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.