Deck 6: Merchandising Operations and the Multistep Income Statement

Question 1

A retail company accepts credit cards as payments for all the following reasons EXCEPT:

A) To receive money faster
B) Because the fee for the service is small compared to the bene?ts
C) To avoid the costs of providing credit directly to customers
D) To increase customer tra?c at its stores.

Answer 1

Because the fee for the service is small compared to the bene?ts

Question 2

A customer purchased $2,000 of goods on credit from Holiday Party Supply on May 1. The customer received the bill on May 15 and mailed a $2,000 cheque on May 28. Holiday received the cheque on May 30. In recording this transaction, Holiday should credit Sales Revenue for $2,000 on which of the following dates?

A) May 1.
B) May 15.
C) May 28.
D) May 30.

Answer 2

May 1.

Question 3

Relax Shack is a giftware wholesaler. All orders are shipped FOB destination and paid for on delivery. When should R elax Shack recognize its revenues?

A) At the time of shipping
B) When the goods reach the customer
C) When payment is received
D) When the goods are removed from inventory

Answer 3

When the goods reach the customer

Question 4

Merchandise was sold on credit for $3,000, terms 1/10, n/30. The entry to record the cash collection should include which of the following?

A) Debit Cash, $3,000, and credit Trade Receivables, $3,000, if collected within the discount period.
B) Debit Cash, $3,000, and credit Trade Receivables, $2,970, and Sales Discount, $30, if collected within the discount period.
C) Debit Cash, $3,000, and credit Trade Receivables, $2,970, and Sales Discount, $30, if collected after the discount period.
D) Debit Cash, $3,000, and credit Trade Receivables, $3,000, if collected after the discount period.

Question 5

A customer purchased a $200 item at Best Bike Shop, paying with a credit card (VISA). The merchant is charged a 2% fee by the credit card company. When recording this sale, the merchant would do which of the following?

A) Debit trade receivables for $200.
B) Credit sales revenue for $200.
C) Credit sales revenue for $196.
D) Credit unearned sales revenue for $200.

Question 6

When goods are sold to a customer with credit terms of 2/15, n/30, the customer will receive which of the following?

A) A 15% discount if they pay within 2 days.
B) A 2% discount if they pay 15% of the amount due within 30 days.
C) A 15% discount if they pay within 30 days.
D) A 2% discount if they pay within 15 days.

Question 7

When do most companies usually recognize revenue as earned and record the revenue?

A) When the customer's order is received
B) When title and risks of ownership pass to the buyer
C) When the order is delivered
D) When payment is received

Question 8

What do credit terms of 2/10, n/30 indicate?

A) Two percent discount for early payment is available if the invoice is paid before the tenth day of the month following the month the sale.
B) Two percent discount for early payment is available within ten days of the invoice date.
C) Ten percent discount for early payment is available if the invoice is paid within two days of the date of the invoice.
D) Two percent discount for early payment is available if the invoice is paid after the tenth day, but before the thirtieth day of the invoice date.

Question 9

A credit sale of $2,500, terms 1/20, n/30, should be recorded with which of the following journal entries? $\begin{array}{|l|l|r|r|}\hline& &\mathrm{DR} & \mathrm{CR} \\\hline \text { A } & \text { Trade receivables } & 2,475 & \\& \text { Sales revenue } && 2,475\\\hline \text { B } & \text { Allowance for discounts } & 25 & \\& \text { Accounts receivable } & 2,475 & \\& \text { Sales revenues } && 2,500 \\\hline \mathrm{C} & \text { Trade receivables } & 2,500& \\& \text { Sales revenue } & & 2,500\\\hline \mathrm{D} & \text { Trade receivables } & 2,500& \\& \text { Sales revenue } & &2,475 \\& \text { Sales discount } & & 25\\\hline\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 10

On a multiple-step income statement, what happens to the amount of sales returns and allowances?

A) It is subtracted from net sales to determine gross margin on sales.
B) It is subtracted from gross margin on sales to determine net sales.
C) It is added in the calculation of cost of goods sold.
D) It is subtracted from gross sales to determine net sales.

Question 11

Regalia Inc. is a mail order clothing retailer. All items are shipped to customers FOB shipping and must be prepaid by the customer before any items are shipped. At what point should Raleigh recognize revenue?

A) At the time of shipping
B) When the goods reach the customer
C) When payment is received
D) When the goods are removed from inventory

Question 12

For sellers of goods, the revenue recognition principle generally requires that revenues be recorded when the following conditions are met:

A) The item is manufactured
B) The sales order is received
C) When title and risks of ownership pass to the buyer.
D) When the goods are received by the buy

Question 13

Central Company sold goods for $5,000 to Western Company on March 12 on credit. Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the transaction by debiting trade receivables for $5,000 and crediting sales revenue for $5,000. Western paid the balance due, less the discount, on March 21. To record the March 21 transaction, Central would debit which of the following?

A) Cash for $4,900.
B) Trade receivables for $4,900.
C) Cash for $5,000.
D) Trade receivables for $5,000.

Question 14

A sale should, not be recognized as revenue by the seller at the time of sale if

A) payment was made by cheque.
B) the selling price is less than the normal selling price.
C) the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated.
D) the buyer cannot return the product unless there it is defective, which rarely occurs.

Question 15

401 Diner reported sales revenues of $53,000 in April. Thirty percent were cash sales and seventy percent were paid by credit cards. 401 Diner pays a three percent fee to the credit card companies.

-401 Diner's credit card fees for April would be closest to:

A) $1,113
B) $1,080
C) $1,590
D) $1,557

Question 16

401 Diner reported sales revenues of $53,000 in April. Thirty percent were cash sales and seventy percent were paid by credit cards. 401 Diner pays a three percent fee to the credit card companies.

-401 Diner's net sales reported for April would be closest to:

A) $16,050
B) $53,500
C) $51,887
D) $15,900

Question 17

On February 15, a local business receives an invoice for electricity used in the month of January and pays it on March 1. In which month should the business recognize the expense?

A) January
B) February
C) March
D) No expense should be recorded.

Question 18

Carthage Caravans rents storage units. In the ?rst month of operation, they collected cash and credit card receipts of $4,140 and during the month they rented thirty-six (36) storage units. All storage units rent out at $115.00 per month. They also received non-refundable deposits of $23.00 each on another ?ve storage units. For two of those deposits the customers had not shown up, and the company did not refund the deposits; the other three deposits were for the following month. The appropriate amount for them to recognize as revenue for their ?rst month is:

A) $4,140
B) $4,163
C) $4,186
D) $4,255

Question 19

A company had the following partial list of account balances at year-end: $$\begin{array} { | l | r | } \hline \text { Sales returns and allowances } & \$ 500 \\\hline \text { Trade receivables } & 9,000 \\\hline \text { Sales discounts } & 700 \\\hline \text { Sales revenues } & 57,200 \\\hline \text { Allowance for doubtful accounts } & 300 \\\hline\end{array}$$

-What amount of Net Sales would be shown on the income statement?

A) $55,700.
B) $56,000.
C) $57,200.
D) $64,200.

Question 20

Central Company sold goods for $5,000 to Western Company on March 12 on credit. Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the transaction by debiting Trade Receivables for $5,000 and crediting Sales Revenue for $5,000. Western paid the balance due on April 9. To record the April 9 transaction, Central would debit which of the following?

A) Cash for $4,900.
B) Trade Receivables for $5,000.
C) Cash for $5,000.
D) Sales discounts for $100.

Question 21

Tabor Company had trade receivables of $450,000 and an allowance for doubtful accounts of $15,500 just prior to writing off as worthless a trade receivable from Fox Company of $5,000. What was the net realizable value of trade receivables as shown by the accounting record before and after the write-off?
$\begin{array} { l r r } && \text { Before } & \text { After } \\\end{array}$
a) $\begin{array} { l r r } & 450,000 & 450,000 \\\end{array}$
b) $\begin{array} { l r r } & 15,000 & 439,500 \\\end{array}$
c) $\begin{array} { l r r } & 434,500 & 429,500 \\\end{array}$
d) $\begin{array} { l r r } & 434,500 & 434,500 \\\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 22

What is the annual interest rate of a sales discount of 2/10, n/30?

A) 24.3%
B) 24.8%
C) 36.5%
D) 37.2%

Question 23

When credit terms for a sale are 2/15, n/40, the customer saves by paying the bill early. Approximately what percent would this savings amount to on an annual basis?

A) 18%.
B) 20%.
C) 30%.
D) 37%.

Question 24

A Co. and G Co. are competitors in the biotechnology market. In 20X3, A Co. reported a gross pro?t percentage of 86.3% while G Co's percentage was 80.7%. What is the most likely cause of G Co.'s lower gross pro?t percentage?

A) Increased product selling prices
B) Decreased product costs
C) Smaller scale operations than A Co.
D) Larger scale operations than A Co.

Question 25

If a company has the opportunity to take a discount of 2/10, n/30 but must borrow money at an annual rate of 16%, what would be the net advantage of taking the discount?

A) 8.3%
B) 8.8%
C) 20.5%
D) 21.2%

Question 26

T Co's gross pro?t percentage has been increasing in the three years from 20X1 through 20X3 from 36.5% to 39.8%. This change has most likely been caused by which of the following?

A) Higher product costs
B) Selling products with lower margins
C) Selling products for higher prices
D) Discounted prices

Question 27

Which of the following statements is true about the allowance method for uncollectible accounts?

A) The net realizable value of trade accounts receivable is greater before an account is written off than after it is written off.
B) Bad Debts Expense is debited when a speci?c account is written off as uncollectible.
C) The net realizable value of trade accounts receivable on the balance sheet is the same before and after an account is written off.
D) Allowance for Doubtful Accounts is closed each year to Income Summary.

Question 28

When an account is written off using the allowance method for uncollectible accounts, trade accounts receivable

A) is unchanged and the allowance account increases.
B) increases and the allowance account increases.
C) decreases and the allowance account decreases.
D) decreases and the allowance account increases.

Question 29

An aging of a company's trade receivables indicates that $6,500 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a

A) debit to Bad Debts Expense for $6,500.
B) debit to Bad Debts Expense for $5,300.
C) debit to Allowance for Doubtful Accounts for $6,500.
D) debit to Bad Debts Expense for $7,700.

Question 30

The balance in Allowance for Doubtful Accounts would have a debit balance when

A) the percentage of receivables basis is used.
B) an uncollectible account is later recovered.
C) write-offs during the year have been less than previous provisions.
D) write-offs during the year have exceeded previous provisions.

Question 31

In 20X3, T Co.'s gross pro?t percentage was 39.8% while their competitor, WWW's percentage was 31.8%. What was the most likely reason for WWW's lower percentage?

A) Lower selling prices
B) Lower product cost as a percentage of sales
C) Ability to differentiate their product in consumers' eyes
D) Higher selling prices

Question 32

To record estimated uncollectible accounts using the allowance method for uncollectible accounts, the adjusting entry would be a debit to?

A) Trade Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B) Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
C) Allowance for Doubtful Accounts and a credit to Trade Accounts Receivable.
D) Loss on Credit Sales and a credit to Trade Accounts Receivable.

Question 33

G Co., which is a biotechnology firm, reported the following revenues on their 20X3 income statement: Product sales $582.2 million, Royalties $214.7 million, Contract revenue $107.0 million and Interest income $64.1 million. Their cost of sales was reported as $104.5 million. What was their gross profit percentage?

A) 82.1%
B) 86.9%
C) 88.4%
D) 89.2%

Question 34

Which of the following accounts is always treated as a contra revenue and not as a selling expense?

A) Net sales
B) Cash equivalents
C) Sales returns and allowances
D) Purchase returns and allowances

Question 35

During 20X1, Thomas Company recorded bad debt expense of $15,000 and wrote off an uncollectible trade receivable amounting to $5,000. Assuming a January 1, 20X1, credit balance in the allowance for doubtful accounts of $10,000, the December 31, 20X1, balance in the allowance account would be which of the following?

A) $5,000.
B) $15,000.
C) $20,000.
D) $25,000.

Question 36

If an account is collected after having been previously written off,

A) the allowance account should be debited.
B) only the control account needs to be credited.
C) both statement of earnings and balance sheet accounts will be affected.
D) there will be both a debit and a credit to trade accounts receivable.

Question 37

A company had the following partial list of account balances at year-end: $$\begin{array} { | l | r | } \hline \text { Sales returns and allowances } & \$ 500 \\\hline \text { Trade receivables } & 9,000 \\\hline \text { Sales discounts } & 700 \\\hline \text { Sales revenues } & 57,200 \\\hline \text { Allowance for doubtful accounts } & 300 \\\hline\end{array}$$

-A company purchased goods on credit with credit terms of 3/15, n/45. Although the company does not have cash available to pay within the discount period, the manager of the company is considering borrowing money to take advantage of the discount. In order to make the appropriate decision, the manager computed the annual interest rate associated with the sales discount. What is the approximate annual rate?

A) 18%.
B) 25%.
C) 38%.
D) 56%.

Question 38

School Supplies Company made the following journal entries (1) to write off an account judged to be uncollectible and (2) to record bad debt expense for 20X1: $\begin{array}{|l|l|r|r|}\hline &&\mathrm{DR} & \mathrm{CR} \\\hline \text { A } & \begin{array}{l}\text { Allowance for doubtful accounts } \\\text { Trade receivables }\end{array} & 1,000 & \\&&&1,000\\\hline \mathrm{B} & \begin{array}{l}\text { Bad debt expense } \\\text { Allowance for doubtful accounts }\end{array} & 3,000 & \\&&&3,000\\\hline\end{array}$
As a result of the first entry only, the book value (net realizable value) of trade receivables was A; as a result of the second entry only, the book value (net realizable value) of trade receivable was B: $$\begin{array} { | l | l | l | } \hline & \text { A } & \text { B } \\\hline 1 & \text { Increased } & \text { Decreased } \\\hline 2 & \text { Decreased } & \text { Decreased } \\\hline 3 & \text { Unchanged } & \text { Unchanged } \\\hline 4 & \text { Unchanged } & \text { Decreased } \\\hline\end{array}$$

A) Choice 1
B) Choice 2
C) Choice 3
D) Choice 4

Question 39

What is the impact of treating sales returns and allowances as a contra revenue but treating sales discounts and credit card discounts as selling expenses?

A) Gross margin is reduced by sales returns and allowances, sales discounts and credit card discounts.
B) Gross margin is reduced by sales returns and allowances but all three accounts cause a decrease in pro?t from operations.
C) Gross margin is reduced by sales returns and allowance but operating pro?t is only reduced by sales discounts and credit card discounts.
D) Gross margin is reduced by sales discounts and credit card discounts but all three accounts cause a decrease in pro?t from operations.

Question 40

In 20X3, C Co. reported net sales revenues of $19.8 billion and cost of goods sold for $6.0 billion. What was their gross profit percentage for 20X3?

A) 30.3%
B) 43.5%
C) 69.7%
D) 76.74%

Question 41

Upon completing an aging analysis of trade receivables, the accountant for Rosco Works estimated that $5,000 of the current $98,000 of trade receivables would be uncollectible. The allowance for doubtful accounts had a $400 credit balance at year-end prior to adjustment. What amount of bad debt expense should appear in Rosco's income statement for the year?

A) $0
B) $4,600.
C) $5,000.
D) $5,400.

Question 42

Liberty Company estimates that its annual bad debts approximate 4% of credit sales. Liberty had the following balances at year-end prior to recording adjusting entries:

Credit Sales $160,000
Trade Receivables $30 ,000
Allowance for Doubtful Accounts $100 (debit balance)


-Liberty estimates that its annual bad debts approximate 4% of credit sales. What would the net realizable value of the receivables on Liberty's year-end balance sheet be?

A) $23,500.
B) $23,600.
C) $23,700.
D) $29,900.

Question 43

In recording the year-end adjusting entry for bad debt expense, a company would do which of the following?

A) Debit trade receivables.
B) Credit trade receivables.
C) Credit allowance for doubtful accounts.
D) Debit allowance for doubtful accounts.

Question 44

Following the completion of an aging analysis, the accountant for Liberty estimated that $1,100 of the receivables would be uncollectible.

- The year-end adjusting entry to record bad debt expense would include which of the following?

A) Credit to allowance for doubtful accounts of $1,100.
B) Credit to allowance for doubtful accounts of $1,200.
C) Debit to bad debt expense of $1,000.
D) Debit to bad debt expense of $900.

Question 45

Prior to the write off of a $30 customer account, Kraft Company had the following account balances: $$\begin{array}{l}\begin{array} { | l | l | } \hline \text { Trade receivables } & \$ 9,800 \text { Debit balance } \\\hline \text { Allowance for doubtful accounts } & \$ 500 \text { Credit balance } \\\hline\end{array}\\\\\text { What was the net realizable value of the receivables before and after the write-off? }\\\\\begin{array} { | l | r | r | } \hline & \text { Before } & \text { After } \\\hline \text { A) } & \$ 9,300 & \$ 9,300 \\\hline \text { B) } & \$ 9,400 & \$ 9,270 \\\hline \text { C) } & \$ 9,800 & \$ 9,770 \\\hline \text { D) } & \$ 9,800 & \$ 9,800 \\\hline\end{array}\end{array}$$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 46

For the year ended December 31, 20X0, Barracks and Bullets Emporium estimated its allowance for doubtful accounts using the year-end aging of accounts receivable. The following data are available $$\begin{array} { | l | r | } \hline \text { Allowance for doubtful accounts, Jan 120X0 } & \$ 37,000 \\\hline \begin{array} { l } \text { Estimated uncollectible accounts during 20X0 } \\( 1 \% \text { on credit sales of } \$ 4,000,000 )\end{array} & \$ 40,000 \\\hline \text { Uncollectible accounts written off, Nov 30 20X0 } & \$ 52,000 \\\hline \text { Estimated uncollectible accounts per aging, Dec 3120X0 } & \$ 74,000 \\\hline\end{array}$$ After year-end adjustment, the bad debt expense for 20X0 should be

A) $89,000
B) $37,000
C) $126,000
D) $52,000

Question 47

Following the completion of an aging analysis, the accountant for Liberty estimated that $1,100 of the receivables would be uncollectible.

-What would be the net realizable value of the receivables on Liberty's year-end balance sheet?

A) $28,800.
B) $28,900.
C) $29,900.
D) $30,100.

Question 48

Under the allowance method for uncollectible accounts, when a speci?c account is written off

A) total assets will be unchanged.
B) net earnings will decrease.
C) total assets will decrease.
D) total assets will increase.

Question 49

Jackson Company uses the allowance method to account for bad debts. During 20X4, a customer became bankrupt and a receivable of $5,000 was deemed uncollectible. What is the entry to record the uncollectible amount? $$\begin{array} { | l | l | r | r | } \hline \text { A) } & \text { Allowance for doubtful accounts } & 5,000 & \\\hline & \text { Trade receivables } & & 5,000 \\\hline \text { B) } & \text { Bad debt expense } & 5,000 & \\\hline & \text { Allowance for doubtful accounts } & &5,000 \\\hline \text { C) } & \text { Allowance for doubtful accounts } & 5,000 & \\\hline & \text { Bad debt expense } & & 5,000 \\\hline \text { D) } & \text { Loss on receivables } &5,000 & \\\hline & \text { Trade receivables } & &5,000 \\\hline\end{array}$$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 50

SRM Company uses the allowance method to record its bad debt expense. When the account of a particular customer is deemed to be uncollectible and is written off, which of the following will be included in the journal entry?

A) Debit to bad debt expense.
B) Credit to bad debt expense.
C) Debit to allowance for doubtful accounts.
D) Debit to trade receivables.

Question 51

The books of Tweed Company provided the following information: Beginning balances: Trade receivables $30,000 Allowances for doubtful accounts (a credit) $2, 000 Transactions during the year: Sales revenue (of which 1/3 were on credit) $1,800,000 Collections on trade receivables $590,000 Accounts written off as uncollectible $2,500 Past collection experience has indicated that 1% of credit sales normally is not collected. Therefore, an adjusting entry for bad debt expense should be made in the amount of

A) $500.
B) $2,500.
C) $6,000.
D) $6,500.

Question 52

Which of the following is true about bad debt expense?

A) It should appear on the statement of financial position as a contra asset.
B) It should appear on the income statement as a contra revenue.
C) It should appear on the income statement as part of selling expenses.
D) It should not appear in the financial statements.

Question 53

In 20X3, T Co. reported a receivables turnover ratio of 11.1 and their competitor, WWW Co., reported a ratio of 4.6. Which of the following is true?

A) T Co. needs to decrease their ratio in order to improve collection time
B) WWW Co. has done a better job of collecting their receivables than T Co.
C) WWW Co. needs to focus on improving their credit and collection process
D) T Co has a better inventory management than WWW Co.

Question 54

Under the allowance method for uncollectible accounts, when a year-end adjustment is made for estimated uncollectible accounts,

A) total assets decrease.
B) total assets are unchanged.
C) net earnings are unchanged.
D) liabilities decrease.

Question 55

When using the allowance method for bad debts, how should bad debt expense be recorded?

A) As an adjusting entry at the end of the accounting period.
B) When a particular account is written off.
C) Whenever the allowance for doubtful accounts has a debit balance.
D) Whenever the allowance for doubtful accounts has a zero balance.

Question 56

Mission Aces Inc partially recovered a trade receivable of $400 from a customer. The total trade receivable of $4,000 had previously been written off as a bad debt. After considering the journal entry or entries that the company will make to record the recovery, what will be the net effect on accounts receivable?

A) Accounts receivable will increase by $400
B) Accounts receivable will decrease by $3,600
C) The effect on accounts receivable is zero
D) Accounts receivable will decrease by $400

Question 57

If a customer pays her bill after her account has already been written off, the company receiving the payment should record the account reinstatement with which of the following?

A) A credit to bad debt expense.
B) A credit to allowance for doubtful accounts.
C) A credit to cash.
D) A debit to bad debt expense.

Question 58

Liberty Company estimates that its annual bad debts approximate 4% of credit sales. Liberty had the following balances at year-end prior to recording adjusting entries:

Credit Sales $160,000
Trade Receivables $30 ,000
Allowance for Doubtful Accounts $100 (debit balance)


-On Liberty's income statement for the year, what would bad debt expense amount to?

A) $5,200.
B) $6,300.
C) $6,400.
D) $6,500.

Question 59

Springtime Company recorded $\$ 3,500,000$ in credit sales in $20 \mathrm { X } 1$ and prepared the following aging schedule of their $\$ 730,000$ in accounts receivable as at December $31,20 \mathrm { X } 1$ :

$\begin{array}{|l|r|r|}\hline \text { Days outstanding } & \text { Balance } & \text { Estimated percentage uncollectible } \\\hline 0-30 \text { days } & \$ 350,000 & 1 \% \\\hline 31-60 \text { days } & 275,000 & 2 \% \\\hline 61-90 \text { days } & 67,500 & 5 \% \\\hline \text { Over } 90 \text { days } & 37,500 & 25 \% \\\hline\end{array}$

The balance in their allowance for doubtful accounts before year-end adjustments is a $\$ 2,000$ credit.

-The bad debt expense for 20X1 is:

A) $21,750
B) $23,750
C) $19,750
D) $35,000

Question 60

Springtime Company recorded $\$ 3,500,000$ in credit sales in $20 \mathrm { X } 1$ and prepared the following aging schedule of their $\$ 730,000$ in accounts receivable as at December $31,20 \mathrm { X } 1$ :

$\begin{array}{|l|r|r|}\hline \text { Days outstanding } & \text { Balance } & \text { Estimated percentage uncollectible } \\\hline 0-30 \text { days } & \$ 350,000 & 1 \% \\\hline 31-60 \text { days } & 275,000 & 2 \% \\\hline 61-90 \text { days } & 67,500 & 5 \% \\\hline \text { Over } 90 \text { days } & 37,500 & 25 \% \\\hline\end{array}$

The balance in their allowance for doubtful accounts before year-end adjustments is a $\$ 2,000$ credit.

-The balance in the allowance for doubtful accounts after year-end adjustments will be

A) $2,000
B) $23,750
C) $21,750
D) $19,750 $21,750.

Question 61

The WD Co. reported revenue of $23,402 million for 20X3. Their trade receivables balance was $3,999 million in 20X3 and $3,633 million in 20X2. How much cash was collected from customers?

A) $23,036
B) $23,306
C) $23,402
D) $23,768

Question 62

In 20X3, A Co. reported product sales revenue of $2,514.4 million and trade receivables of $319.9 million for 20X3 and $269.0 million in 20X2. What was the cash flow generated by sales?

A) $2,194.5 million
B) $2,463.5 million
C) $2,514.4 million
D) $2,565.3 million

Question 63

If C Co.'s trade receivables balance was $1,666 million in 20X2 and $1,798 million in 20X3, what would be the impact on the statement of cash ?ows?

A) A decrease in cash ?ow from investing activities
B) An increase in cash ?ow from operating activities
C) An increase in cash ?ow from investing activities
D) A decrease in cash ?ow from operating activities

Question 64

A high receivables turnover ratio indicates

A) the company's sales are increasing.
B) customers are making payments very quickly.
C) customers are making payments slowly.
D) a large proportion of the company's sales are on credit.

Question 65

An NSF cheque should appear in which section of the bank reconciliation?

A) Addition to the balance per books.
B) Deduction from the balance per books.
C) Addition to the balance per bank.
D) Deduction from the balance per bank.

Question 66

Outstanding cheques from the prior period which clear the bank in the current period

A) should be added to the balance per books.
B) should be deducted from the balance per books.
C) should be deducted from the balance per bank.
D) do not affect the current period's bank reconciliation.

Question 67

On the April 30 bank reconciliation, a deposit made by a company to its bank account on April 18 will appear as a(n)

A) addition to the balance per books.
B) deduction from the balance per books.
C) deduction from the balance per bank.
D) this will not affect the current period's bank reconciliation.

Question 68

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to

A) add $270 to the balance per bank.
B) add $270 to the balance per books.
C) deduct $270 from the balance per books.
D) deduct $270 from the balance per bank.

Question 69

In 20X3, G CO. reported product sales of $717.8 million and trade receivables of $79.4 million. In 20X2, product sales were $584.9 million and trade receivables were $71.4 million. What was its receivables turnover ratio for 20X3?

A) 8.19
B) 8.64
C) 9.04
D) 9.52

Question 70

To aid internal control, the individual authorized to sign cheques should be which of the following?

A) Supervisor of receiving.
B) Accounts payable bookkeeper.
C) Treasurer.
D) Purchasing agent.

Question 71

For accounting purposes, cash includes which of the following?

A) IOU's received from employees.
B) A post-dated cheque received from a customer.
C) Balances on deposit in banks.
D) A note received from a customer in settlement of an overdue trade account receivable.

Question 72

On a bank reconciliation, which of the following would be deducted from the balance per bank?

A) Outstanding cheques.
B) Deposits in transit.
C) Electronic payment by a customer on account.
D) Bank service charges.

Question 73

Profit for T Co. in 20X3 was $59,156 (in thousands). There was a deduction from profit on the statement of cash flows for $2,781 (in thousands) for the change in trade receivables. The trade receivables balance on December 31, 20X3 was $79,024 (in thousands). How much was the trade receivables balance on December 31, 20X2?

A) $56,375
B) $61,937
C) $76,243
D) $81,805

Question 74

Cawthra Limited gathered the following reconciling information in preparing its June bank reconciliation: $$\begin{array} { | l | r | } \hline \text { Cash balance per books, June 30 } & \$ 12,000 \\\hline \text { Electronic collection of account } & 6,000 \\\hline \text { Outstanding cheques } & 9,000 \\\hline \text { Deposits in transit } & 4,500 \\\hline \text { Bank service charge } & 75 \\\hline \text { NSF cheque } & 1,200 \\\hline\end{array}$$ The adjusted cash balance per books at June 30 is

A) $8,775.
B) $12,000.
C) $16,500.
D) $16,725.

Question 75

Vida Corporation gathered the following reconciling information in preparing its July bank reconciliation: $$\begin{array} { | l | r | } \hline \text { Cash balance per books, July 31 } & \$ 3,500 \\\hline \text { Deposits in transit } & 150 \\\hline \text { Electronic collection of account receivable } & 850 \\\hline \text { Bank charge for cheque printing } & 20 \\\hline \text { Outstanding cheques } & 2,000 \\\hline \text { NSF cheque } & 170 \\\hline\end{array}$$ The adjusted cash balance per books at July 31 is

A) $4,160.
B) $4,010.
C) $2,460.
D) $2,310.

Question 76

Which of the following would not be considered an element of good internal control?

A) Require monthly reconciliation of bank accounts with the cash account.
B) Require that all cash receipts be deposited on a daily basis.
C) Require that the individual who handles cash receipts be responsible for the accounting function related to those funds.
D) Require that approval for cash payments and the signing of cheques be assigned to different individuals.

Question 77

Cash equivalents typically include investments with original maturities of which of the following?

A) One month or less.
B) Three months or less.
C) One year or less.
D) One year or the operating cycle, whichever is longer.

Question 78

On Eli Corp's June bank reconciliation, cheques outstanding totaled $5,400. In July, the corporation issued cheques totaling $38,900. The July bank statement shows that $26,300 in cheques cleared the bank in July. A cheque from one of Eli Corp's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding cheques on Eli's July bank reconciliation should be

A) $7,200.
B) $12,600.
C) $17,700.
D) $18,000.

Question 79

Which of the following is required for effective control of cash?

A) One person handles the receipts and disbursements of cash.
B) Cheques be pre-numbered.
C) Cash be deposited monthly in a bank.
D) A reconciliation of the bank balance with the cash balance be prepared twice a year.

Question 80

Which of the following is not a reconciling item when preparing a bank reconciliation?

A) Bank service charges not recorded by the corporation.
B) Outstanding cheques.
C) Interest collected on a note receivable by the bank and recorded by the corporation.
D) Outstanding deposits.