ACCT 2300 Exam 2- T/F

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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


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