Seipp Accounting 131 Exam 2
The following information is available for all care nursing supply fiscal year ending Dec 31, 2012. Calculate Accounts Receivable Turnover ratio: Net sales $450,000 Account Receivable, Dec 31, 2011 $175,000 Account Receivable, Dec 31,2012 $125,000
3
Which of the following statements best describes the term "outstanding Check" from a company's point of view?
A check written by a customer to the company, but it has not been presented to the bank for payment
Accurate description of the Allowance for Doubtful Accounts
contra accounts
Which of the following would NOT appear on a bank statement for a checking account?
outstanding checks
A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?
$720 [1200 x .12(6/12)]
cash collected & recorded by a company but not yet reflected in a bank statement are known as ___________
deposit in transit
while preparing a bank reconciliation, which of the following items would be added to the bank statement balance?
deposit in transit
What is the distinguishing characteristic between accounts receivable and notes receivable?
Notes receivable specify an interest rate and a maturity date at which any interest and principle must be repaid
A company had sales of $40,000, sales discounts of $800, sales returns of 1,600 and commissions owned to sales people of $600, compute net sales.
$37,000
If a company uses the direct write-off method of accounting for bad debts, it will record :
(it will record) bad debt expense only when an account is determined to be uncollected
The company sold merchandise to a customer on Dec 1, 2012, for $120,000. The company accepted a promissory note as payment. The note has a term of three months & an annual interest rate of 10%. The company's accounting period ends on Dec 31. 1. What is the maturity date of the note? 2. What amount should the company recognize as interest revenue on Dec 21,2012? 3. What amount should the company recognize as interest revenue on the maturity date of the note?
1. March 1, 2013 2. $1,000 3. $0
A company receiving payment of $20,000 accounts receivable with in 10 days with terms of 2/10,n/30 would record a sales discount of:
2% of 20,000
Percentage of NET Credit sales method
A percentage estimated by management of what percentage of the net credit sales
A customer's check for $25 that had been deposited into the company's checking account the previous month was returned stamped "NSF" by the bank. Which journal entry is required?
Accounts Receivable $25 Cash $25
Aging Method
Balance Sheet
While preparing a bank reconciliation, which of the following items would be subtracted from the balance per company records?
Bank service charges
During the bank reconciliation process, an accountant identified an error. A check written for $20 to pay a supplier for goods purchased on credit was erroneously recorded in the company's records for $200. Which of the following entries would correct this error?
Cash $180 Accounts Payable $180
Net Percentage sales method
Income Statement
All of the following are TRUE for a company that uses the allowance method of accounting for bad debts EXCEPT: -It uses a contra-asset account called the allowance for doubtful accounts -It reports accounts receivable in the balance sheet at their net realizable value -it records bad debt each time an account is determined to be uncollectable
It records bad debt each time an account is determined to be uncollectable
Each of the following represents an effective cash management practice EXCEPT:
Payments should be expedited in order to simplify record keeping
How will the lender of the promissory note record the note on its books?
The promissory note will be recorded as an asset
Aging Method
bad debt expense is estimated by determining the collectability of the accounts receivable rather than by taking a percentage of total credits
Which of the following items would not be a reconciling item on a bank reconciliation?
cancelled checks
the account which records differences between amounts of cash deposited & amounts from the register tapes is called ___________
cash over & short
A credit memo appeared on the Sept bank statement. How should this amount be treated on the Sept bank reconciliation?
deduct it from the bank balance
Which of the following items would be added to the company's cash balance on a bank reconciliation?
interest earned
According to the Sarbanes-Oxley Act of 2002, who is primarily responsible for establishing & maintaining a system of internal control over the company's financial reporting?
management of the company
What is an example of a debit memo?
notice of a bank service charge
Which is an example of a credit memo?
notice of interest earned on a checking account
While preparing a bank reconciliation, which of the following would be subtracted from the balance per bank statement?
outstanding checks
which allowance method approach is considered to be an income statement approach to establishing bad debts?
percentage of net credit sales
which if the following procedures is NOT part of the preparation of a bank reconciliation for a checking account?
reversing all the transaction recorded on the company's records that do not yet appear on the bank statement
An incentive used by a company to induce the customer to keep damaged goods is called a __________
sales allowance
An incentive used by a company to encourage prompt payment is called a ____________
sales discount
Company's Balance according to the general ledger $23,100 Outstanding checks - $550 Interest earned on the checking account - $100 A customer's NSF check returned by the bank - $1,000
the accountant found error. recorded $600 but correct amount as $650 $22,250
The two allowance procedures used to estimate bed debts
the aging of accounts receivable method takes into account the existing balance in the Allowance for Doubtful Accounts
A reduction in the price granted by the seller for a particular class of customers is called a _____________
trade discount
