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| 1 | |
For many companies, revenue is recognized when title and risk of ownership of purchased goods passes to the buyer. |
| | A) | True |
| | B) | False |
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| 2 | |
The term FOB stands for "freight of buyer." |
| | A) | True |
| | B) | False |
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| 3 | |
A credit card discount and a sales discount are essentially the same thing. |
| | A) | True |
| | B) | False |
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| 4 | |
The credit terms of 2/10, n/60 provide a credit period of 10 days. |
| | A) | True |
| | B) | False |
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| 5 | |
The credit terms of 1/15, n/60 provide a discount period of 15 days. |
| | A) | True |
| | B) | False |
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| 6 | |
The terms sales discount, cash discount, and trade discount are interchangeable (or synonymous) terms. |
| | A) | True |
| | B) | False |
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| 7 | |
If a business offers a customer credit terms of 2/10, n/60, on a $100 sale, the annual rate of interest is equivalent to 13.55%. |
| | A) | True |
| | B) | False |
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| 8 | |
Gross profit (or gross margin) is equal to net sales minus the cost of goods sold (cost of sales). |
| | A) | True |
| | B) | False |
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| 9 | |
Nontrade receivables arise from transactions other than the normal course of selling merchandise and services. |
| | A) | True |
| | B) | False |
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| 10 | |
In order to determine the maturity value of a note receivable, you need to know the principal, due date, and rate of interest. |
| | A) | True |
| | B) | False |
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| 11 | |
Having bad debts recognized in the same time period as the sales that resulted in bad debts is a requirement of the revenue principal. |
| | A) | True |
| | B) | False |
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| 12 | |
The recognition of bad debts under the allowance method requires an adjusting entry at the end of the accounting period in which the account Allowance for Doubtful Accounts is credited. |
| | A) | True |
| | B) | False |
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| 13 | |
Under the allowance method of recognizing bad debts, during the year when an account receivable is judged to be uncollectible and is written off, the net book value of accounts receivable decreases. |
| | A) | True |
| | B) | False |
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| 14 | |
The Allowance for Doubtful Accounts account is an operating expense account. |
| | A) | True |
| | B) | False |
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| 15 | |
When bad debts are estimated on the basis of a percentage of credit sales, the Allowance for Doubtful Accounts balance must be adjusted so that the adjusted balance of the account will be exactly equal to the percent of sales to be written off. |
| | A) | True |
| | B) | False |
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| 16 | |
The aging of accounts receivable method of determining the bad debt expense requires that the adjusted Allowance for Doubtful Accounts balance be exactly equal to the estimated uncollectible accounts based on the analysis of an aging schedule. |
| | A) | True |
| | B) | False |
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| 17 | |
The accounts receivable turnover is computed by dividing net sales by the average net trade accounts receivable. |
| | A) | True |
| | B) | False |
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| 18 | |
Granting later payment deadlines, such as changing credit terms from 2/10, n/30 to 2/10, n/60, will most likely increase the accounts receivable turnover. |
| | A) | True |
| | B) | False |
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| 19 | |
The number of days that are required to make a credit sale and collect the receivable, on an average, can be determined by dividing the accounts receivable turnover into 365. |
| | A) | True |
| | B) | False |
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| 20 | |
When using the indirect method of reporting cash flows, an increase in accounts receivable (trade receivables) is added to the net income figure in the determination of cash flow from operating activities. |
| | A) | True |
| | B) | False |
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| 21 | |
Cash equivalents are short-term investments with original maturities of six months or less that are readily convertible to cash and whose value is unlikely to change as a result of changes in interest rates. |
| | A) | True |
| | B) | False |
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| 22 | |
The procedures for protecting cash from fraud and theft should be a basic element of internal control. |
| | A) | True |
| | B) | False |
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| 23 | |
For effective control of cash, the custody of cash should be separate from the record-keeping of cash. |
| | A) | True |
| | B) | False |
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| 24 | |
Bank reconciliations are NOT one of the major components of internal control. |
| | A) | True |
| | B) | False |
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| 25 | |
It is not possible for the ending balance of the Cash account to be greater than the balance of cash shown on the bank statement. |
| | A) | True |
| | B) | False |
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| 26 | |
If, during the preparation of the bank reconciliation, it is discovered that a check for an $87.00 utility bill was recorded in the journal as $78.00, the error will require a correcting entry to the Cash account and Utilities Expense. |
| | A) | True |
| | B) | False |
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| 27 | |
If, during the preparation of the bank reconciliation, it is discovered that a deposit of $100 was recorded by the bank as a deposit of $10, the error will require a correcting entry to Cash and to Sales. |
| | A) | True |
| | B) | False |
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