Chapter 6 (ACCT 2301)

When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would deposits in transit be handled? A. Added to the balance per the bank statement. B. Subtracted from the balance per the bank statement. C. Added to the balance per company records. D. Ignored.

A. Added to the balance per the bank statement. (Deposits in transit must be added to the balance per the bank statement. These are amounts of cash which belong to the company, but which have not as yet been recorded by the bank. The balance per company records should already include these amounts, so answer "c" is incorrect.)

The Cash account on the balance sheet should not include which of the following items: A. Travel advances to employees B. Currency C. Money orders D. Deposits in transit

A. Travel advances to employees

During its first year of operation, Lenton Company acquired three short-term investments. Investment A cost $50,000 and had a year-end market value of $60,000. Investment B cost $35,000 and had a year-end market value of $17,000. Investment C cost $26,000 and had a year-end market value of $24,000. The journal entry to record the decline in market value would include: A. a debit to Unrealized Loss on Short-Term Investments. B. a credit to Unrealized Gain on Short-Term Investments. C. a debit to Short-Term Investments. D. At least two of the above.

A. a debit to Unrealized Loss on Short-Term Investments. (The appropriate entry is to debit Unrealized Loss on Short-Term Investments and credit Short-Term Investments for $10,000. Choice "a" is the only correct choice.)

Short-term investments owned by a company are: A. reported on the balance sheet as a current asset. B. reported on the balance sheet as a noncurrent asset. C. reported on the balance sheet as a contra-equity account. D. reported on the balance sheet as a reduction of liabilities.

A. reported on the balance sheet as a current asset.

During its first year of operation, Lenton Company acquired three short-term investments. Investment A cost $50,000 and had a year-end market value of $60,000. Investment B cost $35,000 and had a year-end market value of $17,000. Investment C cost $26,000 and had a year-end market value of $24,000. What amount should be reported as a charge against income in Lenton's income statement for the first year of operation? A. $0 B. $10,000 C. $20,000 D. $30,000

B. $10,000 (Aggregate cost equals $111,000 ($50,000 + $35,000 + $26,000). Aggregate market value equals $101,000 ($60,000 + $17,000 + $24,000). The $10,000 difference is a decline which is reported as an unrealized loss.)

A bank reconciliation sometimes points to the need for adjusting entries. In general, the source of the adjustments is: A. the reconciliation of the ending balance per the bank statement to the adjusted cash balance. B. the reconciliation of the cash balance per the company records to the adjusted cash balance. C. both a and b. D. none of the above.

B. the reconciliation of the cash balance per the company records to the adjusted cash balance. (The cash balance per company records is the amount of cash in the general ledger account before the reconciliation. The correct amount of cash actually possessed by the firm is the adjusted cash balance, per the reconciliation. Logically, the reconciliation of the cash balance per company records to the correct amount of cash points to the need for a journal entry to update the Cash account)

Malory Company provides the following information about the month-end bank reconciliation: Ending cash per bank statement $1,367 Ending cash per company records $7,383 Monthly bank service charge $25 Deposits in transit at month-end $8,345 Outstanding checks at month-end $2,399 Customer check returned NSF $45 The correct ending cash balance is: A. $4,914 B. $7,268 C. $7,313 D. $7,383

C. $7,313 ($1,367 + $8,345 - $2,399) = $7,313 ($7,383 - $45 - $27) = $7, 313

Malory Company provides the following information about the month-end bank reconciliation: Ending cash per bank statement $1,367 Ending cash per company records $7,383 Monthly bank service charge $25 Deposits in transit at month-end $8,345 Outstanding checks at month-end $2,399 Customer check returned NSF $45 What journal entry should be recorded to cause the company records to be correct? A. Cash 70 Cash Short & Over 70 B. Miscellaneous Expense 70 Cash 70 C. Miscellaneous Expense 25 Accounts Receivable 45 Cash 70 D. Miscellaneous Expense 2,399 Cash 2,399

C. Miscellaneous Expense 25 Accounts Receivable 45 Cash 70

A credit memorandum accompanying a bank statement would occur for which of the following items? A. A previously deposited customer check which was returned NSF. B. Bank service charges for the month. C. The proceeds of a note collected by the bank are deposited to the account. D. Each of the above.

C. The proceeds of a note collected by the bank are deposited to the account. (A credit memorandum issued by a bank indicates that a bank account has been increased. Of the noted items, only answer "c" relates to a transaction which increases cash.)

When using a petty cash system, the replenishment of the fund would normally include a debit to: A. Cash. B. Petty Cash. C. Revenues. D. None of the above.

D. None of the above (Various expense accounts are debited and Cash is credited.)