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Exam 7: Financial Assets

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Question 101

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In reconciling a bank statement,which of the following items could cause the cash per the bank statement to be greater than the balance of cash shown in the depositor's accounting records?

A) An outstanding check
B) A check returned to the depositor marked NSF
C) Check 457 written for $643 was recorded by the depositor as $463
D) A bank service charge

E) A) and B)
F) None of the above

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Question 102

Multiple Choice

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Which of the following items would cause cash per the bank statement to be smaller than the balance of cash shown in the accounting records?

A) Outstanding checks
B) Interest earned on the average balance of the checking account
C) Check no.824,in the amount of $620.30,is recorded by the bank as $602.30
D) Deposits in transit

E) B) and D)
F) B) and C)

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Question 103

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[The following information applies to the questions displayed below.] The Cash account in the ledger of Hensley,Inc.showed a balance of $3,100 at June 30.The bank statement,however,showed a balance of $3,900 at the same date.The only reconciling items consisted of a $700 deposit in transit,a bank service charge of $7,and a large number of outstanding checks. -What is the total amount of the outstanding checks at June 30?

The direct write-off method is more conservative than the allowance method for valuation of receivables.

[The following information applies to the questions displayed below.] At the end of January,the unadjusted trial balance of Windsor,Inc.included the following accounts: -Windsor uses the balance sheet approach in estimating uncollectible accounts expense,and aging the accounts receivable indicates the estimated uncollectible portion to be $7,400.What is the amount of uncollectible accounts expense recognized in Windsor's income statement for January?

The ________ department ensures that the goods shipped match those ordered by the customer.

If the account Cash Over and Short has a debit balance,it is reported in the balance sheet as a current asset.

Bank reconciliation-classification Indicate how the following items would be treated in a bank reconciliation.You may choose from the following answers: (A)Deducted from the balance per accounting records. (B)Added to balance per accounting records. (C)Deducted from balance per bank statement. (D)Added to balance per bank statement.

Enclosed with the bank statement received by Sydney Company at October 31 was an NSF check for $300.No entry has yet been made by the company to reflect the bank's action in charging back the NSF check.During preparation of the bank reconciliation,the NSF check should be:

[The following information applies to the questions displayed below.] At the end of March,the unadjusted trial balance of Tutor,Inc.included the following accounts: -Tutor uses the balance sheet approach in estimating uncollectible accounts expense,and aging the accounts receivable indicates the estimated uncollectible portion to be $7,400.The net realizable value of Tutor's accounts receivable in the March 31 balance sheet is:

A compensating balance is often required by a bank as a condition for granting a loan.

Which of the following is not a basic means of achieving internal control over cash receipts?

Assuming the maker of the note defaults on May 1,2018,Salem will record on this date:

At the beginning of the year,Robert Company's Allowance for Doubtful Accounts had a $3,200 credit balance.During January,a provision of 2% of sales was made for uncollectible accounts expense.During January,sales totaled $350,000,and $2,900 of accounts receivable were written off as worthless.No recoveries of accounts previously written off were made during the month.Robert's financial statements for January show:

A promissory note:

Reporting cash in the balance sheet (a. )The first asset shown in the balance sheet of many companies is labeled "cash and cash equivalents." Explain the term "cash equivalent" and give two examples.Why are cash and cash equivalents listed first in the balance sheet? (b. )The December bank statement for Kowal Publishing Co.reports a balance of $13,847.59 at December 31,2018.Kowal's accounting records,however,show a balance of $15,245.47 in the same bank account prior to preparation of the bank reconciliation. Which amount should be included in the amount of cash reported in Kowal's balance sheet at December 31,2018? Explain your answer.

The term "financial asset" is synonymous with the term "cash equivalent."

The Allowance for Doubtful Accounts represents:

On November 1,Willis Corporation sold merchandise in return for a 6%,three-month note receivable in the amount of $60,000.The proper adjusting entry at December 31 (end of Willis' fiscal year) includes a:

Bank reconciliation At March 31,the balance of the Cash account according to the records of Fisher Company was $7,261.The March 31 bank statement showed a balance of $8,798.You are to prepare the bank reconciliation of Fisher Company at March 31,using the following supplementary information and as per the given format: (a. )Deposit in transit at March 31,$6,772. (b. )Outstanding checks: no.120,$140;no.121,$932;no.127,$307;no.134,$2,200. (c. )Service charge by bank,$50. (d. )A note receivable for $5,050 left by Fisher Company with bank for collection that had been collected and credited to company's account.No interest involved. (e. )A check for $90 drawn by a customer,Stuart Sands,but deducted from Fisher's account by the bank and returned with the notation "NSF." (f. )Fisher's check no.480,issued in payment of $970 worth of office equipment,correctly written in the amount of $970 but erroneously recorded in Fisher's accounting records as $790.