Chp 7 accounting

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Important elements of an internal control system for cash disbursements include each of the following except:

D. The same person that prepares the check should also record it in the proper journal

COSO defines internal control as a process, affected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in

A. Effectiveness and efficiency of operations

Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/11. What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

A. 9450

Cash equivalents do not include

B. High grade marketable equity securities

Cash may not include

C. Restricted cash

Compensating balances represent

A. Funds in a bank account that can't be spent

Cash that is restricted and not available for current operations is reported in the balance sheet as

B. Investments

Logistics Company had the following items listed in its trial balance at 12/31/11: Included in the checking account balance is $50,000 of restricted cash that Bank of the East requires as a compensating balance for the $300,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents?

A. 412000

Which of the following is true about reporting cash under IFRS?

D. Overdrafts typically are not shown as current liabilities on the balance sheet

Wilson IFRS

B. 55000

Wilson GAAp

C. 60000

Flores Mills Nov 10 entry

B. Option b

Flores Mills Nov 17 entry

B. Option b

Flores Mills Dec 5

D. Option d

Oswego Clay Pipe Company April 12

A. Option a

Oswego Clay Pipe Company April 23

C. Option c

Oswego Clay Pipe Company June 10

C. Option c

Cherokee Nov 10

A. Option a

Cherokee Nov 17

A. Option a

Cherokee Dec 10

B. Option b

Harvey's Wholesale Company April 12

C. Option c

Harvey's Wholesale Company April 23

D. Option d

Harvey's Wholesale Company June 10

B. Option b

Gerschwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the pain upon being offered a 15% price reduction. Gershwin would record this reduction by crediting accounts receivable and debiting

D. Sales allowances

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's would credit accounts receivable and debit:

C. Sales returns

Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should

B. Record an allowance for sales returns in the year of the sale

False Value Hardware began 2011 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2011, customers returned merchandise for credit of $28,000 to their accounts. What is the balance in the allowance for sales returns account at the end of 2011?

C. 43000

False Value's 2011 income statement would report net sales of:

D. 611000

Accounts receivable are normally reported at the

C. Expected amount to be received

The allowance for uncollectible accounts is:

B. Contra asset account

A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off?

C. Increase, No effect

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in

B. Allowance for uncollectible accounts

Which of the following does not change the balance in accounts receivable?

C. Bad debts expense adjusting entry

Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2011, Chez Fred's credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2011, if $180 in accounts receivable were written off during 2011 and if the allowance account had a balance of $750 on 12/31/11?

C. 31180

The following information relates to Halloran Co
s accounts receivable for 2011. What amount should Halloran report for accounts receivable, before allowances, at Dec 31, 2011?

B. 970000

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2010. During 2011, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off. Calistoga's accounts receivable at Dec 31, 2011 are

C. 465280

Calistoga's 2011 bad debt expense is

D. 1575

Calistoga's adjusted allowance for uncollectible accounts at Dec 31, 2011 is

B. 1505

The balance in accounts receivable at the beginning of 2011 was 300. During 2011, 1600 of credit sales were recorded. If the ending balance in accounts receivable was 250 and 100 in accounts receivable were written off during the year, the amount of cash collected from customers during 2011 was

C. 1550

In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable they had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000. What bad debt expense would Dinty report in its first year income statement?

C. 114000

What accounts receivable balance would Dinty report in its first year end balance sheet?

B 218000

In Dinty's adjusting entry for bad debts at year end, which of these would be included?

A. Debit to bad debt expense for 114000

For 2011, Raha's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable of $86,500 and $2,100, respectively, at December 31, 2010. During 2011, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off. Rahal's accounts receivable at Dec 31,2011 are

D. 80160

Jacobsen Co's accounts receivables (no IFRS or GAAP) During 2011, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2010, allowance for uncollectible accounts was $40,000. Under the aging method, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2011?

D. 49400

Rahal's 2011 bad debt expense is

D. None of the above is correct

Rahl's adjusted allowance for uncollectible accounts at Dec 31, 2011 is

C. 3800

When you use an aging schedule approach for estimating uncollectible accounts

A. Bad debts expense is measured indirectly, and the allowance for uncollectible accounts balance is measured directly.

Which of the following is recorded by a credit to Accounts receivable

D. Write off of bad debts

If a company uses the balance sheet approach to estimate bad debt expense, bad debt expense for a period can be determined by

D. Taking the difference between the unadjusted balance in the allowance account and the desired balance.

At January 1, 2011, Farley Co. had a credit balance of $520,000 in its allowance for uncollectible accounts. Based on past experience, 2 percent of Farley's credit sales have been uncollectible. During 2011, Farley wrote off $650,000 of accounts receivable. Credit sales for 2011 were $18,000,000. In its December 31, 2011 balance sheet, what amount should Farley report as allowance for uncollectible accounts?

A. 230000

. San Mateo Company had the following account balances at December 31, 2011 before recording bad debt expense for the year:What amount should San Mateo charge to bad debt expense at the end of 2011 under each method?

B. 58500, 62000

At December 31, 2010, Gill Co reported accounts receivable of $216,000 and an allowance for uncollectible accounts of $8,400. During 2011, accounts receivable increased by $22,000, and $7,800 of bad debts were written off. An analysis of Gill Co.'s December 31, 2011, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2011 would be:

A. 6540

At December 31, 2011, Amy Jo's Appliances had unadjusted account balances in accounts receivable of $311,000 and $970 in the allowance for uncollectible accounts, following 2011 write-offs of $6,450 in bad debts. An analysis of Amy Jo's December 31, 2011, accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for 2011 should be:

C. 5250

Nontrade receivables do not include

A. Sales to customers

Longterm notes receivable issued for noncash assets at an unrealistically low interest rate will be

A. Discounted at an imputed interest rate

Priscilla's Exotic Pets discounted a note receivable without recourse and the sales criteria were met. The discounting is recorded as

C. A sale

Drebin Security Systems sold merchandise to a customer in exchange for a 50000, 5year noninterest-bearing note when an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to

D. The present value of 50000 using a 10% interest rate

A note receivable Mild Max Cycles discounted with recourse was dishonored on its maturity date. Mild Max would debit:

B. A receivable

Baker Inc. acquired equipment from the manufacturer on 10/1/11 and gave a noninterest-bearing note in exchange. Baker is obligated to pay $918,000 on 4/1/12 to satisfy the obligation in full. If Baker accrued interest of $9,000 on the note in its 2011 year-end financial statements, what is its imputed annual interest rate?

B. 4%

Frasquita acquired equipment from the manufacturer on 6/30/11 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/12 to satisfy the obligation in full. If Frasquita accrued interest of $15,000 on the note in its 2011 year-end financial statements, at what amount would it record the equipment on its 6/30/11 balance sheet?

D. 525000

Frasquita acquired equipment from the manufacturer on 6/30/11 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/12 to satisfy the obligation in full. If Frasquita accrued interest of $15,000 on the note in its 2011 year-end financial statements, what would the manufacturer record in its 2011 income statement for this transaction?

C 15000 of interest revenue and 525000 of sales revenue

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made to them in 2011. The notes included Note A: Dated 5/31/11, principal of $120,000 and interest due 3/31/12.
Note B: Dated 7/1/11, principal of $200,000 and interest at 8% annually, due on 4/1/12.
Frankenstein had accrued interest receivable from these notes of $14,400 in its 12/31/11 balance sheet. What is the annual interest rate on Note A?

A. 9.14%

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made to them in 2011. The notes included:
Note A: Dated 5/31/11, principal of $120,000 and interest due 3/31/12.
Note B: Dated 7/1/11, principal of $200,000 and interest at 8% annually, due on 4/1/12.
Frankenstein had accrued interest receivable from these notes of $14,400 on its 12/31/11 balance sheet. What amount of interest revenue would Frankenstein earn on these notes during 2012?

D. None of the above is correct

Plunder Inc. accepted a six-month noninterest-bearing note for 2800 on Jan, 2011. The note was accepted as payment of a delinquent receivable of 2500. What is the correct entry to record the note?

B. Notes, accounts, discount

Plunder's cash collection on July 1, 2011 would be recorded as

A. discount, interest, cash, note

Which of the following is considered a sale of receivables?

C. Factoring receivables without recourse?

The transferor is considered to have surrendered control over its receivables if

D. All of the above must occur

Accounting for the pledging of accounts receivable as a collateral for a loan requires

C. Disclosure of the arrangement in notes to the financial statements

In deciding whether financing with receivables is a secured borrowing or a sale under US GAAP the critical element is the extent to which

C. The transferor of the receivable surrenders control over the assets transferred

In deciding whether financing with receivables is a secured borrowing or a sale under IFRS, the critical element is the extent to which

A. The transferee has received substantially all the risks and rewards of ownership

The purpose of assigning accounts receivable is to

D. Provide collateral for a loan

Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2011. The note, along with interest at 6%, is due on June 30, 2012. On September 30, 2011, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank

C. 39220

On April 1 of the current year, Troubled Company factored receivables with a carrying value of $85,000 for $60,000 in cash from Scrooge Lenders. The transfer was made without recourse. On April 1, Troubled would

D. Debit loss on sale of receivables for 25000

If a company adopts an accounts receivable factoring program and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal)?

B. Cash flow from operations may increase

Assume a company has been maintaining a receivables factoring program for the past five years, and has been experiencing the same level of sales, factoring and bad debts over that time period. Customers typically pay their receivables within 60 days. Which of the following is true with respect to the current period (all else equal)?

B. Cash flow from operations is stable

Which of the following is NOT true regarding accounting for transfers of receivables under IFRS?

C. Transfers of receivables can be treated as a sale if the transferee is a QSPE.

A company's investment in receivables is influenced by several variables, including

D. All of the above are correct

Huckabee's 2011 receivables turnover (rounded) is:

C. 5.26

Huckabee's 2011 average collective period (rounded) is:

A. 69 days

Alliance Software began 2011 with accounts receivable of $115,000. All sales are made on credit. Sales and cash collections from customers for the year were $780,000 and $700,000, respectively. Cost of goods sold for the year was $450,000. What was Alliance's receivables turnover ratio (rounded) for 2011?

B. 5.03

Cromartie establishing the petty cash fund includes

B. A debit to petty cash and credit to cash for 150

Cromartie replenishing the petty cash fund includes

C. A credit to cash and a debit to various expenses for 126.

Hazelton Manufacturing prepares a bank reconciliation at the end of every month. At the end of May, the general ledger checking account showed a balance of $1,360 and the bank statement showed a bank balance of $1,445. Outstanding checks totaled $350 and deposits in transit were $150. The bank statement listed service charges of $30 and NSF checks totaling $85. The corrected cash balance is:

C. 1245

Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the balance in the general ledger checking account was $2,750 and the bank balance on the bank statement was $2,980. Outstanding checks totaled $680 and deposits in transited were $400. The bank statement revealed that a check written for $120 was incorrectly recorded by Brockton as a $220 disbursement. The bank statement listed service charges and NSF check charges totaling $150. The corrected cash balance is:

D. 2700

Which of the following is true about accounting for a troubled debt restructuring?

C. If a receivable is continued, but with modified terms, a loss is typically recorded

Brewer Inc. is owed $200,000 by Carol Co. under a 10% note with two years remaining to maturity. Due to financial difficulties Carol Co. did not pay the prior year's interest. Brewer agrees to settle the receivable (and accrued interest) in exchange for a cash payment of $150,000. The journal entry that Brewer would make to record this transaction would include a loss on troubled debt restructuring of:

D. 70000

The O'Hara Group is owed $1,000,000 by Hilton Enterprises under an 8% note with three years remaining to maturity. The prior year of interest was unpaid. O'Hara agrees to restructure the note under terms that yield a present value of $880,000. The journal entry that O'Hara would make to record this transaction would include a loss on troubled debt restructuring of:

C. 200000

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