Chapter 7 Final Exam Study Flashcards Preview

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Flashcards in Chapter 7 Final Exam Study Deck (15):
1

Which of the following might be classified as a cash equivalent?
-Cash in a checking account.
-30-day treasury bill.
-Money orders waiting to be deposited.
-120-day treasury bill.

30-day treasury bill.

2

An internal control system is designed to do all but which of the following?
-Promote operational efficiency.
-Safeguard assets.
-Encourage adherence to company policies.
-Assure the promotion of the most qualified employees.

Assure the promotion of the most qualified employees.

3

Which of the following is true about cash reporting under IFRS?
-Cash accounts are typically viewed as investments, with overdrafts treated as unrealized losses.
-Overdrafts in one cash account can typically be offset against positive balance in other cash accounts.
-Overdrafts are typically treated as current liabilities, regardless of the existence of other cash accounts.
-Cash accounts are typically viewed as immaterial.

Overdrafts in one cash account can typically be offset against positive balance in other cash accounts.

4

A company uses the gross method to account for cash discounts offered to its customers. If payment is made before the discount period expires, which of the following is correct?
-Sales discounts is debited for the amount of discounts taken by customers.
-Sales discounts is credited for the amount of discounts taken by customers.
-Interest expense is debited for the amount of discounts taken by customers.
-Accounts receivable is credited for the amount of discounts taken by customers.

Sales discounts is debited for the amount of discounts taken by customers.

5

Allister Company does not use the allowance method to account for bad debts and instead any bad debts that do arise are written off as bad debt expense. What problem might this create if bad debts are material?

Receivables likely will be overstated.

6

Jasper Company uses the allowance method to account for bad debts. During 2018, the company recorded bad debt expense of $9,000 and wrote off as uncollectible accounts receivable totaling $5,000. These transactions caused a decrease in working capital (current assets minus current liabilities) of:

$9,000

7

Enchill Company accrues bad debt expense during the year at an amount equal to 3% of credit sales. At the end of the year, a journal entry adjusts the allowance for uncollectible accounts to a desired amount based on an aging of accounts receivable. At the beginning of 2018, the allowance account had a credit balance of $18,000. During 2018, credit sales totaled $480,000 and receivables of $14,000 were written off. The year-end aging indicated that a $21,000 allowance for uncollectible accounts was required. Enchill's bad debt expense for 2018 would be:

$17,000

8

Harmon Sporting Goods received a $60,000, 6-month, 10% note from a customer. Four months after receiving the note, it was discounted at a local bank at a 12% discount rate. The cash proceeds received by Harmon were:

$61,740

9

At the end of June, the Marquess Company factored $200,000 in accounts receivable with Homemark Finance. The transfer is made without recourse. Homemark charges a fee of 3% of receivables factored. During July, $150,000 of the factored receivables are collected. What amount of loss on sale of receivables would Marquess record in June?

$6,000

10

If the transfer were made with recourse but is still accounted for as a sale, what amount of loss on sale of receivables would the company record in June assuming the estimated recourse liability is $2,000?

$8,000

11

Which of the following is true regarding accounting for transfers of receivables under IFRS?
-Transfers of receivables can never be treated as a sale of receivables
-Transfers of receivables can never be treated as a secured borrowing
-Whether the risks and rewards of ownership have been transferred is sometimes the key factor for determining how to account for a transfer of receivables.
-none of the above are true.

Whether the risks and rewards of ownership have been transferred is sometimes the key factor for determining how to account for a transfer of receivables.

12

The replenishment of a petty cash fund might include which of the following?
-A debit to cash.
-A debit to petty cash.
-A debit to office supplies expense.
-A credit to petty cash.

A debit to office supplies expense.

13

In a bank reconciliation, deposits outstanding are:

Added to the bank balance.

14

In a bank reconciliation, NSF checks are:

Subtracted from the book balance.

15

Which of the following is NOT true about accounting for a troubled debt restructuring?
-If a receivable becomes impaired, it is remeasured at the discounted present value of currently expected cash flows.
-If a receivable is remeasured, the discount rate is based on the loan’s original effective rate.
-If a receivable is continued, but with modified terms, no loss is typically recorded.
-Sometimes receivables are settled outright at the time of a restructuring.

If a receivable is continued, but with modified terms, no loss is typically recorded.