ACCT 2300 Exam 2- T/F
A check written by a company but not yet presented to the bank for payment is called a check in transit
F
A company prepares adjusting entries for debit memorandum but not for credit memorandums
F
A six-month certificate of deposit would be considered to be a cash equivalent
F
Bad Debt expense is debited and accounts Receivable is credited at the end of the period to recognize bad debts under the allowance method
F
Cash equivalents are investments that are readily convertible to a known amount of cash, where readily means six months or less
F
Net Purchases equal purchases return, allowances, and discounts plus transportation-In
F
On a bank reconciliation, bank charges for the month are added to the cash balance per the books
F
On the Income statement of a merchandising company, cost of goods is added to nets sales to arrive at gross margin or gross profit
F
Promissory notes are non-negotiable
F
Purchase returns and allowance is subtracted from cost of goods sold to determine net purchases
F
Some cash equivalents appear in the long term investment section of a balance sheet
F
The percentage of net credit sales approach for recognizing bad debt considers any existing balance in allowance for Doubtful accounts
F
When reconciling a bank account, the company must prepare an adjusting entry for deposits in transit
F
With the periodic inventory system, the inventory account is updated after each sale of purchase
F
Accounts receivable are shown on the balance sheet at their net realizable vale
T
Because the allowance method results in better matching, accounting standards require its use rather than the direct write-off method, unless bad debts are immaterial
T
Checks received from customers are considered to be cash in the company's books
T
Cost of goods sold represents an outflow of an asset, inventory, from the sale of products
T
Credit Terms of n/30 mean that the net amount of the invoice, less any returns or allowances, is due within 30 days of the date of the invoice
T
Purchase discounts decrease the total cost of merchandise acquired
T
Sales Revenue Is an inflow of assets
T
The buyer must include goods purchased FOB shipping point in its inventory account if the goods are still in transit
T
The makers of a note recognize a note payable on the balance sheet and interest expense on its incomes statement
T
The three distinct types of cost to manufacturer are direct materials, direct labor, and manufacturing overhead?
T
Under the allowance method of accounting for bad debts, the company estimates the amount of bad debts before those debts actually occur
T
When a bank pays interest or collects an amount owed to a company by one of the bank's customers, the bank issues a credit memorandum
T
When reconciling bank account, the company does not have to prepare an adjusting entry for outstanding checks
T
Whether investments are reported was current assets or concurrent assets depends on the company's intent
T
the payee of a note recognizes a note receivable on the balance sheet and interest revenue on its income statement
T
the use of the allowance method is an attempt by accountants to match bad debt as an expense with the revenue of the period in which a sale on credit takes place
T
