ACC CH 7 AND 8 SG ANSWERS

During 2010, Tempo Inc. has monthly cash expenses of $120,000. On December 31, 2010, its cash balance is $1,860,000. The ratio of cash to monthly cash expenses is:

15.5

A $135 petty cash fund has cash of $44 and receipts of $93. The journal entry to replenish the account would include a:

credit to cash over and short for $2

An element of internal control is:

risk assessment

Which of the following would be subtracted from the balance per books on a bank reconciliation?

service charges

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited:

when an account is determined to be worthless.

The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollecttible. The entry to write off this account would be which of the following?:

debit bad debt expense; credit accounts recievable

Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a:

debit to accounts recievable

An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $2,000. If Allowance for Doubtful Accounts has a $200 credit balance, the adjustment to record the bad debt expense for the period will require a:

debit to bad debt expense for $1,800

An aging of a company's accounts receivable indicates that estimate of the uncollectible accounts totals $5,000. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record the bad debt expense for the period will require a

debit to bad debt expense for $3,800.

To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a:

debit to bad debts expense and a credit to allowance for doubtful accounts.

A $150 petty cash fund has cash of $28 and receipts of $110. The journal entry to replenish the account would include a:

debit to cash over and short for $12

A $100 petty cash fund contains $89 in petty cash receipts, and $7.50 in currency and coins. The journal entry to record the replenishment of the fund would include a:

debit to cash short and over for $3.50

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles:

does not affect net income in the period it is collected.

Entries are made to the Petty Cash account when:

establishing the fund.

Which of the following would be subtracted from the balance per bank on a bank reconciliation?

outstanding checks

A necessary element of internal control is:

Information and communication.

At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $640. During the year, $350 of previously written-off accounts were reinstated and accounts totaling $410 are written-off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful Accounts should be:

$580

A 60-day, 10% note for $9,000, dated April 15, is received from a customer on account. The face value of the note is:

$9,000

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivables is:

$9,000

When a company uses the allowance method of accounting for uncollectible receivables, which entry would NOT be found in the general journal?

Bad Debt Expense 500 Accounts Receivable - Bob Smith 500

In management's internal control report that is now required of all public companies, which of the following does NOT have a direct effect on a company's internal control system?

Board of trustees

Which of the following would be added to the balance per books on a bank reconciliation?

Notes collected by the bank

Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was:

added to the balance per company's records.

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n):

addition to the balance per company's records.

Receipts from cash sales of $7,500 were recorded incorrectly in the cash receipts journal as $5,700. This item would be included on the bank reconciliation as a(n):

addition to the balance per the company's records

Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible account:

affects only balance sheet accounts

The debit balance in Cash Short and Over at the end of an accounting period is reported as:

an expense on the income statement

A bank reconciliation should be prepared periodically because:

any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected.

The type of account and normal balance of Petty Cash is a(n):

asset, debit

Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts?

debit Accounts receivable; credit Cash

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer. What entry is required in the company's accounts?

debit Cash; credit Notes receivable

Allowance for Doubtful Accounts has a debit balance of $1,200 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $13,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?

debit bad debt expense, $15,100; credit allowance for doubtful accounts, $15,100.

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?

debit bad debt expense, $15,200; credit allowance for doubtful accounts, $15,200.

Accompanying the bank statement was a debit memo for an NSF check received from a customer. This item would be included on the bank reconciliation as a(n):

deduction from the balance per company's records.

A check drawn by a company in payment of a voucher for $635 was recorded in the journal as $365. This item would be included in the bank reconciliation as a(n):

deduction from the balance per the company's records.

Which of the following items that appeared on the bank reconciliation did NOT require an adjusting entry?

deposits in transit

If the maker of a promissory note fails to pay the note on the due date, the note is said to be:

dishonored

A debit balance in the Allowance for Doubtful Accounts:

indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

A note receivable due in 18 months is listed on the balance sheet under the caption:

investments

The direct write-off method of accounting for uncollectible accounts:

is not generally accepted as a basis for estimating bad debts.

The bank reconciliation:

is part of the internal control system.

Which of the following should NOT be considered cash by an accountant?

postage stamps

Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called:

preventative controls

Which one of the following below is NOT a factor that influences a business's control environment?

proofs and security measurers

The notification accompanying a check that indicates the specific invoice being paid is called a:

remittance advice

In the normal operation of business you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $425 is "NSF". The bank also informs you that due to the amount of activity on your business account the monthly service charge is $45. During a bank reconciliation:

subtract both values from balance according to books.

When does an account become uncollectible?

there is no general rule for when an account becomes uncollectible

Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts:

total assets decrease

On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the:

total estimated uncollectible accounts as of the end of the year.

Notes or accounts receivables that result from sales transactions are often called:

trade recievables

A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n):

voucher