Fin Accounting Ch 4, Ch 5

Pear Co. loaned $10,000 to Peach Plastics on December 1, 2018, by issuing a 9-month, 6% note receivable. Which of the following is the correct journal entry on September 1, 2019, for the collection of this note, assuming Pear has a December 31st year-end?

Cash: 10,450 Notes Receivable: 10,000 Interest Receivable: 50 Interest Revenue: 400

Frosty Drive In recorded credit card sales of $14,000 for the month. The credit card fee associated with the transactions totaled 2%. Which of the following is the correct journal entry to record these credit card sales?

Cash: 13720 Credit Card Discount Expense: 280 Sales Revenue: 14,000

On November 11th, Smaller Company sold merchandise with a selling price of $8,000 on account to Rogers Office Supplies, with terms 2/10, n/30. No sales returns are expected. On November 17th, Smaller received the full amount due from Rogers Office Supplies. Prepare the journal entry for Smaller Company on November 17th, using the gross method.

Cash: 7840 Sales Discount: 160 Accounts Receivable: 8000

Having a corporate code of ethics that prohibits employees from accepting gifts from customers or vendors is an example of which component of internal control?

Control environment

On December 1st, Jackson Company sold merchandise with a selling price of $1,000 on account to Mr. Jenkins, with terms 3/10, n/30. Using the gross method and ignoring cost of goods sold, what journal entry did Jackson Company prepare on December 1st? Jackson Company expects no sales returns.

Debit Accounts Receivable for $1,000 and credit Sales Revenue for $1,000.

On December 1st, Johnson Company sold merchandise with a selling price of $2,000 on account to Mr. Thompson, with terms 2/10, n/30. Using the gross method and ignoring cost of goods sold, what journal entry did Johnson Company prepare on December 1st? Johnson Company expects no sales returns.

Debit Accounts Receivable for $2,000 and credit Sales Revenue for $2,000.

What is the effect on the financial statements of writing off an uncollectible account under the direct write-off method?

Decreases net income and decreases assets

On March​ 15, Maxwell Plush sold and shipped merchandise on account for​ $6,000 to Kittson Amusement​ Park, terms FOB shipping​ point, n/30.​ Maxwell's cost of goods sold is​ 40% of sales. How is Maxwell impacted by this sale on March​ 15?

Its assets will​ increase, as will its equity.

Which of the following items is not true about​ fraud?

Its damages must exceed a threshold of​ $150,000. true things about fraud - It is an intentional misrepresentation of facts. - It can cause injury or damage to another party. - It is designed to persuade another party to act in a way that causes injury or damage to that party.

What is the effect on the financial statements when writing off an uncollectible account under the allowance method?

No net effect

Wally's World sold $24,000 of merchandise to Chase Liquidators on December 23rd, terms FOB destination. This shipment is still in transit on December 31st, year-end for Wally's World. Will Wally's World record revenue for this transaction on its current year-end December 31st income statement?

No, no revenue is recorded for items shipped FOB destination until those items reach the buyer.

Purple Company sells goods to the Green Company for $12,000. It offers credit terms of 3/10, n/30. If Green Company pays the invoice within the discount period, Purple Company will record a debit to Cash in the amount of:

$11,640

Frosty Drive In recorded credit card sales of $14,000 for the month. The credit card fee associated with the transactions totaled 2%. What amount of cash did Frosty receive for these credit card sales?

$13,720

Collectibles, Inc. estimated that 2% of its $900,000 sales will be uncollectible and has a $2,000 credit balance in the allowance account. What amount will Collectibles, Inc. record as uncollectible account expense for the period using the percent-of-sales method?

$18,000

The current credit balance in Allowance for Uncollectible Accounts before adjustment is $450. A percent-of-sales reveals $2,800 of uncollectible accounts. What is the ending balance in the Allowance for Uncollectible Accounts?

$3,250

Base Electronics recorded sales in the last week of the year totaling $100,000 (cost of goods sold was $70,000). Base estimates that approximately 4% of these sales will be returned. What is the amount of Sales Refunds Payable that Base will record at year-end related to these sales?

$4,000

Ernst Electronics recorded sale in the last week of the year totaling $140,000 (cost of goods sold was $80,000). Ernst estimates that approximately 3% of these sales will be returned. What is the amount of Sales Refunds Payable that Ernst will record at year-end related to these sales?

$4,200

Snider Shipping accepted an eight-month, $20,000 note receivable, with 6% interest, from Reading Company on September 1st of the current year. Snider Shipping's year-end is December 31. What is the amount of interest to be accrued on December 31st of the current year (round to the nearest dollar)?

$400

A 90-day, 12% note for $20,000 dated July 10th, is received from a customer. What is the amount of interest earned at maturity (to the nearest dollar)?

$592

Boston Company sells goods to the Chicago Company for $10,000. It offers credit terms of 2/10, n/30. If Chicago Company pays the invoice within the discount period, Boston Company will record a debit to Cash in the amount of:

$9,800

Why does cash require some specific internal​ controls?

- Most transactions ultimately affect cash. - Cash is easy to convert to other forms of wealth. - Cash is relatively easy to steal. (all of the above)

Which of the following items used to reconcile cash does not require an adjusting entry?

- Outstanding checks - deposits in transit things that do require an adjusting entry - Interest earned - Bank service charge - NSF check

Which of the following is not an objective of internal control?

- to guarantee that a company will not go bankrupt - to have proper auditing procedures actual objectives of internal control: - to encourage adherence to company policies - to promote operational efficiency - to help safeguard the assets a business uses in its operations - to comply with legal requirements - to ensure accurate, reliable accounting records

The following information was taken from the most recent balance sheet of Collectible Calendars, Inc.: Cash & Cash Equivalents $32,000 Short-term Investments 8,000 Current Receivables (Net) 64,000 Current Liabilities 92,000 What is Collectible Calendars quick ratio (round to two decimal places)?

1.13

Pear Co. loaned $10,000 to Peach Plastics on December 1st of the current year, by issuing a 9-month, 6% note receivable. What is the maturity value of this note?

10,450

Bedding By Us had net credit sales of $452,000 during the year and an average accounts receivable balance of $34,769. On average, how many days did it take Bedding By Us to collect Accounts Receivable (round to two decimal places)?

28.08 days

Basic Design had net credit sales of $400,000 during the year and an average accounts receivable balance of $40,000. On average, how many days did it take Basic Design to collect Accounts Receivable (round to two decimal places)?

36.50 days

The two major types of receivables are?

Accounts and Notes

Which of the following would be included in the total of "Cash and Cash Equivalents" on the balance sheet?

All of these would be classified as "Cash and Cash Equivalents." - Certificates of deposit - Time deposits - U.S. government securities maturing in 60 days

The following represents the five steps in the revenue recognition model, in random order: Determine the transaction price Identify the contract with the customer Recognize revenue as the entity satisfies performance obligations Allocate the transaction price to the performance obligations in the contract Identify the performance obligations in the contract Which of the following is the correct order for the five-step revenue recognition model?

B, E, A, D, C

A journal entry would need to be made for which of the following adjustments on a bank​ reconciliation?

Bank service charges

When journalizing estimated sales returns, there would be a debit to:

Sales Returns and Allowances.

Which law or regulation requires that public companies must maintain a strong internal control system?

Sarbanes-Oxley Act

Which law or regulation requires that the CEO and CFO of public companies must certify in writing that their company's annual and quarterly reports are accurate and complete?

Sarbanes-Oxley Act

Encryption is a technology-based internal control measure that:

rearranges messages by a mathematical process.

A $700 deposit made into our bank account is listed on the bank statement as $70. On a bank reconciliation, this will appear as a(n) ________.

addition to the bank balance

Estimating uncollectible accounts by analyzing receivables from specific customers according to how long each has been outstanding is known as the:

aging-of-receivables method.

After performing a bank reconciliation, we need to journalize ________.

all items on the book side of the reconciliation

Which of the following statements is​ true?

all of them - Credit sales increase receivables. - Collections on account decrease receivables. - Write-offs of accounts decrease receivables.

The document that explains all differences between a company's cash records and the bank's figures is called a(n) _________.

bank reconciliation

Each of the following represents an internal control procedure except for:

clear lines of authority and communication. actual internal control procedures: - compliance monitoring. - limited access to both assets and records. - separation of duties.

The current credit balance in Allowance for Uncollectible Accounts before adjustment is $650. An aging schedule reveals $3,500 of uncollectible accounts. What is the debit amount to Uncollectible-Account Expense for this entry, and the ending balance in the Allowance for Uncollectible Accounts?

Uncollectible-Account Expense = $2,850; ending balance of Allowance for Uncollectible Accounts = $3,500

Which of the following is NOT an example of a misappropriation of assets?

The company CFO intentionally misclassified long-term assets as current assets. actual misappropriation of assets: - The inventory manager was caught stealing inventory for personal use, then writing off the inventory as being damaged or obsolete. - The purchasing manager agreed to pay extremely inflated prices for inventory from a supplier. The supplier, in return, provides the purchasing manager with monthly gift cards for personal use. - An employee with a corporate credit card used the card to purchase dinner for his family weekly, writing this expense off as dinner with a client.

Nichols Company has shipped goods to one of its customers FOB shipping point. Nichols Company will recognize sales revenue when:

The goods leave Nichols' shipping dock.

For companies that are too small to hire separate employees to do all the different functions needed for internal controls, the key to good internal controls is ________.

getting the owner involved

Which of the following is NOT an element of the fraud triangle?

greed actual elements of fraud traingle: - motive - opportunity - rationalization

The maintaining of the petty cash account at a particular balance (cash plus vouchers) is referred to as a(n) _____________.

imprest system

The bookkeeper for Moon Company wrote a check for $ 100 to pay for furnace maintenance. The check was incorrectly recorded in the general journal as $ 10. The entry to correct this error would​ be:

increase Repairs and Maintenance Expense by $ 90.

With regard to Accounts Receivable, a separate account for each customer is kept in a(n):

subsidiary ledger.

When a company receives customers checks by mail:

the mailroom sends all customer checks to the treasurer, who has the cashier deposit the checks in the bank.

For retailers, a way to speed up cash collections is:

to accept debit and credit card sales.