Deck 5: Cash and Receivables

Question 1

What amount will be included in "cash and cash equivalents"?

A)$36,000
B)$42,000
C)$52,000
D)$64,000

Answer 1

C

Question 2

What is included in "cash and cash equivalents"?

A)Petty cash.
B)Six-month term deposits in Canadian dollars.
C)Guaranteed Investment Certificate maturing in 100 days.
D)Four-month term deposit in U.S. dollars.

Answer 2

A

Question 3

What dollar amount will be included in "cash and cash equivalents"?

A)$8,000
B)$10,000
C)$19,000
D)$21,000

Answer 3

B

Question 4

Explain why the definition of cash and cash equivalents is important for the financial statements. How would a transfer from one bank account to another be reported in the cash flow statement?

Question 5

What is not included in "cash and cash equivalents"?

A)Canadian cash on hand.
B)Demand deposits.
C)Six-month term deposits.
D)Three-month Treasury bills.

Question 6

Which of the following is not a reason for preparing a bank reconciliation?

A)It explains differences between cash in the general ledger and cash on the bank statement.
B)It is necessary in order to prevent fraud committed by employees.
C)It is helpful in identifying any errors made by the bank.
D)It is helpful in identifying any bookkeeping errors made in the general ledger.

Question 7

What amount will be included in "cash and cash equivalents"?

A)$36,000
B)$42,000
C)$54,000
D)$64,000

Question 8

What dollar amount will be included in "cash and cash equivalents"?

A)$9,000
B)$11,000
C)$21,000
D)$22,000

Question 9

Which statement about "cash and cash equivalents" is correct?

A)The definition for "cash and cash equivalents" used on the balance sheet differs from the definition for "cash and cash equivalents" used on the cash flow statement.
B)A change in the composition of "cash and cash equivalents" is considered an operating activity on the cash flow statement.
C)A change in the composition of "cash and cash equivalents" is not considered a cash flow for purposes of the cash flow statement.
D)"Cash and cash equivalents" are short term liquid investments that can be converted to cash within a short time frame.

Question 10

What amount will be included in "cash and cash equivalents"?

A)$0
B)$12,000
C)$36,000
D)$64,000

Question 11

What amount will be included in "cash and cash equivalents"?

A)$18,000
B)$22,000
C)$30,000
D)$42,000

Question 12

What is included in "cash and cash equivalents"?

A)Guaranteed Investment Certificate maturing in 181 days.
B)Four-month term deposits.
C)U.S. cash on hand.
D)Guaranteed Investment Certificate maturing in 125 days.

Question 13

What dollar amount will be included in "cash and cash equivalents"?

A)$9,000
B)$12,000
C)$21,000
D)$22,000

Question 14

What amount will be included in "cash and cash equivalents"?

A)$36,000
B)$42,000
C)$54,000
D)$64,000

Question 15

Define "cash" and explain how funds that are subject to restrictions should be accounted for in the accounting records.

Question 16

What amount will be included in "cash and cash equivalents"?

A)$12,000
B)$18,000
C)$24,000
D)$54,000

Question 17

What criterion is not required for a "cash equivalent"?

A)Convertibility into cash.
B)Long term investment.
C)Insignificant risk of change in value.
D)Highly liquid investment.

Question 18

What amount will be included in "cash and cash equivalents"?

A)$30,000
B)$36,000
C)$40,000
D)$42,000

Question 19

Which statement is correct about the bank reconciliation?

A)It compares cash in the company's records with those of the bank.
B)It does not identify accounting errors made by the bank.
C)It interferes with other internal controls over cash.
D)It compares cash in the general ledger with the monthly budgets.

Question 20

What is included in "cash and cash equivalents"?

A)Short term, liquid investments convertible into known amounts of cash.
B)Short term, highly liquid investment convertible into known amounts of cash.
C)Cash restricted for plant expansion.
D)Sinking funds.

Question 21

The following accounts were abstracted from Almond Co.'s unadjusted trial balance at December 31, 2013: Debit Credit
Accounts receivable $3,850,000
Allowance for uncollectible accounts 51,000
Net credit sales $5,950,000
The company estimates that 5 percent of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2013, the allowance for doubtful accounts should have a credit balance of

A)192,500
B)243,500
C)246,500
D)297,500

Question 22

Pomegranite Company's bank balance on its October 31, 2012 bank statement is $11,500. Pomegranite's accountant is preparing a bank reconciliation and determined that three cheques issued by Pomegranite to its suppliers for a total of $6,500 had not yet cleared the bank. Also, a deposit for $700 made by Pomegranite on October 31 did not appear on the bank statement. Bank service charges of $240 appear on the bank statement, but have not yet been recorded in the general ledger.
Given the above information, prepare a bank reconciliation to determine the correct cash balance that should be reflected in Pomegranite's general ledger at October 31, 2012.

Question 23

Small Company (SC)is in its fourth year of retail operations. The owner/manager previously employed a part-time bookkeeper to sign cheques, as well as to prepare journal entries, bank reconciliations, and monthly financial statements. SC has just hired you as the first full-time accountant to replace the bookkeeper, and you are preparing the December 31, 2012 financial statements.
Required:
a. Briefly explain the concept of "segregation of duties."
b. Identify an internal control issue relating to SC's cash-handling procedures, and provide your recommendation(s)to improve SC's internal controls over cash.

Question 24

Explain why it is important to segregate duties of employees dealing with cash in an organization. Provide an example of ways which this segregation could be made on the payables side

Question 25

Which statement about "cash and cash equivalents" is correct?

A)The definition for "cash and cash equivalents" used on the balance sheet differs from the definition for "cash and cash equivalents" used on the cash flow statement.
B)A change in the composition of "cash and cash equivalents" is considered a financing activity on the cash flow statement.
C)A change in the composition of "cash and cash equivalents" is considered a cash flow for purposes of the cash flow statement.
D)The definition for "cash and cash equivalents" used on the balance sheet is the same as the definition for "cash and cash equivalents" used on the cash flow statement.

Question 26

Explain some controls that can be used in an organization to safeguard cash and other assets.

Question 27

What is one way to segregate duties to improve controls over cash?

A)Request all customers to pay in cash.
B)Separate sales employees from employees who book the accounting entries.
C)Request all customers to pay by cheques made payable to "CASH."
D)Have the employee who is responsible for making cash deposits to the bank also do the bank reconciliations.

Question 28

The following accounts were abstracted from Almond Co.'s unadjusted trial balance at December 31, 2013: Debit Credit
Net credit sales $2,950,000
Accounts receivable $800,000
Allowance for uncollectible accounts 11,000
The company estimates that 1.5 percent of the net credit sales will become uncollectible. After adjustment
At December 31, 2013, the allowance for doubtful accounts should have a credit balance of

A)11,000
B)12,000
C)33,250
D)44,250

Question 29

Which of the following would be an example of segregation of duties?

A)Sales employees have the ability to delete or modify accounts receivables.
B)Employees who make sales to customers record the credit sales in the accounts receivables.
C)Customer refunds are not recorded on a credit note.
D)Employees depositing funds to the bank do not prepare the bank reconciliation.

Question 30

Which of the following would not be an example of segregation of duties?

A)Sales employees have restricted ability to delete or modify accounts receivables.
B)Employees make sales to customers and record the credit sales in the accounts receivables.
C)Customer refunds are recorded on a written credit note.
D)Employees depositing funds to the bank do not prepare the bank reconciliation.

Question 31

What amount will be included in "cash and cash equivalents"?

A)$0
B)$12,000
C)$36,000
D)$64,000

Question 32

What are the general recognition criteria for non-cash assets under GAAP?

A)If the item meets the definition of an asset, it must have an indefinite life.
B)If the item meets the definition of an expense, it must be measurable.
C)In order for the item to be an asset, it will have future economic benefits, be under the entity's control, and result form past transactions.
D)Future transactions can be recorded under GAAP.

Question 33

Identify whether each of the following items should be classified in "cash and cash equivalents" on the balance sheet. Assume that the reporting entity has operations in Canada.

Question 34

Explain why a bank reconciliation is necessary.

Question 35

Identify the two criteria for classifying an investment as a cash equivalent.

Question 36

Which statement about internal controls over cash is correct?

A)Internal controls should not be designed to be preventative.
B)A bank reconciliation is designed for prevention of problems before the fact.
C)Controls should restrict sales staff ability to modify or delete accounts receivable.
D)Credit notes should not be issued for customer refunds.

Question 37

During May 2012, ABC Company wrote a cheque (#345)to a supplier as a payment on its account. The cheque was written for the correct amount of $16,900. The May bank statement listed the cheque at $61,900 and an ending account balance of $(50,500)in overdraft.
Required:
a. Given the above information, prepare the portion of the May cash reconciliation that reconciles the bank balance to the cash balance to be used in the financial statements.
b. Where on the balance sheet should the cash (or overdraft)balance be shown?

Question 38

Identify if the following investments meet the requirements to be classified as cash and cash equivalents.

Question 39

Which statement about internal controls over cash is correct?

A)A bank reconciliation is the only control required for cash.
B)A bank reconciliation is designed for detection of problems after the fact.
C)A bank reconciliation is a tool to investigate employee fraud.
D)A bank reconciliation is designed to prevent problems from happening.

Question 40

Explain why it is important to segregate duties of employees dealing with cash in an organization. Provide three examples of ways which this segregation could be made on the receivables side.

Question 41

Which statement best describes the gross method of accounting for cash discounts?

A)Records receivables at their present value amount.
B)Records any discounts forfeited as income.
C)Records any discounts taken as a reduction in revenue.
D)Records any discounts taken as an expense.

Question 42

Maximum Inc. reported credit sales of $880,000, bad debt write-offs of $297,000 and bad debt expense of $257,000 for last year. Accounts receivable had a balance of $1,367,000 at the beginning of the year and $1,381,000 at the end of the year. How much cash was collected from customers during the year?

A)$457,000
B)$569,000
C)$714,000
D)$866,000

Question 43

Which statement is correct?

A)A transfer with recourse means that the purchaser of the receivables takes the collection risk.
B)A transfer without recourse means that the seller of the receivables takes the collection risk.
C)Factoring with recourse negatively impacts the working capital ratio.
D)Factoring without recourse creates a liability on the balance sheet.

Question 44

Jackie Co.'s allowance for doubtful accounts was $15,000 at the end of 2013 and $205,000 at the end of 2012. For the year ended December 31, 2013, Jackie reported bad debt expense of $48,000 in its income statement. What amount did Jackie debit to the appropriate account in 2013 to write off actual bad debts?

Question 45

A $50,000 sale transaction is made with terms of 2/10, net 30. Assuming that the customer takes the discount, what amount is booked to the "cash discount" account under the net method of recording a discount?

A)$0
B)$1,000 debit
C)$1,000 credit
D)$49,000 debit

Question 46

Which statement about receivables is correct?

A)Receivables are non-monetary items.
B)Monetary items are measured at their present value.
C)Trade receivables generally have payments terms extending beyond 3 months.
D)Trade receivables should generally be recorded at their discounted present value.

Question 47

Which statement is not correct?

A)Factoring with recourse creates a liability on the balance sheet.
B)Factoring with recourse creates a liability and receivable on the balance sheet.
C)Factoring without recourse negatively impacts the working capital ratio.
D)Factoring without recourse means that the seller takes the collection risk.

Question 48

Which statement is correct?

A)Factoring without recourse creates a receivable on the balance sheet.
B)Factoring with recourse negatively impacts the current ratio.
C)Factoring without recourse negatively impacts the working capital ratio.
D)Factoring without recourse creates a liability on the balance sheet.

Question 49

Which statement is not correct?

A)Factoring with recourse creates a liability on the balance sheet.
B)Factoring with recourse negatively impacts the current ratio.
C)Factoring with recourse negatively impacts the working capital ratio.
D)Factoring without recourse negatively impacts the current ratio.

Question 50

EasyCredit Inc reported cash sales of $45,000, credit sales of $280,000 and write-offs of bad debts of $7,000 for last year. Accounts receivable had a balance of $327,000 at the beginning of the year and $381,000 at the end of the year. How much cash was collected from customers during the year?

A)$54,000
B)$219,000
C)$264,000
D)$334,000

Question 51

A $50,000 sale transaction is made with terms of 2/10, net 30. What amount is debited to the accounts receivable account when the sale is made under the gross method of accounting for cash discounts?

A)$49,000 credit
B)$49,000 debit
C)$50,000 credit
D)$50,000 debit

Question 52

Which statement best describes the net method of accounting for cash discounts?

A)Records receivables at their face value.
B)Records any discounts forfeited as income.
C)Records any discounts taken as an expense.
D)Records any discounts taken as a reduction in revenue.

Question 53

Which statement is correct?

A)A transfer with recourse means that the purchaser cannot go back to the company for compensation of bad debts.
B)A transfer with recourse means that the purchaser of the receivables takes the collection risk.
C)A transfer with recourse means that the seller of the receivables takes the collection risk.
D)A transfer without recourse means that the seller of the receivables takes the collection risk.

Question 54

Which of the following is one of the general criteria for recognizing an asset?

A)The item must have future economic benefits.
B)The item must have an indefinite life.
C)The item must be tangible.
D)The item must be material.

Question 55

Which statement is correct?

A)The "gross" method for recording cash discounts is conceptually better than the "net" method.
B)The net method understates expenses.
C)The gross method overstates revenue.
D)Under the "gross" method, an entry is needed if the discount is taken.

Question 56

Philip Corp reported credit sales of $240,000 and write-offs of bad debts of $57,000 for last year. Accounts receivable had a balance of $1,127,000 at the beginning of the year and $881,000 at the end of the year. How much cash was collected from customers during the year?

A)$246,000
B)$429,000
C)$486,000
D)$669,000

Question 57

A $100,000 sale transaction is made with terms of 5/10, net 30. What amount is debited to the accounts receivable account when the sale is made under the gross method of recording a discount?

A)$95,000 credit
B)$95,000 debit
C)$100,000 credit
D)$100,000 debit

Question 58

A $50,000 sale transaction is made with terms of 2/10, net 30. Assuming that the customer takes the discount, what amount is booked to the "cash discount" account under the gross method of accounting for cash discounts?

A)$0
B)$1,000 debit
C)$1,000 credit
D)$49,000 debit

Question 59

Which statement is correct?

A)A transfer without recourse means that the purchaser can go back to the company for compensation of bad debts.
B)A transfer without recourse means that the purchaser of the receivables takes the collection risk.
C)A transfer without recourse means that the seller of the receivables takes the collection risk.
D)A transfer with recourse means that the purchaser of the receivables takes the collection risk.

Question 60

Which statement is correct?

A)The "net" method for recording cash discounts is conceptually inferior to the "gross" method.
B)Under the "net" method, an entry is needed if the discount is not taken.
C)The "gross" method for recording cash discounts is conceptually superior to the "net" method.
D)The gross method overstates revenue.

Question 61

Sahil Inc. reported credit sales of $600,000 and cash collections of $450,000 for last year. The ending balance in accounts receivable was $800,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $80,000 at the beginning of the year. What was the bad debt expense for the year?

A)$1,500
B)$6,000
C)$8,000
D)$86,000

Question 62

Karin-Jones Ltd. reported an opening balance of $1,712,000 in accounts receivable and of $147,000 in allowance for doubtful accounts for last year. During the year, sales on account were $2,500,000, collections of accounts receivable were $1,300,000, and bad debt expense was $89,000. At the end of the year, the company had a credit balance of $172,000 in the allowance for doubtful accounts. What amount of accounts receivable was written off during the year?

A)$25,000
B)$64,000
C)$83,000
D)$2,912,000

Question 63

Fruit Valley Inc. reported cash sales of $250,000, credit sales of $850,000, cash collections from receivables of $500,000, bad debt write-offs of $25,000 and bad debt expense of $35,000 for last year. Accounts receivable had a balance of $1,000,000 at the end of the year. What was the balance in the accounts receivable account at the beginning of the year?

A)$425,000
B)$460,000
C)$650,000
D)$675,000

Question 64

Fitness Machines reported cash sales of $50,000, credit sales of $800,000 and bad debt expense of $150,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year and $1,250,000 at the end of the year. Assuming there are no write-offs during the year, how much cash was collected from customers during the year?

A)$400,000
B)$450,000
C)$550,000
D)$600,000

Question 65

Sabrina Inc. reported credit sales of $700,000 and cash sales of $100,000. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. What was the bad debt expense for the year?

A)$7,000
B)$8,000
C)$15,000
D)$47,000

Question 66

Medical Machines reported credit sales of $800,000, cash returns of $25,000 and bad debt expense of $150,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year and $1,250,000 at the end of the year. Assuming there are no write-offs during the year, how much cash was collected from customers during the year?

A)$375,000
B)$525,000
C)$550,000
D)$650,000

Question 67

Family Fun reported cash sales of $250,000, credit sales of $750,000, cash collections from receivables of $500,000, bad debt write-offs of $25,000 and bad debt expense of $35,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. What was the ending balance in the accounts receivable account?

A)$1,190,000
B)$1,225,000
C)$1,440,000
D)$1,475,000

Question 68

Fitness Machines reported credit sales of $880,000 and bad debt expense of $250,000 for last year. Accounts receivable had a balance of $1,400,000 at the beginning of the year and $1,350,000 at the end of the year. Assuming there are no write-offs made during the year, how much cash was collected from customers during the year?

A)$630,000
B)$680,000
C)$930,000
D)$1,180,000

Question 69

Pauline Company estimates the allowance for doubtful accounts by aging its accounts receivable. At the end of 2012, the balance in the allowance account was $50,000. During 2013, the company wrote off $5,000 and collected a $3,000 receivable that had been previously written off as uncollectible. At the end of 2013, the aging schedule indicated that the balance of the allowance for doubtful accounts should be $64,000. What is the bad debt expense for 2013?

A)$16,000
B)$19,000
C)$66,000
D)$69,000

Question 70

Micelle Inc. reported credit sales of $600,000 and cash collections of $450,000 for last year. The ending balance in accounts receivable was $800,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $80,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the balance in the allowance for doubtful accounts at the end of the year?

A)$6,000
B)$8,000
C)$81,500
D)$86,000

Question 71

A $100,000 sale transaction is made with terms of 5/10, net 30. What entry is made to the accounts receivable account when the sale is made under the net method of recording a discount?

A)$95,000 credit
B)$95,000 debit
C)$100,000 credit
D)$100,000 debit

Question 72

Micelle Inc. reported credit sales of $600,000, cash collections of $450,000 and bad debt expense of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the end of the year. Assuming there are no write-offs made during the year, what was the balance in the accounts receivable account at the beginning of the year?

A)$400,000
B)$850,000
C)$865,000
D)$1,150,000

Question 73

Family Fun reported credit sales of $800,000, cash collections of $550,000 and bad debt expense of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the ending balance in the accounts receivable account?

A)$450,000
B)$1,235,000
C)$1,250,000
D)$1,800,000

Question 74

Micelle Inc. reported credit sales of $700,000 and cash sales of $100,000 for last year. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the balance in the allowance for doubtful accounts at the end of the year?

A)$7,000
B)$8,000
C)$47,000
D)$150,000

Question 75

Which statement is correct about recording an allowance for doubtful accounts?

A)Accounts receivable are not adjusted for known uncollectible amounts.
B)Net accounts receivable is recalculated when there are changes recorded in the Allowance for Doubtful Accounts contra account.
C)Comparability is the reason an allowance for doubtful accounts is needed.
D)An allowance for doubtful accounts does not require estimates or judgments.

Question 76

Lenient Corp. reported cash sales of $1,145,000, credit sales of $1,880,000, cash returns of $50,000, bad debt write-offs of $300,000 and bad debt expense of $250,000 for last year. Accounts receivable had a balance of $3,400,000 at the beginning of the year and $2,350,000 at the end of the year. How much cash was collected from customers during the year?

A)$2,630,000
B)$2,975,000
C)$3,725,000
D)$3,775,000

Question 77

Which statement is correct about estimating the allowance for doubtful accounts?

A)Under the income statement approach, bad debt expense is based on the accounts receivable amount.
B)Under the income statement approach, bad debt expense is based on the percentage of credit sales.
C)Under the income statement approach, bad debt expense is based on an aging of the accounts receivable amount.
D)Under the income statement approach, bad debt expense is based on the volume of sales transactions.

Question 78

Marvelos Inc. reported credit sales of $1,000,000 and cash sales of $100,000 for last year. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of ending accounts receivable. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the balance in the allowance for doubtful accounts at the end of the year?

A)$11,000
B)$15,000
C)$51,000
D)$55,000

Question 79

Which statement is not correct about estimating the allowance for doubtful accounts under the balance sheet approach?

A)Accounts receivable are stated at their net realizable value.
B)Accounts receivable are stated at their fair value.
C)Bad debt expense is based on the accounts receivable balance.
D)Bad debt expense is based on an aging of the accounts receivable.

Question 80

Medical Machines reported credit sales of $800,000, cash collections of $550,000 and bad debt write-offs of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. What was the ending balance in the accounts receivable account?

A)$450,000
B)$1,235,000
C)$1,250,000
D)$1,800,000