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| 1 | |
The term financial assets refers to which of the following? |
| | A) | Assets easily and directly convertible into known amounts of cash |
| | B) | Cash and receivables, only |
| | C) | Cash, receivables, and investments, only |
| | D) | Marketable securities, only |
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| 2 | |
In the balance sheet, financial assets are shown at which value? |
| | A) | Historical cost |
| | B) | Current value |
| | C) | Cash equivalent |
| | D) | None of the above |
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| 3 | |
Which of the following is nota cash equivalent? |
| | A) | U.S. Treasury bills |
| | B) | High grade commercial paper |
| | C) | 60-day certificate of deposit (CD) |
| | D) | Investment in General Motors stock |
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| 4 | |
How is interest earned on cash equivalents shown in the statement of cash flows? |
| | A) | As an operating activity |
| | B) | As an investing activity |
| | C) | As a financing activity |
| | D) | As a noncash investing and financing activity |
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| 5 | |
Sometimes the condition of granting a loan requires the borrower to maintain a minimum average balance on deposit in a non-interest-bearing checking account. Which term is used when referring to this minimum average balance? |
| | A) | Lines of credit |
| | B) | Deposit in transit |
| | C) | Compensating balance |
| | D) | Cash equivalent |
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| 6 | |
The unused portion of a line of creditis considered to be which of the following? |
| | A) | An asset. |
| | B) | A liability. |
| | C) | An increase in owners' equity. |
| | D) | None of the above. |
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| 7 | |
Which of the following would be considered a major step in achieving internal control over cash transactions? |
| | A) | Separate the function of handling cash from the maintenance of accounting records. |
| | B) | Require that all cash receipts be deposited daily. |
| | C) | Make all payments by check (with the exception of the Petty Cash fund). |
| | D) | All of the above. |
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| 8 | |
A control listing is a list of: |
| | A) | all daily cash receipts and disbursements. |
| | B) | cash receipts at the time and place money is received. |
| | C) | the vendor accounts in a subsidiary ledger to the Accounts Payable control account. |
| | D) | petty cash disbursements. |
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| 9 | |
Companies purchase fidelity bondsfor reimbursement of losses occurring from which of the following? |
| | A) | Employee fraud or embezzlement. |
| | B) | Inventory shrinkage. |
| | C) | Customer dissatisfaction with products. |
| | D) | NSF checks. |
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| 10 | |
For which of the following does a bank credit the depositor's account? |
| | A) | Service charges |
| | B) | NSF checks |
| | C) | Interest earned on checking account |
| | D) | Checks |
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| 11 | |
The proper treatment of outstanding checks is to report them in the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 12 | |
The proper treatment of a deposit recorded by the business but not yet recorded by the bank, is to report the deposit in the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 13 | |
The proper treatment of bank service charges is to report them in the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 14 | |
The proper treatment of a note receivable collected by the bank for the depositor is to report it in the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 15 | |
The proper treatment on a bank reconciliation of an NSF check returned with the bank statement is to report it on the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 16 | |
The bookkeeper recorded a bank deposit at $450, but the bank recorded the deposit at its correct amount of $540. The proper treatment of this issue is to report it in the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 17 | |
A company purchased store supplies with payment by check. The bookkeeper recorded the payment as $1,340.56. The bank recorded the check at its correct amount of $3,140.56. Which of the following will occur, if no adjusting entries are made and the error is not detected through the bank reconciliation? |
| | A) | The trial balance will not balance |
| | B) | Accounts payable will be understated |
| | C) | The book Cash account will be understated |
| | D) | The checking account might become overdrawn |
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| 18 | |
When the bank acts as a collection agency of a depositor's notes receivable, the collection of a note receivable will be shown in the bank statement as which of the following? |
| | A) | Debit memorandum |
| | B) | Service charge |
| | C) | Credit memorandum |
| | D) | A NSF notation |
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| 19 | |
The bookkeeper recorded a check at $140.56 for store supplies. The bank recorded the check at an incorrect amount of $410.56. This error will be reported in the bank reconciliation as which of the following? |
| | A) | An addition to the balance per bank statement |
| | B) | A deduction from the balance per bank statement |
| | C) | An addition to the balance per depositor's records |
| | D) | A deduction from the balance per depositor's records |
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| 20 | |
Which of the following would require a credit to the Petty Cash account? |
| | A) | The petty cash fund is short by $3.50 |
| | B) | The petty cash fund is over by $4.50 |
| | C) | The Petty Cash account is being increased |
| | D) | The Petty Cash account is being decreased |
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| 21 | |
If the petty cash fund is not reimbursed at the end of the accounting period, which of the following will occur? |
| | A) | Net income will be understated or net loss will be overstated |
| | B) | Assets will be understated in the balance sheet |
| | C) | The cash account will be understated |
| | D) | The balance sheet and the income statement will not be correct |
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| 22 | |
Recording the purchase 120 shares of June-Girl stock for $53.00 a share, plus a brokerage commission of $120, on October 1 will require a journal entry which will include one of the following. |
| | A) | A debit to Marketable Securities for $6,360 |
| | B) | A debit to Broker Commission Expense for $120 |
| | C) | A credit to Cash for $6,480 |
| | D) | Both (A) and (B). |
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| 23 | |
On December 31, the company received a cash dividend of $.50 per share on 1,000 shares from one of its marketable securities. The December 31 journal entry will include one of the following. |
| | A) | A debit to Marketable Securities for $500 |
| | B) | A credit to Dividend Revenue for $500 |
| | C) | A credit to Interest Revenue for $500 |
| | D) | A credit to Marketable Securities for $500 |
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| 24 | |
On December 31, the company sold one of its marketable securities for $65,000. The marketable securities were recorded at a cost of $48,500. The brokerage commission for handling the sale was 3% of the sales price. The December 31 journal entry to record the sale of the marketable security will include which of the following? |
| | A) | A credit to Gain on Sale of Investment for $16,500 |
| | B) | A debit to Cash for $66,950 |
| | C) | A credit to Marketable Securities for $46,550 |
| | D) | A credit to Gain on Sale of Investments for $14,550 |
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| 25 | |
The valuation principle that provides for the adjustment of short-term investments to appear in the balance sheet at their current market value is called which of the following? |
| | A) | Recognizing holding gains and losses |
| | B) | Mark-to-market |
| | C) | The cost principle |
| | D) | The materiality concept |
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| 26 | |
A marketable security was purchased for $14,500 on December 10. On December 31, the last day of the accounting period, the market value of the security was $15,000. How is the gain in market value reported? |
| | A) | As an Unrealized Holding Gain in the stockholders' equity of the balance sheet |
| | B) | As income in the income statement |
| | C) | As a cash flow from investing activities |
| | D) | It is ignored in all of the financial statements |
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| 27 | |
A marketable security was purchased for $14,500 on December 10. On December 31, the last day of the accounting period, the market value of the security was $13,900. How is the loss in market value reported? |
| | A) | As income in the income statement |
| | B) | As a cash flow from investing activities |
| | C) | It is ignored in all of the financial statements |
| | D) | Reduces the reported cost of the security in the balance sheet |
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| 28 | |
The balances of the Unrealized Holding Gain on Investments and Unrealized Holding Loss on Investments accounts: |
| | A) | Are subject to income tax. |
| | B) | Represent future income tax effects. |
| | C) | Are reported as revenue and expense, respectively. |
| | D) | Are elements of liabilities. |
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| 29 | |
The Allowance for Doubtful Accounts is which of the following? |
| | A) | A liability account |
| | B) | A contra-asset account |
| | C) | A valuation account |
| | D) | Both (B) and (C) |
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| 30 | |
When a firm writes off a bad debt under the allowance method of accounting for bad debts, which of the following will occur? |
| | A) | The net realizable value of accounts receivable decreases |
| | B) | Total net current assets will decrease |
| | C) | The cash account will decrease |
| | D) | The net realizable value of accounts receivable will not change |
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| 31 | |
When a firm collects (recovers) part of an account receivable that was previously written off under the allowance method of accounting for bad debts, which of the following will occur? |
| | A) | The net realizable value of accounts receivable will increase |
| | B) | The cash account will decrease by the amount of the recovery |
| | C) | The allowance account will decrease by the amount collected |
| | D) | The net realizable value of accounts receivable will decrease |
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| 32 | |
The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustment, of $450. The uncollectible accounts are estimated at 3% of net credit sales of $650,000. After the appropriate adjusting entry to recognize the uncollectible account expense, the Allowance for Doubtful Accounts account should have a credit balance of which amount? |
| | A) | $19,950 |
| | B) | $19,500 |
| | C) | $19,050 |
| | D) | $20,400 |
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| 33 | |
The Allowance for Doubtful Accounts account has a year-end debit balance, prior to adjustments, of $500. Estimated uncollectible accounts, based on an aging of the accounts receivable, are $6,200. After the appropriate adjusting entry to recognize the uncollectible accounts expense, the Allowance for Doubtful Accounts account should have a credit balance of which amount? |
| | A) | $6,700 |
| | B) | $5,700 |
| | C) | $6,200 |
| | D) | $6,100 |
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| 34 | |
The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustments, of $600. Estimated uncollectible accounts, based on an aging of the accounts receivable, are $6,200. The appropriate adjusting entry to recognize the uncollectible accounts expense should include a credit to the Allowance for Doubtful Accounts account for which amount? |
| | A) | $6,800 |
| | B) | $5,600 |
| | C) | $6,200 |
| | D) | $6,000 |
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| 35 | |
Which accounting principle or concept permits the direct write-off method of accounting for uncollectible accounts? |
| | A) | Full-disclosure principle |
| | B) | Business entity concept |
| | C) | Matching principle |
| | D) | Materiality principle |
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| 36 | |
Which accounting principle, concept, or assumption is generally followed when determining an appropriate amount to establish for the Allowance for Doubtful Accounts account? |
| | A) | Materiality principle |
| | B) | Conservatism concept |
| | C) | Realization principle |
| | D) | Business entity concept |
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| 37 | |
Which of the following is the FASB position with regards to the concentration of credit risk? |
| | A) | Companies should disclose all significant concentrations of credit risk |
| | B) | Companies should record an estimated amount of the concentration of credit risk |
| | C) | Companies should calculate but not report the concentration of credit risk |
| | D) | Companies have the option of reporting or not reporting the concentration of credit risk. |
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| 38 | |
Employees who receive cash and checks in the mail from credit customers should do which of the following? |
| | A) | Immediately credit the customer's account for the appropriate amount |
| | B) | Notify the customer of the receipt of payment |
| | C) | Prepare a list of customer receipts and pass it on the custodian of the accounts receivable subsidiary ledger |
| | D) | Determine the bad debt expense for the period |
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| 39 | |
A company owned credit union is being dissolved. The credit union sold its notes receivable to a finance company for 95% of the face value of the notes. What is this activity called? |
| | A) | Factoring |
| | B) | Securing collateral |
| | C) | Using collateral |
| | D) | A direct write off |
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| 40 | |
On December 10, a customer made a purchase of $486.00 (ignore sales taxes), and charged it on her American Express card. American Express charges the retailer a 4% discount. When payment is received from American Express on December 29, the journal entry to record the receipt of cash will include which of the following? |
| | A) | A debit to Cash for $468.00 |
| | B) | A debit to Credit Card Discount Expense for $18.00 |
| | C) | A credit to Accounts Receivable: American Express for $486.00 |
| | D) | Both (A) and (C) |
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| 41 | |
On December 29, a customer made a purchase of $1,256.33 (ignore sales taxes), and charged the purchase to her MasterCard. At the end of the month, or the nearest bank statement date, the retailer's bank will charge 4.5% on all bank credit card deposits. At the time of the sale, the journal entry to record the bank credit card sale will include which of the following? |
| | A) | A debit to Cash for $1,206.08 |
| | B) | A credit to Sales for $1,256.33 |
| | C) | A debit to Credit Card Discount Expense for $50.22 |
| | D) | A credit to Credit Card Discount Expenses for $50.22 |
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| 42 | |
Consider the following note:
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072996501/388061/Mc_Chapter7.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (37.0K)</a>]]>
Who is the payee of the note? |
| | A) | Ramblewood Manufacturing, Incorporated |
| | B) | Albert P. Higgins |
| | C) | Fist State Bank of California |
| | D) | Treasurer |
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| 43 | |
Calculate the interest on a $4,000, 6% note receivable dated April 10 with a maturity date of July 9. |
| | A) | $24 |
| | B) | $60 |
| | C) | $240 |
| | D) | $18 |
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| 44 | |
What is the maturity dateof a $6,000, 8%, 90-day note signed and issued on June 3? |
| | A) | August 30. |
| | B) | September 2. |
| | C) | September 1. |
| | D) | August 28. |
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| 45 | |
A $5,000, 6%, 60-day note was received on June 15 from a customer in exchange for the customers' outstanding account receivable. On the due date, the maker of the notedefaulted on the note. There was no adjusting entry for accrued interest revenue on June 30 or July 31. The required journal entry to record the default will include which of the following? |
| | A) | A debit to Accounts Receivable for $5,050.00 |
| | B) | A credit to Notes Receivable for $5,050.00 |
| | C) | A credit to Interest Receivable for $50.00 |
| | D) | All of the above |
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| 46 | |
A $24,000, 60-day, 8% note was issued on December 10. The December 31 adjusting entry to accrue the interest earned on the note will include which of the following? |
| | A) | A debit to Cash for $112 |
| | B) | A credit to Interest Revenue for $112 |
| | C) | A credit to Interest Revenue for $320 |
| | D) | A credit to Interest Revenue for $208 |
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| 47 | |
Consider the following information related to a note receivable:
| Face value of the note | $6,000 | | Interest revenue accrued to October 31 | $129 | | Interest rate | 9% | | Term of note | 90 days | | Date of note | August 6 |
The note is collected on November 4, its due date. The journal entry to record the collection of the note will include which of the following? |
| | A) | A debit to Cash for $6,000 |
| | B) | A credit to Interest Revenue for $135 |
| | C) | A debit to Cash for $6,129 |
| | D) | A credit to Interest Revenue for $6 |
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| 48 | |
On October 21, you received notice that one of your customers had defaulted on a 60-day, 8%, $3,400 note receivable dated 60 days earlier. The journal entry to record the default will include which of the following? |
| | A) | A debit to Accounts Receivable for $3,400 |
| | B) | A credit to Notes Receivable for $3,445.33 ($3,400.00 + $45.33) |
| | C) | A credit to Interest Revenue for $45.33 |
| | D) | A debit to Accounts Receivable for $3,354.46 |
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| 49 | |
Gross Sales total $505,000 and Sales Returns and Allowances total $15,000. Average accounts receivable for the period are $42,000. Calculate the accounts receivable turnover rate. |
| | A) | 11.67 |
| | B) | 12.02 |
| | C) | 12.38 |
| | D) | 12.55 |
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| 50 | |
Net credit sales total $355,000. The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance is currently $21,000. Assuming a 365-day year, what is the average number of days required to collect the accounts receivable? |
| | A) | 18.51 |
| | B) | 23.67 |
| | C) | 19.72 |
| | D) | 17.55 |
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| 51 | |
If the average days outstanding in accounts receivable are 21.5 days, what is the accounts receivable turnover rate (to the nearest tenth)? |
| | A) | 16.7 |
| | B) | 15.4 |
| | C) | 18.0 |
| | D) | 17.0 |
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| 52 | |
Consider the following table:
| Transaction | Income Statement | | A | Cash sales | Included in net sales | | B | Collection of accounts receivable | Included in net sales | | C | Sales on accounts receivable | Included in net sales | | D | Direct write-off of an account receivable | Included as an operating expense |
Which line in the table (A, B, C, or D) is incorrect? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 53 | |
Consider the following table:
| Transaction | Income Statement | | A | Write-off of an account receivable through an allowance account | No effect | | B | Investments in marketable securities | No effect | | C | Investment sold at a loss | No effect | | D | Unrealized Holding Gain on Investments | No effect |
Which line in the table (A, B, C, or D) is incorrect? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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