Question 1

The allowance for uncollectible accounts is a(n) :

Accepted Answer

A)   asset.
B)   contra current asset.
C)   expense.
D)   contra revenue.E) B) and C)
F) A) and D)

Question 2

The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:

Accepted Answer

A)   consistency.
B)   matching revenue and expense.
C)   original cost.
D)   objectivity.E) A) and B)
F) B) and D)

Question 3

When a manufacturer invests in short-term marketable securities:

Accepted Answer

A)   the return on investment is more important than the risk involved.
B)   the securities are likely to have a maturity date more than a year in the future.
C)   the market value of the securities is likely to fluctuate significantly.
D)   risk avoidance is of great importance.E) B) and C)
F) A) and C)

Question 4

Which of the following is NOT an example of an inventory account a manufacturing firm might use?

Accepted Answer

A)   Work in process inventory.
B)   Finished goods inventory.
C)   Merchandise inventory.
D)   Raw materials inventory.E) A) and D)
F) B) and D)

Question 5

When costs are rising over time:

Accepted Answer

A)   LIFO results in higher profits that FIFO.
B)   Cost of goods sold using the weighted average method will be greater than LIFO cost of goods sold.
C)   ending inventory balances will be greater under LIFO.
D)   FIFO results in higher profits than LIFO.E) All of the above
F) C) and D)

Question 6

When an uncollectible account receivable is written off against the allowance for bad debts:

Accepted Answer

A)   total current assets decrease and expenses increase.
B)   total current assets are not affected.
C)   total current assets decrease and expenses decrease.
D)   current assets decrease and expenses are not affected.E) A) and B)
F) A) and C)

Question 7

In an inflationary economic environment, the selling price set for a firm's products will:

Accepted Answer

A)   not be affected by the cost flow assumption used.
B)   be higher if LIFO is used than if FIFO is used.
C)   be higher if FIFO is used than if LIFO is used.
D)   be derived from the weighted average cost of inventory.E) All of the above
F) A) and B)

Question 8

The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to:

Accepted Answer

A)   determine the amount of cash in the account actually available to the entity.
B)   satisfy generally accepted accounting principles.
C)   verify the amount of petty cash on hand.
D)   determine whether or not the entity has issued an NSF check.E) A) and B)
F) A) and C)

Question 9

An organization's system of internal control is designed primarily to:

Accepted Answer

A)   ensure that no employees steal the organization's property.
B)   increase efficiency by letting one employee handle all aspects of a transaction from beginning to end.
C)   ensure that the organization's balance sheet will always balance.
D)   provide an operating framework for all employees as they work to achieve the organization's goals.E) B) and C)
F) A) and D)

Question 10

Which of the following is(are)  a category for securities?

Accepted Answer

A)   Trading.
B)   Held-to-maturity.
C)   Available-for-sale.
D)   All of these.E) A) and B)
F) None of the above

Question 11

The following is a portion of the current assets section of the balance sheets of The Sweet Cafe at December 31, 2014 and 2013: $$\begin{array} { | l | c | r | } 
\hline & 12 / 31 / 14 & 12 / 31 / 13 \
\hline \text { Accounts receivable, less allowance for bad debts of } & \$ 243,600 & \$ 215,800 \
\$ 7,200 \text { and } \$ 5,100 \text {, respectively. } & & \
\hline
\end{array}$$ (a.) If bad debts expense for 2014 totaled $16,400, what was the amount of accounts receivable written off during the year?
(b.) The December 31, 2014, Allowance account balance includes $8,400 for a past due account that is not likely to be collected. This account has not been written off. If it had been written off, what would have been the effect of the write off on:
(1.) The current ratio at December 31, 2014?
(2.) Net income and ROE for the year ended December 31, 2014?
(c.) What do you suppose was the level of The Sweet Cafe's sales in 2014, compared to 2013? Explain your answer.

Accepted Answer

(a.) $5,100 + $16,400 - Accounts written...

Question 12

If an organization purchases $700 of supplies on account, with terms of 2/15, n50:

Accepted Answer

A)   $650 must be paid within 15 days of the invoice date.
B)   $698 must be paid within 50 days of the invoice date.
C)   $686 can be paid within 15 days of the invoice date, or $700 must be paid within 50 days of the invoice date.
D)   $686 can be paid within 15 days of the invoice date, or $714 must be paid within 50 days of the invoice date.E) A) and B)
F) A) and C)

Question 13

One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO cost flow assumption in an inflationary economic environment is that:

Accepted Answer

A)   net income will be higher.
B)   income taxes will be lower.
C)   balance sheet inventory values will be higher.
D)   a higher selling price can be established.E) A) and D)
F) A) and C)

Question 14

A cash equivalent is a current asset that:

Accepted Answer

A)   will be converted to cash within one year.
B)   will be converted to cash within one month.
C)   is readily convertible into cash with a minimal risk.
D)   is readily convertible into cash with a substantial risk.
E)   none of these.F) A) and B)
G) A) and C) C

Question 15

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

Accepted Answer

A)   the accounts receivable asset should be stated at original cost.
B)   the exact amount of the losses from bad debts is known.
C)   revenues should be stated at realizable value.
D)   all costs incurred in the current period should be subtracted from current period revenues.E) All of the above
F) A) and B) D

Question 16

The principal reason for converting a customer's account receivable to a note receivable is:

Accepted Answer

A)   the note receivable earns interest and the account receivable does not.
B)   the receivable is less likely to have to be written off as uncollectible.
C)   working capital is immediately increased.
D)   the customer is more likely to continue purchasing the company's products.E) None of the above
F) A) and C)

Question 17

Prepare a bank reconciliation for Show Me, Inc., as of June 30 from the following information:
(a.) The June 30 balance shown on the bank statement is $2,898.
(b.) Outstanding checks at June 30 totaled $165.
(c.) A deposit of $212 made on June 30 was not included in the balance shown on the bank statement.
(d.) The bank statement contained an adjustment of $205 for a note receivable collected by the bank on behalf of Show Me, Inc. ($191 principal and $14 interest).
(e.) A bank charge of $17 was made to the account during June. Although the company was expecting a charge, the amount was not known until the bank statement arrived.
(f.) The bank erroneously charged a $170 check of Shirt, Inc., against the Show Me, Inc., bank account.
(g.) The June 30 balance in the general ledger Cash account, before reconciliation, is $3,013.
(h.) The bank statement included a notice that a customer's check for $86 that had been deposited on June 14 had been returned NSF.
Required:
(1.) Prepare the bank reconciliation for Show Me, Inc., as of June 30.
(2.) Prepare the appropriate adjusting entry(ies) or show the reconciling items in a horizontal model, for Show Me, Inc., related to the bank reconciliation.

Accepted Answer

$$\begin{array} { | l | c | l | r | } 
\hline \text { (1.) } & & & \
\hline \text { Balance per bank } & \$ 2,898 & \text { Balance per books } & \$ 3,013 \
\hline \text { Add: Deposits in transit } & 212 & \text { Add: Note collected } & 205 \
\hline { \text { Error } } & 170 & \text { Less: NSF check } & ( 86 ) \
\hline \text { Less: Outstanding checks } & ( 165 ) & \text { Bank service charge } & ( 17 ) \
\hline \text { Reconciled balance } & \$ 3.115 & \text { Reconciled balance } & \$ 3.115 \
\hline & & & \
\text { (2.) } & & & \
\hline \text { Cash } & 102 & & \
\hline \text { Miscellaneous expense } & 17 & & \
\hline \text { Accounts receivable } & 86 & { } \
\hline  { \text { Notes receivable } } & & 191 & \
\hline \text { Interest income } & & 14 & \
\hline
\end{array}$$

Question 18

Assume that on September 1, 2013, a 6-month rent payment for $3,000 per month (for a total of $18,000)  was made with respect to a commercial lease that the company entered into on that date as a tenant. The company took occupancy of the rented space immediately. The lease term will expire on February 28, 2014. The $18,000 payment was recorded as a debit to Prepaid Rent on September 1, 2013. The adjusting entry on December 31, 2013, is as follows:

A. Dr. Prepaid Rent  6,000\quad 6,0006,000 
  \quad    \quad    \quad  Cr. Rent Expense  \quad    \quad  6,000

B. Dr. Prepaid Rent  12,000\quad 12,00012,000 
  \quad    \quad  Cr. Rent Expense  \quad    \quad    \quad  12,000

C. Dr. Rent Expense  6,000\quad 6,0006,000 
  \quad    \quad  Cr. Prepaid Rent  \quad    \quad    \quad  6,000

D. Dr. Rent Expense  12,000\quad 12,00012,000 
  \quad    \quad    \quad    \quad  Cr. Prepaid Rent  \quad   12,000

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option D E) C) and D)
F) All of the above

Question 19

Which of the following is true regarding notes receivables?

Accepted Answer

A)   A notes receivable is always a long-term asset.
B)   A notes receivable is always a current asset.
C)   A note is a more formal document than an account receivable.
D)   A note is a less formal document than an account receivable.E) A) and B)
F) None of the above

Question 20

For which of the following reconciling items would an adjusting entry be necessary on the company's book?

Accepted Answer

A)   A deposit in transit.
B)   An error by the bank.
C)   Outstanding checks.
D)   A bank service charge.E) A) and D)
F) A) and C)

Exam 5: Accounting for and Presentation of Current Assets

The allowance for uncollectible accounts is a(n) :

Correct Answer
verified

The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:

Correct Answer
verified

When a manufacturer invests in short-term marketable securities:

Correct Answer
verified

Which of the following is NOT an example of an inventory account a manufacturing firm might use?

Correct Answer
verified

When costs are rising over time:

Correct Answer
verified

When an uncollectible account receivable is written off against the allowance for bad debts:

Correct Answer
verified

In an inflationary economic environment, the selling price set for a firm's products will:

Correct Answer
verified

The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to:

Correct Answer
verified

An organization's system of internal control is designed primarily to:

Correct Answer
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Which of the following is(are) a category for securities?

Correct Answer
verified

Correct Answer
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(a.) $5,100 + $16,400 - Accounts written...
View Answer

If an organization purchases $700 of supplies on account, with terms of 2/15, n50:

Correct Answer
verified

One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO cost flow assumption in an inflationary economic environment is that:

Correct Answer
verified

A cash equivalent is a current asset that:

Correct Answer
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C

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

Correct Answer
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D

The principal reason for converting a customer's account receivable to a note receivable is:

Correct Answer
verified

Correct Answer
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Which of the following is true regarding notes receivables?

Correct Answer
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For which of the following reconciling items would an adjusting entry be necessary on the company's book?

Correct Answer
verified

Exam 5: Accounting for and Presentation of Current Assets

The allowance for uncollectible accounts is a(n) :

Correct AnswerverifiedShow Answer

The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:

Correct AnswerverifiedShow Answer

When a manufacturer invests in short-term marketable securities:

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of an inventory account a manufacturing firm might use?

Correct AnswerverifiedShow Answer

When costs are rising over time:

Correct AnswerverifiedShow Answer

When an uncollectible account receivable is written off against the allowance for bad debts:

Correct AnswerverifiedShow Answer

In an inflationary economic environment, the selling price set for a firm's products will:

Correct AnswerverifiedShow Answer

The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to:

Correct AnswerverifiedShow Answer

An organization's system of internal control is designed primarily to:

Correct AnswerverifiedShow Answer

Which of the following is(are) a category for securities?

Correct AnswerverifiedShow Answer

Correct Answerverified(a.) $5,100 + $16,400 - Accounts written...View AnswerShow Answer

If an organization purchases $700 of supplies on account, with terms of 2/15, n50:

Correct AnswerverifiedShow Answer

One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO cost flow assumption in an inflationary economic environment is that:

Correct AnswerverifiedShow Answer

A cash equivalent is a current asset that:

Correct AnswerverifiedC

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

Correct AnswerverifiedD

The principal reason for converting a customer's account receivable to a note receivable is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding notes receivables?

Correct AnswerverifiedShow Answer

For which of the following reconciling items would an adjusting entry be necessary on the company's book?

Correct AnswerverifiedShow Answer

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(a.) $5,100 + $16,400 - Accounts written...
View Answer

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C

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D

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