Question 1
Question 1 options:
1)
A debit to Cash for $2,000
2)
A debit to Accounts Receivable for $960
3)
(2 points)
Grand Duke Company collected payment from American Federal Credit Card Company (nonbank) for sales of $2,000, less a 3% credit card collection fee. The proper journal entry to record this transaction would include:
A credit to Service Charge for $40
4)
A credit to Sales for $2,000
5)
None of these
Question 2
(2 points)
Which statement about internal control for cash disbursements is false?
Question 2 options:
1)
All significant disbursements should be made by check.
2)
Cash in the ledger should be reconciled to cash reported by the bank.
3)
The individual responsible for signing checks should not also prepare the checks.
4)
Petty cash receipts should be kept for a period of time.
5)
All of the above
Question 3
(2 points)
Under the cash basis of accounting, revenues are recognized in the period of cash receipt, while expenses are recognized in the period incurred.
Question 3 options:
1)
True
2)
False
[KB1]This wording doesn't make sense, but I'm not sure what it's supposed to be.
Question 4
(2 points)
Generally, the allowance method is considered preferable to the direct write-off method because the allowance method:
Question 4 options:
1)
Recognizes expense when a specific account is determined to be uncollectible
2)
Reflects the actual facts as they have taken place
3)
Recognizes the expense of a bad debt in the same period as the sale
4)
Relies on estimates, which are always accurate and stable among years
Question 5
(2 points)
Jaq is evaluating a proposal to begin selling goods on credit to his friends. Which of the following would not be a cause for concern?
Question 5 options:
1)
The need to evaluate credit worthiness
2)
Forgoing use of funds during periods of credit extension to customers
3)
The reluctance of customers to take advantage of the service
4)
The risk of not collecting
5)
None of these
Question 6
(2 points)
After preparing a bank reconciliation for Ariel and Company, certain adjustments to the Cash account in the Ariel's records may be necessary. The source for this journal entry could be the reconciliation of:
Question 6 options:
1)
The ending balance per company records to the adjusted cash balance
2)
The ending balance per bank statement to the adjusted cash balance
3)
Both A and B
4)
Neither A or B
Question 7
(2 points)
When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would outstanding checks be handled?
Question 7 options:
1)
Added to the balance per the bank statement
2)
Depends on the nature of the outstanding checks
3)
Outstanding checks would be ignored
4)
None of these
Question 8
(2 points)
The Direct write-off approach records a loss from an uncollectable Accounts Receivable when it is determined to be uncollectable.
Question 8 options:
1) True2) False
Question 9
(2 points)
When reconciling the ending cash balance per the company records to the correct adjusted cash balance, how would outstanding checks be handled?
Question 9 options:
1)
Added to the balance per the company records
2)
Subtracted from the balance per the company records
3)
Either A or B, depending on the nature of the outstanding checks
4)
None of these
Question 10
(2 points)
Cinderella uses aging to estimate uncollectibles. Accounts of $150,000 are less than 30 days old (96% collectible); $80,000 are 30 to 60 days old (85% collectible); $35,000 are 61-120 days old (50% collectible); and the remaining $10,000 is 10% collectible.
Question 10 options:
1)
The Allowance for Uncollectibles should have a balance of $6,000.
2)
The Allowance for Uncollectibles should have a balance of $17,500.
3)
The Allowance for Uncollectibles should have a balance of $44,500.
4)
The Allowance for Uncollectibles should have a balance of $29,500.
5)
None of these
Question 11
(2 points)
In preparing a bank reconciliation, outstanding checks should be added back to the ending balance per the bank statement.
Question 11 options:
1) True2) False
Question 12
(2 points)
Prince Charming had annual sales of $2,00,000, and the January 1 Allowance for Uncollectibles had a credit balance of $50,000. $18,600 of accounts were written off during the year. Using the percentage of sales technique and a 5% rate, uncollectible accounts expense is:
Question 12 options:
1)
$100,000
2)
$18,600
3)
$50,000
4)
$118,600
5)
None of these
Question 13
(2 points)
If Drizella should collect an account in 2020 that was written off in 2019, Drizella would debit Cash for the amount received and credit:
Question 13 options:
1)
An income account entitled Adjustment of Prior Period Earnings
2)
The Accounts Receivable account
3)
The Bad Debts Expense account
4)
None of these
Question 14
(2 points)
Scuttle Company uses an allowance method for recording uncollectibles. Scuttle determined that $8,000 due from Prince Eric will not be collected. The entry Scuttle should record to write off the Prince Eric account is:
Question 14 options:
1)
Uncollectible Accts Expense 8,000
Accounts Receivable 8,000
2)
Sales 8,000
Accounts Receivable 8,000
3)
Uncollectible Accts Expense 8,000
Allow. for Uncollectible Accts 8,000
4)
Allow. for Uncollectible Accts 8,000
Accounts Receivable 8,000
Question 15
(2 points)
Gus uses an allowance method for recording bad debts. Gus determined that $7,500 of accounts receivable from Jaq Corporation are uncollectible. The entry Gus should make to write off the Jaq account would include:
Question 15 options:
1)
A credit to Cash for $7,500
2)
A credit to Allowance for Uncollectible Accounts for $7,500
3)
A credit to Accounts Receivable for $7,500
4)
A credit to Uncollectible Accounts Expense for $7,500
5)
None of these
Question 16
(2 points)
The amount of the difference between the balance per bank statement and balance per books requires a journal entry.
Question 16 options:
1) True2) False
Question 17
(2 points)
Sebastian's financial statements revealed uncollectible accounts expense of $10,000, accounts receivable of $160,000, and allowance for uncollectible accounts of $69,000. The net realizable value of Sabastian's accounts receivable is:
Question 17 options:
1)
$91,000
2)
$150,000
3)
$89,000
4)
$160,000
Question 18
(2 points)
Prince Eric Company uses an allowance method to account for bad debts. Prince Eric estimates that 9% of the outstanding accounts receivable will be uncollectible. At the end of the year, Prince Eric has outstanding accounts receivable of $500,000 and a debit balance in the Allowance for Uncollectible Accounts of $15,000. Prince Eric should record uncollectible accounts expense of:
Question 18 options:
1)
$60,000
2)
$15,000
3)
$45,000
4)
$55,500
Question 19
(2 points)
Fairy Godmother had an aging revealed
[KB1] a target year-end allowance of $120,000. The balance in Allowance for Uncollectibles, before adjustment, contained a $10,000 debit balance.
Question 19 options:
1)
The Uncollectibles Accounts Expense should be increased by $60,000.
2)
The Uncollectibles Accounts Expense should be increased by $70,000.
3)
The Uncollectibles Accounts Expense should be increased by $110,000.
4)
The Uncollectibles Accounts Expense should be increased by $150,000.
5)
None of these
Question 20
(2 points)
Ursula Company uses the direct write-off method of recording uncollectible accounts receivable. Recently, a customer informed Ursula that he would be unable to pay $800 owed to Ursula. Ursula's proper journal entry to reflect this event would be:
Question 20 options:
1)
Uncollectible Accts Expense 800
Allow. for Uncollectible Accts 800
2)
Allow. for Uncollectible Accts 800
Accounts Receivable 800
3)
Sales 800
Accounts Receivable 800
4)
None of the above