Bonus Quizzes

The accounts receivable turnover ratio is used to evaluate how well a company does in collecting its accounts receivable.

True

The amount of interest paid is a function of three variables: the amount borrowed, the interest rate, and the length of the loan period.

True

An accounting system must be computerized in order to implement any internal control procedures.

False

As a result of the bank reconciliation process, a company will prepare an adjusting entry for a debit memo but not for a credit memo.

False

Cash equivalents typically appear in the long-term investments section of a balance sheet.

False

If a company estimates its bad debt expense on the basis of a receivables aging, the balance in the Allowance for Doubtful Accounts account will not affect the amount of the end-of-period adjusting entry for bad debts.

False

If a company has an internal audit function, it does not need to have external auditors.

False

Net Sales = Total credit sales − Sales Discounts − Sales Returns and Allowances

False

Selling on credit protects a company from the risk that some of its receivables will never be collected.

False

The best response to an employee caught stealing from the company is to say "Don't ever let me catch you doing that again!

False

The key to being classified as a cash equivalent is that the amount must be available to pay debts within a year's time or less.

False

The lender of a note recognizes a note payable on the balance sheet and interest expense on its income statement.

False

The longer a customer's account balance remains outstanding, the greater the likelihood that it will be collected in the near future.

False

The sole purpose for creating an internal control system is to deter embezzlement

False

When reconciling a bank account, the company has to prepare an adjusting entry for outstanding checks.

False

Accounts receivable are shown on the balance sheet at their net realizable value.

True

Because the allowance method results in better matching, GAAP requires its use rather than the direct write-off method, unless bad debts are immaterial.

True

Money market accounts with original maturities of less than 90 days are cash equivalents.

True

The lender of a note recognizes a note receivable on the balance sheet and interest revenue on its income statement.

True

The stronger the system of internal control, the higher the accuracy of the company's accounting records and financial reports.

True