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100

Postage stamps are classified as

A. cash 

B. inventory 

C. office supplies

D. receivables 

C. office supplies

100

The accounts receivable reported on the balance sheet should include 

A. allowance for doubtful accounts

B. interest receivable 

C. notes receivable 

D. advances to related parties and officers 

A. allowance for doubtful accounts

100

All of these are true about the gross method, except

A. views a discount not taken by the customer as part of sales revenue 

B. A/R & Sales are for the gross amount on the date of the original transaction 

C. considers sales revenue to be the net amount, after discount

D. can overstate inventory for the period 

C. considers sales revenue to be the net amount, after discount 

(that is for the net method)

100

Which one applies to the net method?

A. any discounts not taken by the customer are considered interest revenue

B. can overstate inventory for the period 

C. views a discount not taken by the customer as part of sales revenue 

D. A/R & Sales are for the whole amount on the date of the original transaction 

A. any discounts not taken by the customer are considered interest revenue

100

Accounts receivable from officers, employees, or affiliated companies should be presented on the balance sheet

A. as offsets to capital

B. as assets but separately from other receivables

C. as trade notes and accounts receivable if they otherwise qualify as current assets

D. by means of footnotes only

B. as assets but separately from other receivables

200

What is restricted cash?

A. Restricted cash is cash that is required to be held by lenders as collateral for outstanding loans

B. Restricted cash is cash that is set aside for a particular purpose or otherwise not available for immediate use

C. Restricted cash is cash is short-term paper with a maturity of less than three months that is liquid enough to be considered a type of cash

D. Restricted cash is cash that is used to compensate for bank overdrafts

B. Restricted cash is cash that is set aside for a particular purpose or otherwise not available for immediate use

200

Free points!!!

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200

When a customer purchases merchandise inventory from a business organization, the customer may be given a discount which is designed to induce prompt payment. What is the term for this type of discount?

A. A nominal discount

B. A trade discount

C. A cash discount

D. An enhancement discount

C. A cash discount

200

Why is the allowance method preferable to the direct write-off method?

A. The allowance method recognizes the expense of a bad debt in the year in which the account is determined to be uncollectible 

B. The allowance method reflects the real facts 

C. The allowance method recognizes the expense of a bad debt in the same period as the sale

D. The allowance method relies on estimates which are always accurate and stable among years 

C. The allowance method recognizes the expense of a bad debt in the same period as the sale

200

Receivables are classified by which of the following general rules? (Choose all that apply.)
1. Disclose any loss contingencies that exist on the receivables.
2. Indicate the receivables classified as current and noncurrent.
3. Disclose any receivables designated or pledged as collateral. 

A. 1, 2, and 3

B. Only 2

C. 2 and 3 but not 1

D. 1 and 3 but not 2

A. 1, 2, and 3

300

Hat Trick Manufacturing sold equipment to Puck & Co., taking in exchange a zero interest bearing note. The equipment had a fair market value of $36,000 and the face amount of the note was $40,000. How should Hat Trick Manufacturing present the note in a balance sheet prepared immediately after receipt of the note?

A. At face amount plus implicit interest 

B. At face amount without adjustment 

C. At face amount less implicit interest

D. At face amount plus the anticipated net earnings related to the note 

C. At face amount less implicit interest

300

Miles Corporation sold land to South Ridge Inc.  for $200,000 cash and a zero interest-bearing note with a face amount of $600,000. The fair value of the land at the date of sale was $690,000. What value should be assigned to the note receivable by South Ridge? 

A. $490,000

B. $400,000 

C. $600,000 

D. $590,000 

A. $490,000

300

Why do companies often use the gross method of recording cash discounts if the net method is theoretically more correct?

A. The gross method requires less bookkeeping

B. The net method requires the sales discounts forfeited to be calculated, which requires math too complex for most accountants 

C. The net method recognizes interest revenue, which should be ignored because it is not material 

D. The gross method is preferred by the FASB 

A. The gross method requires less bookkeeping

300

What is the expected result of an accounts receivable that the company expects to collect in 10 months?

A. It would be classified as a noncurrent receivable because the current year or operating cycle includes the next 10 months. 

B. It would be classified as a noncurrent receivable regardless of the date or operating cycle 

C. It would be classified as a current receivable because the current year or operating cycle includes the next 10 months

D. It would be classified as a current receivable regardless of the date or operating cycle 

C. It would be classified as a current receivable because the current year or operating cycle includes the next 10 months

300

What are the average receivables for the period if the average collection period is 45 days and its net sales are $3,000,000?

A. $4,433,333

B. $66,667

C. $246,575

D. $369,863

D. $369,863

400

Cerulean Corporation had accounts receivable of $105,000 at the beginning of the year and $115,000 at the end of the year. What would be the company’s average collection period if they reported net sales of $950,000 and one can assume 365 days a year?

A. $42.3 days

B. $44.2 days

C. $22.6 days

D. $51.2 days

A. $42.3 days

400

During the year, Kiner Company made an entry to write off a $16,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $200,000 and the balance in the allowance account was $18,000. The net realizable value of accounts receivable after the write-off entry was

A. $200,000.
B. $198,000.
C. $166,000.
D. $182,000

D. $182,000

[($200,000 – $16,000) – ($18,000 – $16,000) = $182,000]

400

Kaniper Company has the following items at year-end:
Cash in bank $30,000
Petty cash 300
Short-term paper with maturity of 2 months 5,500
Postdated checks 1,400
Kaniper should report cash and cash equivalents of

A. $30,000
B. $30,300
C. $35,800

D. $37,200

C. $35,800

($30,000 + $300 + $5,500 = $35,800)

400

Kennison Company has cash in bank of $15,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of

A. $14,000
B. $15,000
C. $17,000
D. $18,000

B. $15,000

400

Gandalf & Sons receives a 5-year, $20,000 zero interest-bearing note, the present value of which is $11,348.60. What is the implicit interest rate that equates the total cash to be received to the present value of the future cash flows?

A. 9%

B. 12%

C. 8%

D. 10%

B. 12%

500

For the month of May 2015, Ceres Corporation, which uses the direct write-off method in accounting for uncollectible accounts receivable, has the following information:
Cash sales - $40,000
Cash received on accounts receivable - 32,000
Accounts receivable, May 1, 2015 - 105,000
Accounts receivable, May 31, 2015 - 92,000
Accounts receivable written off as uncollectible - 2,000

What are the gross sales for May 2015?

A. $61,000

B. $59,000

C. $19,000

D.  $78,000

A. $61,000

500

Al's Toys book balance on December 31, 2015, was $10,000. In addition, Al had the following items on its premises on December 31:

Check payable to Al’s Toys, dated January 5, 2016, included in December 31 book balance
$ 250
Postage stamps on hand not included in December 31 book balance
120
Cashier's check payable to Al’s Toys, dated December 26, 2015, not included in December 31 book balance
1,500

The proper amount to be shown as Cash on AI's balance sheet at December 31, 2015, is

A. $11,620

B. $9,630

C. $11,250

D. $11,870

C. $11,250

500

Assume Wilton prepares an aging schedule that estimates total uncollectible accounts at $30,500. Prepare the entry to record bad debt expense.

A. Dr. Bad Debt Expense: 30,500

Cr. Allowance Doubtful Accounts: 30,500

B. Dr. Bad Debt Expense: 30,500

Cr. Allowance for Uncollectible Accounts: 30,500

C. Dr. Bad Debt Expense: 26,800

Cr. Allowance Doubtful Accounts: 26,800

D. Dr. Bad Debt Expense: 26,800

Cr. Allowance for Uncollectible Accounts: 26,800

C. Dr. Bad Debt Expense: 26,800

Cr. Allowance Doubtful Accounts: 26,800

(Allowance Doubtful Accounts = 30,500 – 3,700 = 26,8000)

500

ABC Inc. had net sales in 2018 of $1,500,700. At December 31, 2018, before adjusting entries, the balances in selected accounts were: Accounts Receivable $232,500 debit, and Allowance for Doubtful Accounts $3,700 credit.

Assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expense.

A. Dr. Bad Debt Expense: 23,250

Cr. Allowance Doubtful Accounts: 23,250

B. Dr. Bad Debt Expense: 19,550

Cr. Allowance Doubtful Accounts: 19,550

C. Dr. Account Receivable: 23,250

Cr. Bad Debt Expense: 23,250

D. Dr. Account Receivable: 19,550

Cr. Bad Debt Expense: 19,550

B. Dr. Bad Debt Expense: 19,550

Cr. Allowance Doubtful Accounts: 19,550

(Allowance Doubtful Accounts = 232,500 x 10% - 3,700 = 19,550)

500

Checking account balance at bank $46,280; money market balance at mutual fund (has checking privileges) $50,220; NSF check received from customer $828. What is the cash balance?

A. $47,108

B. $46,280

C. $96,500

D. $97,328

C. $96,500

(46,280 + 50,220)

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