financial exam 3

is so near its maturity that it presents insignificant risk of changes in interest rates.

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and is acceptable as a means to pay current liabilities. has a current market value that is greater than its original cost .bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation. is so near its maturity that it presents insignificant risk of changes in interest rates.

cash discounts under the net method.

All of the following are problems associated with the valuation of accounts receivable except uncollectible accounts. returns. cash discounts under the net method allowances granted.

B. 30-day treasury bill.

Which of the following is always classified as a cash equivalent? A. Cash in a checking account. B. 30-day treasury bill. C. 120-day treasury bill. D. Money orders waiting to be deposited.

Environmental liabilities

Accounting topics where present value-based accounting measurements are relevant include: taxes. inventory. Environmental liabilities. all of these answer choices are correct.

environmental liabilities.

Accounting topics where present value-based accounting measurements are relevant include: taxes. inventory. environmental liabilities. all of these answer choices are correct.

B. $5,880.

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at: A. $5,940. B. $5,880. C. $6,000. D. $6,120.

future earnings will not be affected substantially by future price declines.

All of the following are major disadvantages of using LIFO, except: lower profits reported in inflationary times. doesn't approximate the physical flow of inventory. future earnings will not be affected substantially by future price declines. inventory is understated.

open accounts resulting from short-term extensions of credit.

All of the following are non-trade receivables except: deposits paid as a guarantee of performance. open accounts resulting from short-term extensions of credit. claims against insurance companies for casualties sustained. interest receivable.

cash discounts under the net method

All of the following are problems associated with the valuation of accounts receivable except uncollectible accounts. returns cash discounts under the net method allowances granted.

Short-term paper with a maturity of 6 months

Cash Consists of all of the following except: Personal Checks Certified Checks Money Orders Short-term paper with a maturity of 6 months

short-term paper with a maturity of 6 months.

Cash consists of all of the following except: personal checks. certified checks. money orders. short-term paper with a maturity of 6 months.

$91,000

During the year, Trout Enterprises made an entry to write off an $8,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $100,000 and the balance in the allowance account was $9,000. The net realizable value of accounts receivable before and after the write-off entry was $100,000. $99,000. $83,000. $91,000.

$91,000.

During the year, Trout Enterprises made an entry to write off an $8,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $100,000 and the balance in the allowance account was $9,000. The net realizable value of accounts receivable before and after the write-off entry was $100,000. $99,000. $83,000. $91,000.

$960,000.

Everhart Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes. The balance in the LIFO Reserve account at the end of 2016 was $120,000. The balance in the same account at the end of 2017 is $180,000. Everhart's Cost of Goods Sold account has a balance of $900,000 from sales transactions recorded during the year. What amount should Everhart report as Cost of Goods Sold in the 2017 income statement? $840,000. $900,000. $960,000. $1,080,000.

inventory for $800.

FBS Corporation uses the perpetual inventory method and the gross method for recording purchases on account. On May 11, it purchased $44,000 of inventory, terms 2/10, n/30. On May 13, FBS returned goods that cost $4,000. On May 19, FBS paid the supplier. On May 19, the company should credit purchase discounts for $880. inventory for $880 .purchase discounts for $800 .inventory for $800.

period costs.

Freight charges on goods sold are accounted for as: manufacturing costs. product costs. period costs. variable costs.

always greater than the present value.

Future value is the value now of a future amount. the amount that must be invested now to produce a known future value. always greater than the present value. all of these answer choices are correct.

Always greater than the present value

Future value is : the value now of a future amount. the amount that must be invested now to produce a known future value always greater than the present value. all of these answer choices are correct.

an item of "other revenues and gains" in the income statement.

If a company employs the net method of recording accounts receivable from customers, then sales discounts forfeited (not taken) should be reported as an addition to sales in the income statement an item of "other revenues and gains" in the income statement. a deduction from accounts receivable in determining the net realizable value of accounts receivable. sales discounts forfeited in the cost of goods sold section of the income statement.

retained earnings is understated.

If the beginning inventory is overstated the current ratio is overstated .cost of goods sold is understated retained earnings is understated. working capital is understated.

B. LIFO

In a period of declining costs, the use of which of the following inventory cost methods would result in the highest ending inventory? A. FIFO. B. LIFO. C. Average cost. D. Weighted-average cost.

LIFO periodic method

In a period of rising prices, the inventory method that produces the lowest ending inventory is the: average cost method. FIFO perpetual method. LIFO periodic method .LIFO perpetual method.

all of these answer choices are correct.

In order to determine how much $100,000 deposited now will grow to 6 years from now, one would use the: future value of 1 table. present value of 1 table .formula FV = PV (FVFn,i) .all of these answer choices are correct.

D. Distort the net income.

In periods when costs are rising, LIFO liquidations: A. Can't occur. B. Are used to reduce tax liabilities. C. Are a source of off-balance-sheet financing. D. Distort the net income.

Future value, present value, number of periods and interest rate.

In solving single-sum problems, which of the following values can be calculated? Only future value and present value only the number of periods and interest rate only the future value, present value, and interest rate. Future value, present value, number of periods and interest rate.

Future value, present value, number of periods and interest rate.

In solving single-sum problems, which of the following values can be calculated? only future value and present value. only the number of periods and interest rate. only the future value, present value, and interest rate. Future value, present value, number of periods and interest rate.

recorded when payment is received within the discount period.

In the gross method of recording cash discounts, sales discounts are: recorded at the time of sale. recorded when payment is received within the discount period. never recorded. ignored unless they are material in amount

recorded when payment is received within the discount period.

In the gross method of recording cash discounts, sales discounts are:recorded at the time of sale. recorded when payment is received within the discount period. never recorded. ignored unless they are material in amount.

all of these answer choices are correct.

Notes receivable can be classified as current trade non-trade all of these answer choices are correct.

All of these answer choices are correct

Notes receivable can be classified as current. trade. nontrade. all of these answer choices are correct.

D. $50,000

On December 28, year 2, Kerr Manufacturing Co. purchased goods costing $50,000. The terms were FOB destination. Some of the costs incurred in connection with the sale and delivery of the goods were as follows:Packaging for shipment $1,000Shipping $1,500Special handling charges $2,000These goods were received on December 31, year 2. In Kerr's December 31, year 2 balance sheet, what amount of cost for these goods should be included in inventory? A. $54,500 B. $53,500 C. $52,000 D. $50,000

net income, current assets, and retained earnings were understated.

On December 30, Kessler Co. accepted delivery of merchandise which it purchased on account. As of December 31, Kessler had recorded the purchase, but did not include the merchandise in its physical count of ending inventory. The effect of this on its financial statements for December 31 would be net income, current assets, and retained earnings were understated. net income was correct and current assets were understated. net income was understated and current liabilities were overstated. net income was overstated and current assets were understated.

On March 1, 2017, Beijing Pasta Company will debit Interest Expense for $14,000.

On March 1, 2017, Beijing Pasta Company assigns $1,400,000 of its accounts receivable to Bank of China as collateral for a $1,000,000 note. Bank of China assesses a finance charge of 1 percent of the accounts receivable and interest on the note of 12 percent. Which of the following is correct regarding this transaction? Beijing Pasta Company has factored its receivables. On March 1, 2017, Beijing Pasta Company will debit Interest Expense for $14,000. On March 1, 2017, Beijing Pasta Company will debit Loss on Sale of Receivables for $34,000. On March 1, 2017, Beijing Pasta Company will credit Due from Factor for $20,000.

On March 1, 2017, Beijing Pasta Company will debit Interest Expense for $14,000.

On March 1, 2017, Beijing Pasta Company assigns $1,400,000 of its accounts receivable to Bank of China as collateral for a $1,000,000 note. Bank of China assesses a finance charge of 1 percent of the accounts receivable and interest on the note of 12 percent. Which of the following is correct regarding this transaction? Beijing Pasta Company has factored its receivables. On March 1, 2017, Beijing Pasta Company will debit Interest Expense for $14,000. On March 1, 2017, Beijing Pasta Company will debit Loss on Sale of Receivables for $34,000. On March 1, 2017, Beijing Pasta Company will credit Due from Factor for $20,000.format test

all the answer options list possible classifications.

Receivables may be classified as all of following except: current or non-current accounts receivable or notes receivable. all the answer options list possible classifications. trade receivables or non-trade receivables.

LIFO liquidations often distort net income and may result in substantial tax payments.

Select the correct statement concerning LIFO liquidations from the following. LIFO liquidations often distort net income and do not result in substantial tax payments. LIFO liquidations seldom distort net income and do not result in substantial tax payments. LIFO liquidations seldom distort nets income and may result in substantial tax payments. LIFO liquidations often distort net income and may result in substantial tax payments.

cash equivalents.

Short-term paper with maturities of less than 3 months should be classified as cash equivalents investments temporary investments receivables

cash equivalents

Short-term paper with maturities of less than 3 months should be classified as cash equivalents .investments. temporary investments .receivables.

B. Understated.

The Jackson Company incorrectly omitted $100,000 of merchandise from its 2016 ending inventory. As a result of these errors, 2016 before-tax income is: A. Overstated. B. Understated.

C. Understated by $64,000.

The Jackson Company incorrectly omitted $100,000 of merchandise from its 2016 ending inventory. In addition, a merchandise purchase of $40,000 was incorrectly recorded as a $4,000 debit to the purchases account. As a result of these errors, 2016 before-tax income is: A. Overstated by $64,000. B. Understated by $136,000. C. Understated by $64,000. D. Overstated by $136,000.

gives a reasonably correct statement of receivables in the balance sheet.

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach gives a reasonably correct statement of receivables in the balance sheet. best relates bad debt expense to the period of sale. is the only generally accepted method for valuing accounts receivable. makes estimates of uncollectible accounts unnecessary.

present value of an ordinary annuity of 1 table.

The amounts that must be deposited now at 6% interest to permit withdrawals of $10,000 at the end of each period for a specified number of periods are contained in the: present value of 1 table. future value of an ordinary annuity of 1 table. present value of an ordinary annuity of 1 table. present value of an annuity due of 1 table.

is based on facts, not estimates

The direct write-off method is based on facts, not estimates .is often used for financial reporting purposes. records the expense in the same period as the associated revenue. all of these answer choices are correct.

is based on facts, not estimates

The direct write-off method is based on facts, not estimates is often used for financial reporting purposes .records the expense in the same period as the associated revenue. all of these answer choices are correct.

FIFO method.

The ending inventory and cost of goods sold will be the same whether a perpetual or periodic system is used under the: weighted-average method .moving-average method. LIFO method. FIFO method.

dollar-value LIFO.

The method employed by most companies that use a LIFO system is: specific goods LIFO dollar-value LIFO. specific goods pooled LIFO. weighted-average LIFO.

percentage-of-receivables approach.

The procedure that provides a reasonably accurate estimate of the receivables' realizable value is often referred to as the: percentage-of-sales approach percentage-of-receivables approach. direct write-off method. income statement approach.

percentage-of-receivables approach.

The procedure that provides a reasonably accurate estimate of the receivables' realizable value is often referred to as the: percentage-of-sales approach. percentage-of-receivables approach. direct write-off method income statement approach.

$40,950.

The required balance in Wheeler's Allowance for Doubtful Accounts is $36,750, based on an aging of its accounts receivable. The Allowance for Doubtful Accounts currently has a debit balance of $4,200. Wheeler's bad debt expense for the period is $4,200. $36,750. $40,950. $32,550.

Present value of 1 table

The table that would show the smallest value for 7 periods at 5% is the: future value of 1 table. present value of 1 table. present value of an ordinary annuity table. present value of an annuity due table.

present value of 1 table.

The table that would show the smallest value for 7 periods at 5% is the: future value of 1 table. present value of 1 table. present value of an ordinary annuity table. present value of an annuity due table.

C. Significant cash flow advantages over FIFO.

The use of LIFO during a long inflationary period can result in: A. A net increase in income tax expense. B. An inflated balance sheet. C. Significant cash flow advantages over FIFO. D. A reduction in inventory turnover over FIFO.

Invoice price less the purchase discount allowable whether taken or not.

The use of a Purchase Discounts Lost account implies that the recorded cost of a purchased inventory item is its invoice price. invoice price plus the purchase discount lost. invoice price less the purchase discount taken .invoice price less the purchase discount allowable whether taken or not.

receivables

Travel advances should be reported as supplies. Cash because they represent the equivalent of money. investments. receivables

Minimum deposits required to be maintained in connection with a borrowing arrangement.

What is a compensating balance? Savings account balances. Margin accounts held with brokers. Temporary investments serving as collateral for outstanding loans. Minimum deposits required to be maintained in connection with a borrowing arrangement.

Matching is being followed

When a company estimates its bad debt expense using the percent of net credit sales method, which of the following statements is true? Matching is being followed. Matching is not being followed. Substance over form is being followed. Going concern is not being followed.format test

Matching is being followed.

When a company estimates its bad debt expense using the percent of net credit sales method, which of the following statements is true? Matching is being followed. Matching is not being followed. Substance over form is being followed. Going concern is not being followed.

cash discount.

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) trade discount nominal discount. enhancement discount. cash discount.

Increase the allowance for doubtful accounts.

When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of a small account previously written off would Increase net income .Decrease the allowance for doubtful accounts. Have no effect on the allowance for doubtful accounts. Increase the allowance for doubtful accounts.

Increase the allowance for doubtful accounts

When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of a small account previously written off would Increase net income. Decrease the allowance for doubtful accounts. Have no effect on the allowance for doubtful accounts. Increase the allowance for doubtful accounts.

Increase the allowance for doubtful accounts.

When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of a small account previously written off would Increase net income. Decrease the allowance for doubtful accounts. Have no effect on the allowance for doubtful accounts. Increase the allowance for doubtful accounts.

Equal to number of rents

When the future value of an annuity due is computed, the number of compounding periods will always be: equal to the number of rents. greater than the number of rents. less than the number of rents. less than or equal to the number of rents.

Equal to number of rents

When the future value of an annuity due is computed, the number of compounding periods will always be: equal to the number of rents. greater than the number of rents.less than the number of rents. less than or equal to the number of rents.

Purchases.

Which of the following accounts does not exist in a perpetual inventory system? Inventory. Cost of Goods Sold .Sales Returns and Allowances. Purchases.

Percentage-of-sales

Which of the following approaches of estimating bad debt expense may provide a better "matching" of bad debt expense to sales? Direct write-off Percentage-of-sales Aging of accounts receivable All of these approaches satisfy a better "matching" of bad debt expense to sales.

Bad debt expense is an estimate that is based on historical and prospective information.

Which of the following concepts relates to using the allowance method in accounting for accounts receivable? Bad debt expense is an estimate that is based on historical and prospective information. Bad debt expense is based on the actual amounts determined to be uncollectible. Bad debt expense is an estimate that is based only on an analysis of the receivables aging. Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.

D) .The present value is the value now (present time) for a future sum or sums discounted assuming compound interest.

Which of the following is a correct definition for one of the variables fundamental to all compound interest problems? A) The rate of interest is a semi-annual rate that must be adjusted, if necessary, to the length of the compounding period. B) The number of time periods is the number of compounding periods where each period may be equal to or greater than a year. C) The future value is the value at a future date of a given sum or sums invested assuming simple interest D) .The present value is the value now (present time) for a future sum or sums discounted assuming compound interest.

The present value is the value now (present time) for a future sum or sums discounted assuming compound interest.

Which of the following is a correct definition for one of the variables fundamental to all compound interest problems? The rate of interest is a semi-annual rate that must be adjusted, if necessary, to the length of the compounding period. The number of time periods is the number of compounding periods where each period may be equal to or greater than a year. The future value is the value at a future date of a given sum or sums invested assuming simple interest. The present value is the value now (present time) for a future sum or sums discounted assuming compound interest

A percentage of accounts receivable adjusted for the balance in the allowance.

Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense? Actual losses from uncollectible accounts. A percentage of accounts receivable adjusted for the balance in the allowance. A percentage of accounts receivable not adjusted for the balance in the allowance. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance.

Debit Cash, credit accounts receivable

Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method? Debit Allowance for Doubtful Accounts, credit Accounts Receivable. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. Debit Cash, credit accounts receivable

The inventory will be overstated.

Which of the following is not considered an advantage of LIFO when prices are rising? The inventory will be overstated. The more recent costs are matched against current revenues. There will be a deferral of income tax. A company's future reported earnings will not be affected substantially by future price declines.

The fair value option must be elected at the time the financial instrument is originally recognized.

Which of the following is not true with regard to the fair value option? Fair value provides more relevant information than historical cost because it reflects the financial instrument's current cash equivalent value. The unrealized holding gain or loss is calculated as the net change in fair value from one period to the next. The unrealized holding gain or loss is included in net income. The fair value option must be elected at the time the financial instrument is originally recognized.

Rents occur at the beginning of each period in an annuity due.

Which of the following is true? Rents occur at the beginning of each period in an ordinary annuity. Rents occur at the end of each period in an annuity due. Rents occur at the beginning of each period in an annuity due. Rents occur in the middle of each period in an ordinary annuity.

Postage stamps on hand

Which of the following items should not be included in the Cash caption on the balance sheet? Coins and currency in the cash register Checks from other parties presently in the cash register Amounts on deposit in checking account at the bank Postage stamps on hand

Direct write-off

Which of the following methods of determining annual bad debt expense violates the expense recognition concept? Percentage of sales Percentage of ending accounts receivable Percentage of average accounts receivable Direct write-off

Charging bad debts as accounts are written off as uncollectible.

Which of the following methods of determining bad debt expense does not properly match expense and revenue? Charging bad debts with a percentage of sales under the allowance method. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. Charging bad debts with an amount derived from aging accounts receivable under the allowance method. Charging bad debts as accounts are written off as uncollectible.

Goods held on consignment.

Which of the following should not be included in a company's ending inventory? In-transit goods purchased and shipped FOB shipping point. In-transit goods sold and shipped FOB destination. Goods held on consignment. Goods out on consignment.

Receivables include equity securities purchased by the company.

Which of the following statements is false? Receivables include equity securities purchased by the company. Receivables include credit card receivables. Receivables include amounts owed by employees as result of company loans to employees. Receivables include amounts resulting from transactions with customers.

The rate of interest is a semi-annual rate that must be adjusted, if necessary, to the length of the compounding period.

Which of the following statements is incorrect regarding the variables that are fundamental to all compound interest problems? The rate of interest is a semi-annual rate that must be adjusted, if necessary, to the length of the compounding period. A time period may be equal to or less than a year. The future value is the value at a future date of a given sum or sums invested assuming compound interest. The present value is the value now (present time) for a future sum or sums discounted assuming compound interest.

It is easier to erode LIFO layers using dollar-value LIFO techniques than it is with specific goods pooled LIFO.

Which of the following statements is not true as it relates to the dollar-value LIFO inventory method? It is easier to erode LIFO layers using dollar-value LIFO techniques than it is with specific goods pooled LIFO. Under the dollar-value LIFO method, it is possible to have the entire inventory in only one pool Several pools are commonly employed in using the dollar-value LIFO inventory method. Under dollar-value LIFO, increases and decreases in a pool are determined and measured in terms of total dollar value, not physical quantity.

C. The higher the interest rate and the longer the compounding period, the lower the present value.

Which of the following statements regarding time value of money is true? A. The lower the interest rate and the shorter the compounding period, the lower the present value .B. The lower the future cash flow and the shorter the compounding period, the lower the present value. C. The higher the interest rate and the longer the compounding period, the lower the present value. D. The higher the future cash flow and the longer the compounding period, the lower the present value.

The periodic payments must always be the same amount.

Which of the following statements related to an annuity is correct? The periodic payments must always be the same amount. The interval between payments need not be the same. The interest must be compounded annually. An annuity can be classified as an ordinary annuity or an unordinary annuity.

LIFO is appropriate where prices tend to lag behind costs.

Which of the following statements related to the LIFO method is incorrect? LIFO is preferable if revenues have been increasing faster than costs. LIFO is preferable in situations where it has been traditional. LIFO is appropriate where prices tend to lag behind costs. LIFO is not appropriate in situations where specific identification is traditional.

LIFO is not appropriate where prices tend to lead costs.

Which of the following statements related to the LIFO method is incorrect? LIFO is preferable if revenues have been increasing faster than costs. LIFO is preferable in situations where it has been traditional. LIFO is not appropriate where prices tend to lead costs. LIFO is not appropriate in situations where specific identification is traditional.

C. Future value of annuity of $1 per period.

Which of the following tables shows the largest value for an interest rate of 8% for 10 periods? A. Future value of $1 at compound interest .B. Present value of $1 at compound interest. C. Future value of annuity of $1 per period. D. Present value of annuity of $1 per period.

Improved matching of bad debt expense with revenue.

Why is the allowance method preferred over the direct write-off method of accounting for bad debts? Allowance method is used for tax purposes. Estimates are used. Determining worthless accounts under direct write-off method is difficult to do. Improved matching of bad debt expense with revenue.

Travel advances

___________ is/are treated as receivables if collected from employees or deducted from their salaries. Short-term paper Petty cash Bank overdrafts Travel advances