ACCT 3010 Ch 7
When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will: a. offset the overdraft against cash account. b. report the same in the notes to financial statement. c. report the bank overdraft amount as account payable. d. classify the bank overdraft as compensating balance.
A
All of the following are problems associated with the valuation of accounts receivable except a. uncollectible accounts. b. returns. c. cash discounts under the net method. d. allowances granted.
C
On January 1, 2014, Lynn Company borrows $2,000,000 from National Bank at 11% annual interest. In addition, Lynn is required to keep a compensatory balance of $200,000 on deposit at National Bank which will earn interest at 5%. The effective interest that Lynn pays on its $2,000,000 loan is a. 10.0%. b. 11.0%. c. 11.5%. d. 11.6%.
D
If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as a. a deduction from sales in the income statement. b. an item of "other expense" in the income statement. c. a deduction from accounts receivable in determining the net realizable value of accounts receivable. d. sales discounts forfeited in the cost of goods sold section of the income statement.
A
Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct? a. Net approach. b. Gross approach. c. Allowance approach. d. All three approaches are theoretically correct.
A
Which of the following concepts relates to using the allowance method in accounting for accounts receivable? a. Bad debt expense is an estimate that is based on historical and prospective information. b. Bad debt expense is based on the actual amounts determined to be uncollectible. c. Bad debt expense is an estimate that is based only on an analysis of the receivables aging. d. Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.
A
Consider the following: Cash in Bank - checking account of $18,500, Cash on hand of $500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling $124,000. How much should be reported as cash in the balance sheet? a. $ 18,500. b. $ 19,000. c. $ 22,500. d. $136,500.
B
Kennison Company has cash in bank of $15,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of a. $14,000. b. $15,000. c. $17,000. d. $18,000.
B
Which of the following statements is correct regarding receivables? a. Receivables are written promises of the purchaser to pay for goods or services. b. Receivables are claims held against customers and others for money, goods, or services. c. Receivables are non-financial assets. d. Receivables that are expected to be collected within a year are classified as noncurrent.
B
Kaniper Company has the following items at year-end: Cash in bank $30,000 Petty cash 300 Short-term paper with maturity of 2 months 5,500 Postdated checks 1,400 Kaniper should report cash and cash equivalents of a. $30,000. b. $30,300. c. $35,800. d. $37,200.
C
The accounting for cash discounts and trade discounts are a. the same. b. always recorded net. c. not the same. d. tied to the timing of cash collections on the account.
C
What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? a. As offsets to capital. b. By means of footnotes only. c. As assets but separately from other receivables. d. As trade notes and accounts receivable if they otherwise qualify as current assets.
C
The category "trade receivables" includes a. advances to officers and employees. b. income tax refunds receivable. c. claims against insurance companies for casualties sustained. d. none of these answer choices are correct.
D
Trade discounts are a. not recorded in the accounts; rather they are a means of computing a price. b. used to avoid frequent changes in catalogues. c. used to quote different prices for different quantities purchased. d. all of the above.
D
When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n) a. trade discount. b. nominal discount. c. enhancement discount. d. cash discount.
D
Which of the following should be recorded in Accounts Receivable? a. Receivables from officers b. Receivables from subsidiaries c. Dividends receivable d. None of these answer choices are correct.
D
Why do companies provide trade discounts? a. To avoid frequent changes in catalogs. b. To induce prompt payment. c. To easily alter prices for different customers. d. To avoid frequent changes in catalogs and to easily alter prices for different customers.
D
Why is the allowance method preferred over the direct write-off method of accounting for bad debts? a. Allowance method is used for tax purposes. b. Estimates are used. c. Determining worthless accounts under direct write-off method is difficult to do. d. Improved matching of bad debt expense with revenue.
D