

A) True 
 B)False

Question 17

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is not correct?

Accepted Answer

A)  Under the direct write-off method,no provision is created when the risk of uncollectibility appears. 
B)  All countries allow the direct write-off method. 
C)  The direct write-off method shows receivables at their nominal value when in fact,there is a known risk of uncollectibility. 
D)  The only situation where the direct write-off method might not create a misrepresentation of the financial situation of the firm is when the sales revenue and the percentage of uncollectible receivables is essentially constant or stable. 
A)  Under the direct write-off method,no provision is created when the risk of uncollectibility appears. 
B)  All countries allow the direct write-off method. 
C)  The direct write-off method shows receivables at their nominal value when in fact,there is a known risk of uncollectibility. 
D)  The only situation where the direct write-off method might not create a misrepresentation of the financial situation of the firm is when the sales revenue and the percentage of uncollectible receivables is essentially constant or stable.

Question 19

IAS 39 defines three categories of financial instruments in assets?

Accepted Answer

A) True 
 B)False

What is the term used for doubtful or disputed accounts,which are partly or totally uncollectible?

What is (are)the advantage(s)to the seller of notes receivable?

Which of the following statements is false?

What is the name of the written document in which a person or business promises to pay a given amount to a third party on a specified date?

The valuation of the uncollectibility risk constitutes one of the tools managers use to manage their earnings.

How is the figure for 'average days of sales' calculated?

Generally,the uncollectibility risk is evaluated and an allowance for uncollectibles is recorded as a provision.What is this method called?

Which method is used for reporting current investments in the financial statements?

Notes can be discounted;the accounts receivable represented by notes are taken out of the assets at the time of discounting.However,this can still represent:

Held-to-maturity investments are valued at fair value through profit or loss in the balance sheet.

Which of the following items is not a type of accounts receivable reported in the financial statements?

The more a receivable exceeds the contractual credit terms,the less likely it is to be uncollectible.

Which of the following items is not a financial asset?

What does the credit policy of a firm impact?

What is the name of the accounting document in which the total amount of accounts receivable is split by customer?

It is necessary to know the amount of discounted notes in order to compute the average days of sale in a financial statement analysis.

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Which of the following statements is not correct?

IAS 39 defines three categories of financial instruments in assets?

Accounting: the Language of Business

Introduction to Financial Statements

Financial Statements: Interrelations and Construction

Accounting Principles and End-Of-Period Adjustments

Regulation of Accounting and Financial Reporting

Revenue Recognition Issues

Tangible Fixed Assets

Intangible Assets

Inventories

Shareholders Equity

Liabilities and Provisions

Business Combinations

Income Statement Analysis

Balance Sheet Analysis

Statement of Cash Flows Construction

Statement of Cash Flows Analysis and Earnings Quality

Ratio Analysis, financial Analysis and Beyond

Filters

Exam 10: Financial Instruments in the Statement of Financial Position and Fair Value Accounting

What is the term used for doubtful or disputed accounts,which are partly or totally uncollectible?

What is (are)the advantage(s)to the seller of notes receivable?

Which of the following statements is false?

What is the name of the written document in which a person or business promises to pay a given amount to a third party on a specified date?

The valuation of the uncollectibility risk constitutes one of the tools managers use to manage their earnings.

How is the figure for 'average days of sales' calculated?

Generally,the uncollectibility risk is evaluated and an allowance for uncollectibles is recorded as a provision.What is this method called?

Which method is used for reporting current investments in the financial statements?

Notes can be discounted;the accounts receivable represented by notes are taken out of the assets at the time of discounting.However,this can still represent:

Held-to-maturity investments are valued at fair value through profit or loss in the balance sheet.

Which of the following items is not a type of accounts receivable reported in the financial statements?

The more a receivable exceeds the contractual credit terms,the less likely it is to be uncollectible.

Which of the following items is not a financial asset?

What does the credit policy of a firm impact?

What is the name of the accounting document in which the total amount of accounts receivable is split by customer?

It is necessary to know the amount of discounted notes in order to compute the average days of sale in a financial statement analysis.

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Which of the following statements is not correct?

IAS 39 defines three categories of financial instruments in assets?

Accounting: the Language of Business

Introduction to Financial Statements

Financial Statements: Interrelations and Construction

Accounting Principles and End-Of-Period Adjustments

Regulation of Accounting and Financial Reporting

Revenue Recognition Issues

Tangible Fixed Assets

Intangible Assets

Inventories

Shareholders Equity

Liabilities and Provisions

Business Combinations

Income Statement Analysis

Balance Sheet Analysis

Statement of Cash Flows Construction

Statement of Cash Flows Analysis and Earnings Quality

Ratio Analysis, financial Analysis and Beyond

Filters