Acct Chapter 6

During its first year of operation, Lenton Company acquired three investments in trading securities. 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? $0 $10,000 $20,000 $30,000

$10,000

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: $4,914 $7,268 $7,313 $7,383

$7,313

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

Added to the balance per the bank statement.

The Cash account is listed on the balance sheet in the current asset section, and all cash items are normally combined and reported as a single figure. Correct Incorrect

Correct

The initial recording of trading securities is at cost, including brokerage fees. Correct Incorrect

Correct

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? Debit Cash for 70, and Credit Cash Short & Over for 70 Debit Miscellaneous Expense for 70, and Credit Cash for 70 Debit Miscellaneous Expense for 25, Debit Accounts Receivable for 45, and Credit Cash for 70 Debit Miscellaneous Expense for 2,399, and Credit Cash for 2,399

Debit Miscellaneous Expense for 25, Debit Accounts Receivable for 45, and Credit Cash for 70

Which of the following cause differences between bank statements and a company's books (accounting records)? Deposits in transit Outstanding checks NSF checks All of the above.

Deposits in transit Outstanding checks NSF checks All of the above.

Monthly bank service charges are subtracted in the reconciliation of a certain "amount" to the correct adjusted cash balance. What is the "amount" in question? Ending balance per bank statement Ending balance per company records

Ending balance per company records

Companies may legally use the "float," even to the extent of writing checks when no money is in an account. True False

False

Only decreases in value are recognized for trading securities. True False

False

The accounting department should have exclusive control over the functions of cash collection, bank deposits, recording appropriate journal entries, and preparing the periodic bank reconciliation. True False

False

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

None of the above.

Which of the following items would be subtracted from the balance per bank statement in adjusting to the correct adjusted cash balance? Outstanding checks NSF checks

Outstanding checks

The replenishment of a petty cash fund involves a credit to which of the following accounts? Cash Petty Cash

Petty Cash

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

The proceeds of a note collected by the bank are deposited to the account.

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

Travel advances to employees

The Cash account on the balance sheet should not include which of the following items? Travel advances to employees Currency Money orders Deposits in transit

Travel advances to employees

The items reported in the Cash account on the balance sheet must be acceptable to a bank for deposit and free from restrictions for use in satisfying current debts. True False

True

The reconciliation of the cash balance per company records to the correct adjusted cash balance would indicate the need for journal entries. True False

True

During its first year of operation, Lenton Company acquired three investments in trading securities. 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 debit to Unrealized Loss on Trading Securities. a credit to Unrealized Gain on Trading Securities. a debit to Trading Securities. At least two of the above.

a debit to Unrealized Loss on Trading Securities.

The original amount of a petty cash fund should be equal to cash remaining in the fund plus: cash short and over petty cash receipts

petty cash receipts

Short-term investments owned by a company are: reported on the balance sheet as a current asset. reported on the balance sheet as a noncurrent asset. reported on the balance sheet as a contra-equity account. reported on the balance sheet as a contra-equity account.

reported on the balance sheet as a current asset.

The trading securities owned by a company are: reported on the balance sheet as a current asset. reported on the balance sheet as a noncurrent asset. reported on the balance sheet as a contra-equity account. reported on the balance sheet as a reduction of liabilities.

reported on the balance sheet as a current asset.

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

the reconciliation of the cash balance per the company records to the adjusted cash balance.

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

the reconciliation of the cash balance per the company records to the adjusted cash balance.