acct 211 final
: Which of the following would result in a credit made to depositor's bank account?
EFT payroll check
A plant asset may be removed from the books even though it is not fully depreciated.
TRUE
ADDITIONS AND IMPROVEMENTS to a plant asset that increase its operating efficiency, productive capacity, or expected useful life are generally debited to the asset affected.
TRUE
Access to the accounting records of a company asset should be denied to the custodian of that asset.
TRUE
According to the basic principles of cash management, a company should offer discounts to encourage customers to pay bills early.
TRUE
Accounts receivable are valued and reported on the balance sheet at cash realizable value.
TRUE
CONCENTRATION OF CREDIT RISK is a threat of nonpayment from a single large customer that could threaten the financial health of the company.
TRUE
Companies usually DO show goodwill and trademarks separately under "Intangible assets" on a balance sheet.
TRUE
Depreciating accounts receivable is NOT an accounting issue with accounts receivable.
TRUE
Disbursement of most payments through checks is an effective internal control activity.
TRUE
Expenses for clearing a vacant lot are included in the cost of land account.
TRUE
If a company receives a 60-day, 5% note for $5,000 on September 5th, the company should receive the principal of the note plus interest in early November.
TRUE
Inadequate monitoring of employee actions can create opportunities for theft and fraud.
TRUE
Intangible assets should be reported as a separate classification on the balance sheet.
TRUE
Interest earned would require an adjusting entry on the company's books in a bank reconciliation.
TRUE
Interest incurred during construction can be included in the cost of constructing a building.
TRUE
NOTES receivable are evidenced by a formal instrument of credit.
TRUE
Q 8.129: The NET amount expected to be collected from receivables is the cash realizable value.
TRUE
The allowance method of accounting DOES NOT VIOLATE the matching principle.
TRUE
The declining-balance method of depreciation produces a decreasing depreciation expense each period.
TRUE
The units-of-activity method of computing depreciation is production based.
TRUE
Two advantages for the retailer of accepting a national credit card are that the issuer performs the credit investigation and that the issuer undertakes the collection process.
TRUE
Book value is the difference between the cost of the plant asset and
The accumulated depreciation to date.
A change in the estimate of the useful life of equipment requires
The amount of periodic depreciation be changed in the current year and in future years.
Using prenumbered checks and having an approved invoice for each check reflect the principle of
documentation procedures.
In the cash disbursements section of a cash budget, repayments of borrowed funds are
excluded
Which of the following is not included in the cash receipts section of a cash budget?
expected borrowings
One way to accelerate receivable collections is through an arrangement with a
factor
A six-month treasury is an example of a cash equivalent.
false
Outstanding checks would be subtracted from balance per books in a bank reconciliation.
false its subtracted from balance per the bank
When or how is bad debt expense recorded under the allowance method?
for an amount that the company estimates it will not collect
How is the return on assets ratio computed?
from the profit margin ratio multiplied by the asset turnover ratio
When a note receivable is _________, Cash is debited for the note's maturity value.
honored
Which of the following is an internal control feature that would address employees who do not take vacation?
human resource controls
Where is bad debt expense reported on the income statement?
in the operating expenses section
Privileges, rights, and competitive advantages that are owned by companies are reported under ________ in financial statements.
intangible assets
Which of the following assets should NOT be amortized?
intangible assets having an indefinite life
If an intangible asset has a limited life, its cost must be amortized over a period of
its useful life
A depreciable cost is the cost of an asset
less its salvage value.
By paying liabilities early, a company
loses the use of the cash before full payment is due.
An effective way establish responsibility is to
make only one person responsible for a given task.
Requiring potential customers to provide bank guarantees is one way that a company can
minimize its losses due to bad debt.
The asset turnover ratio is calculated as ________ divided by average total assets.
net sales
Where do companies report a gain on disposal of plant assets?
"other revenues and gains" section of the income statement
Franklin Corporation bought equipment on January 1, 2014. The equipment cost $150,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is
$120,000
A month-end bank statement shows a balance of $45,500, outstanding checks are $9,500, a deposit of $3,500 was in transit at month end, and a deduction error of $250 made by the bank against the account. The correct balance is in the bank account at the month end is
$45,500 - $9,500 + $3,500 + $250 = $39,750
Which of the following statements regarding the financial statement presentation of receivables is NOT true? Select all that apply.
-The allowance for doubtful receivables is reported under notes in the financial statement. -Short-term investments appear after short-term receivables on the balance sheet because these investments are nearer to cash.
Which of the following is an internal control activity for cash?
-designating specific employees to handle cash No alt text provided for this image -locking the cash register tape until a supervisor removes it No alt text provided for this image -separating the functions of record keeping and physical custody of cash
What is a company required to report in its notes to its financial statements? Select all that apply.
-problems relating to bad debt -significant concentration of credit risk
The financial statements of the Tyler Company report net sales of $300,000 and accounts receivable of $50,000 and $10,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for the Tyler Company?
10 TIMES $300,000 ÷ [($50,000 + $10,000) ÷ 2] = 10 times
The financial statements of Watson Tools report credit sales of $600,000 and accounts receivable of $40,000 and $6,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Watson Tools?
26.08 $600,000 ÷ [($40,000 + $6,000) ÷ 2] = 26.08
The financial statements of the Dimensions Company reports credit sales of $600,000 and accounts receivable of $20,000 and $10,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Dimensions?
40 $600,000 ÷ [($20,000 + $10,000) ÷ 2] = 40
Which of the following are included in the cash receipts section of a cash budget? Select all that apply.
=collections from customers =cash sales =receipts of interest and dividends
What do cash equivalents include?
=money market funds =commercial paper
Which of the following would appear in the cash budget?
=office salaries expense =travel expense =interest expense
What type of investment is appropriate for investing idle cash?
=short-term securities =risk-free securities =interest-paying government securities
Which of the following statements about accounts receivable is true?
Accounts receivable represent purchases that customers have paid for on credit.
Intangible assets should be reported
As a separate classification on the balance sheet.
Which of the following statements is true?
Both the gross amount of receivables and the allowance for doubtful accounts should be reported.
Which of the following statements is true?
Cash equivalents include money market accounts, commercial paper, and U.S. treasury bills held for ninety days or less.
A collects payment directly from customers after buying receivables from businesses.
FACTOR
The depreciation and amortization methods used should NOT be described on financial statements.
FALSE
The sale or transfer of accounts receivable in order to raise funds is called collateralizing.
FALSE
When a note receivable is honored, Cash is credited for the note's maturity value.
FALSE
When customers make purchases with a national credit card, the retailer absorbs any losses from uncollectible accounts.
FALSE
Cash equivalents include money market funds, commercial paper, U.S. treasury bills held for ninety days or less, and restricted cash.
FALSE because Restricted cash is not a cash equivalent because restricted cash is not a highly liquid investment.
Which of the following statements about credit risk is true?
If a company has a significant concentration of credit risk, it is required to discuss that in its notes to its financial statements.
What is true about Allowance for Doubtful Accounts on the balance sheet?
It is deducted from accounts receivable.
The requirement that companies maintain an adequate system of internal controls was mandated by the
Sarbanes-Oxley Act.
When a note receivable is honored, Cash is debited for the note's _________ value.
MATURITY
When a ________ is dishonored, a payee's entry includes a credit to Notes Receivable.
NOTE
Which of the following is an example of poor internal control?
One person is responsible for handling all related transactions.
If a company receives a 60-day, 5% note for $5,000 on September 5, which of the following statement is true?
The company should receive the principal of the note plus interest in early November.
Starling Silks received a 60-day, 5% note for $20,000 on May 5th. Which of the following statements is true?
The principal of the note plus interest is due on in early July.
Which of the following will increase the funds in a company's bank account?
a deposit
What is the meaning of the term concentration of credit risk?
a threat of nonpayment from a single large customer that could threaten the financial health of the company
All of the following are internal control procedures for cash except
designating the same individual to receive the cash and pay the bills.
The asset turnover ratio is calculated by
dividing net sales by average total assets.
Credit sales result in the creation of ________ for the company.
accounts receivable
Poor internal controls might include
allowing the person responsible for the information to verify it.
Who should prepare the bank reconciliation?
an employee who has no other responsibilities related to cash
Which of the following is an example of financial pressure?
an employee who is facing financial problems caused by too much debt
A company purchased a trademark when it purchased another company. The trademark has
an indefinite life and should not be amortized.
Plant assets are ordinarily presented in the balance sheet
at cost less accumulated depreciation.
A ________ reports both the gross amount of receivables and the allowance for doubtful accounts.
balance sheet
Where should both the gross amount of receivables and the allowance for doubtful accounts reported?
balance sheet
Which expenditures increase the company's investment in productive facilities?
capital expenditures
Which of the following contributes to efficient cash management?
cash budget
Planning the timing of major expenditures and monitoring payment of liabilities are basic principles of
cash management.
Expenditures that occur frequently during the period of ownership are
ordinary repairs.
Sale, exchange, or retirement are the three ways in which _____ are disposed of.
plant assets
The return on assets ratio indicates an overall measure of
profitability.
Before a check is used, an employee should check that the invoice agrees with the purchase order and the
receiving report.
When a fully depreciated plant asset is ________, no gain or loss on disposal will be recorded.
retired
Which of the following is an overall measure of profitability?
return on assets ratio
An overall measure of profitability is the
return on assets ratio.
An ordinary repair is considered to be which type of expenditure?
revenue expenditure
What is the book value of an asset is equal to?
the asset's cost less accumulated depreciation
For which of the following would a bank issue a credit memorandum?
the collection of notes receivable
Depreciation is recorded for ________, when disposal of a plant asset occurs during the year.
the fraction of the year to the date of disposa
The depreciation and amortization methods should be described in
the notes to the financial statements.
Which depreciation method should management select?
the one that best measures the plant asset's contribution to revenue over its useful life
An example of independent internal verification is
the reconciliation of the cash register tape with the cash in the register.
Restricted cash would not be reported on the balance sheet as a cash equivalent.
true
Cash realizable value is emphasized by the percentage receivables basis for estimating
uncollectible accounts.