Chapter 7
Jim borrows $1,000 and has to repay $1,100 at the end of the year. The $100 payment is referred to as
interest
Money and claims to receive money in amounts that are fixed or determinable are called
monetary assets.
Receivables represent a company's claims to the future collection of
other assets services cash
When adjusting the bank balance in a bank reconciliation, which item must be subtracted from the bank balance?
outstanding checks
Which concept means that money can be invested today to earn interest and grow to a larger amount in the future?
Time value of money concept
Coins, balances in checking accounts, checks received from customers and money orders received are all included in the ______ account on the balance sheet.
cash
Internal control procedures for cash disbursements (other than small disbursements from petty cash) should include that
checks are signed by authorized individuals. all disbursements (other than petty cash) are made by check. all expenditures are authorized.
An account receivable is normally classified as a
current asset.
Internal control consists of plans to
minimize errors and theft. promote operational efficiency. encourage adherence to company policies and procedures.
Assigning or pledging accounts receivable is used in a
secured borrowing.
Which of the following is an example of a monetary asset?
Accounts receivable
Which of the following situations would involve the calculation of the future value of an ordinary annuity?
Depositing an amount to a savings account each month that will grow to purchase a car in 5 years.
Which of the following items are classified as receivables?
amounts loaned and expected to be repaid amounts owed by customers tax refund claims
Restricted cash is usually reported in the balance sheet
as noncurrent assets.
When a company has a claim to receive assets in the future, how is this recorded on the balance sheet?
A receivable
Which of the following are adjustments to the bank balance in a bank reconciliation?
Adjustments for bank errors Add deposits outstanding Deduct checks outstanding
Which of the following are services performed by a factor?
Buy accounts receivable. Handle billing and collection of accounts receivable.
True or false: At the date of issue, the stated rate of interest on the bond is always equal to the market rate of interest on the bond.
False
Which of the following are services performed by a factor?
Handle billing and collection of accounts receivable. Buy accounts receivable.
Most monetary assets are valued at the _____ value of ______ cash flows.
Present Future
Which of the following are the four variables in present value annuity problems?
The interest rate The present value The number of periods The payment amount
Assume you borrow $10,000 from the bank and promise to repay the amount in 5 equal installments beginning one year from today. The stated interest rate on the loan is 5%. What is the unknown variable in this problem?
The payment amount
True or false: Present value calculations are used in calculating pension contributions for defined benefit plans.
True
Valuing defined benefit pension obligation typically requires the calculation of the present value of a
deferred annuity
When adjusting the bank balance in a bank reconciliation, which item must be added to the bank balance?
deposits in transit
A(n) _____ borrowing occurs when accounts receivable are assigned or pledged as collateral for a loan. (Enter one word per blank.
secured or secure
The rate of interest printed on the face of a bond is referred to as the ____ interest rate.
stated, nominal, coupon, or face
The future value of an ordinary annuity table is used when calculating
the future value of a series of payments.