FINANCIAL ACCOUNTING

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When a note is received from a customer, it is recorded by debiting Notes Receivable and crediting Accounts Payable

False

The balance of the allowance for doubtful accounts is added to accounts receivable on the balance sheet

False

The cash account in the depositor's ledger is a(n)

asset with a debit balance

The credit balance in Cash short and over at the end of an accounting period is reported as

income on the income statement

The debit balance in Cash Short and over at the end of an accounting period is reported as

an expense on the income statement

Cash change funds, once established, require no additional charges or credits to cash

unless the amount of the fund is to be increased or decreased

On the bank's accounting records, customers' accounts are normally shown as

a liability

Credit memorandums from the bank

show the bank has collected a note receivable for the customer

A check drawn by a depositor for $195 in payment of a liability was recorded in the journal as $915. The item would be included on the bank reconciliation as a(n)

addition to the balance per the depositor's records

Journal entries based on the reconciliation are required in the depositor's accounts for:

book errors

Accompanying the bank statement was a debit memorandum for bank service charges. What entry is required in the depositor's accounts?

debit Miscellaneous Administrative Expense; credit Cash

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the customer. What entry is required in the depositor's accounts?

debit Cash; credit Notes Receivable

What entry is required in the depositor's accounts to record outstanding checks?

None

The type of account and normal balance of Petty Cash is a(n)

asset, debit

The debit recorded in the journal to establish the petty cash fund is to :

Petty Cash

Merchandise Inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error?

net income is ovestated

The inventory method that considers the inventory to be composed of the units of merchandise acquired earliest is called:

first-in, first-out

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is:

lifo

If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is:

$60

Internal control over receivables is achieved when the employee who handles the accounting for receivables:

is not involved with the operating aspects of approving credit

The internal control objective most relevant to receivables is:

safeguard assets

The two methods of accounting for noncollectable receivables are the allowance method and the :

direct write-off method

What is the type of account and normal balance of Allowance for Doubtful Accounts?

Contra asset, credit

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

Bad Debts expense

The journal entry to record a note received from a customer to apply on account is:

debit Notes Receivable; credit Accounts Receivable

Which of the following is included in the cost of constructing a building?

interest on money borrowed to finance construction

Which of the following is included in the cost of land?

brokerage commission

A fixed asset's estimated value at the time it is to be retired from service is called:

residual value

Expenditures that add to the utility of fixed assets for more than one accounting period are:

capital expenditures

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry:

debit Accumulated Depreciation; credit Machinery

The accumulated depreciation account is:

reported on the balance sheet as a deduction from the cost of the mineral deposit

Which of the following is classified as an intangible asset on the balance sheet?

Goodwill

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