Question 1

A Cash Over and Short account is
A)not generally acceptable under Canadian GAAP.
B)debited when the sum of the receipts and the cash in the fund is more than the imprest
Amount.
C)debited when the sum of the receipts and the cash in the fund is less than the imprest
Amount.
D)a contra account to Cash.

Accepted Answer

The answer of A Cash Over and Short account is
A)not...

Question 2

On February 1, 2013, Chocolate Corp.factored receivables with a carrying amount of $300,000 to Eclair Inc.Eclair assessed a finance charge of 3% of the receivables and retained 5% of the receivables.Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Chocolate Corp.for February.Assume that Chocolate factors the receivables on a without recourse basis.The loss to be reported is
A)$ 0.
B)$9,000.
C)$15,000.
D)$24,000.

Accepted Answer

The answer of On February 1, 2013, Chocolate Corp.factored receivables...

Question 3

Twinkie Ltd.assigned $500,000 of Accounts Receivable to Friendly Finance as security for a loan of $420,000.Friendly charged a 2% commission on the amount of the loan; the interest rate on the note was 10%.During the first month, Twinkie collected $110,000 of the assigned accounts, after deducting $380 of discounts.As well, Twinkie accepted returns worth $1,350 and wrote off assigned accounts totalling $3,700.Entries made by Twinkie during the first month would include a
A)debit to Cash of $110,380.
B)debit to Bad Debts Expense of $3,700.
C)debit to Allowance for Doubtful Accounts of $3,700.
D)debit to Accounts Receivable of $115,430.

Accepted Answer

The write-off of assigned accounts would require a debit to Allowance for Doubtful Accounts, not Bad Debts Expense, as the accounts were previously estimated to be uncollectible.

Question 4

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon has used the net method, and payment was received within the discount period, the entry to record the payment would include
A)an additional debit of $85.24 to Accounts Receivable.
B)a credit of $8,438.76 to Accounts Receivable.
C)a credit of $85.24 to Sales.
D)a debit of $85.24 to "Forfeited Sales Discounts."

Accepted Answer

The answer of Macaroon Corp.has sold goods at terms 1/10,...

Question 5

During the year, Brownie Inc, who uses the allowance method, made an entry to write off a $2,000 uncollectible account.Before this entry was posted, the balance in accounts receivable was $40,000 and the balance in the allowance account was $3,500.The net realizable value of accounts receivable after the write-off entry was
A)$40,000.
B)$38,500.
C)$38,000.
D)$36,500.

Accepted Answer

The answer of During the year, Brownie Inc, who uses...

Question 6

The ratio that is used to assess the liquidity of accounts receivable is the
A)current ratio.
B)receivables turnover ratio.
C)quick ratio.
D)inventory turnover ratio.

Accepted Answer

The receivables turnover ratio is used to assess the liquidity of accounts receivable by indicating how quickly a company collects its outstanding receivables. It is calculated as net credit sales divided by average accounts receivable. A higher ratio indicates that the company is collecting its receivables more quickly and efficiently, while a lower ratio suggests that the company may have difficulty collecting its outstanding debts. The other ratios listed are not specifically designed to assess the liquidity of accounts receivable.

Question 7

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the gross method, the entry to record the sale is
A)a debit and credit of $7,671.60 to Accounts Receivable and Sales respectively.
B)a debit and credit of $8,438.76 to Accounts Receivable and Sales respectively.
C)a debit and credit of $8,524 to Accounts Receivable and Sales respectively.
D)debits of $8,438.76 and $85.24 to Accounts Receivable and "Forfeited Sales Discounts"
Respectively, and a credit to Sales for the total.

Accepted Answer

The answer of Macaroon Corp.has sold goods at terms 1/10,...

Question 8

Fudge Ltd.receives a four-year, $100,000 zero-interest bearing note.The present value of this note is $65,873.10.What is the implicit rate of interest?
A)12%
B)11%
C)10%
D)9%

Accepted Answer

The answer of Fudge Ltd.receives a four-year, $100,000 zero-interest bearing...

Question 9

Fudge Ltd.receives a four-year, $100,000 zero-interest bearing note.The present value of this note is $65,873.10.Assuming the note was issued on January 1, 2013, and the effective interest method is used, the interest income to be recognized for calendar 2013 will be
A)$11,000.00.
B)$ 9,000.46.
C)$ 7,246.04.
D)$ 6,587.31.

Accepted Answer

The interest income for 2013 is calculated using the effective interest rate method: $65,873.10 (present value) * 11% (implied interest rate) = $7,246.04.

Question 10

Which of the following is INCORRECT regarding factoring of receivables?
A)Factoring usually involves a sale to only one company.
B)The fees are relatively high.
C)The quality of the receivables may be lower.
D)The seller usually continues to service the receivables.

Accepted Answer

Factoring does not always involve a sale to only one company. It can involve multiple factors who purchase different portions of the receivables.

Question 11

Fudge Ltd.receives a four-year, $100,000 zero-interest bearing note.The present value of this note is $65,873.10.Interest income to be recognized for calendar 2014 will be
A)$11,797.06.
B)$ 8,712.62.
C)$ 8,043.11.
D)$ 7,246.04.

Accepted Answer

The answer of Fudge Ltd.receives a four-year, $100,000 zero-interest bearing...

Question 12

If receivables are used as collateral in borrowing transactions
A)the receivables generally come under the control of the lender.
B)a liability is reported on the borrower's statement of financial position.
C)the receivables will be reported as a liability.
D)the transaction would be reported as a sale.

Accepted Answer

The answer of If receivables are used as collateral in...

Question 13

If a note receivable was issued at an amount that is less than its face value, then
A)the note was issued at a premium.
B)the note was issued at a discount.
C)the note's stated rate was the same as the prevailing market rate of interest.
D)it must be a zero-interest-bearing note.

Accepted Answer

If a note receivable was issued at an amount that is less than its face value, it means that it was issued at a discount. This is because the stated rate of the note is higher than the prevailing market rate of interest, and investors require a discount to compensate them for the difference in rates. Therefore, the note is sold for less than its face value to give the investor a yield that is equivalent to the market rate of interest.

Question 14

On February 1, 2013, Chocolate Corp.factored receivables with a carrying amount of $300,000 to Eclair Inc.Eclair assessed a finance charge of 3% of the receivables and retained 5% of the receivables.Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Chocolate Corp.for February.Assume that Chocolate factors the receivables on a with recourse basis.The recourse obligation has a fair value of $1,000.The loss to be reported is
A)$16,000.
B)$15,000.
C)$10,000.
D)$ 9,000.

Accepted Answer

The answer of On February 1, 2013, Chocolate Corp.factored receivables...

Question 15

If a note receivable was issued at an amount that is more than its face value, then
A)the note was issued at a premium and the note's stated rate was different from the
Prevailing market rate of interest.
B)the note was issued at a premium and the note's stated rate was the same as the
Prevailing market rate of interest.
C)the note was issued at a discount and the note's stated rate was the same as the
Prevailing market rate of interest.
D)the note was issued at a discount and the note's stated rate was different from the
Prevailing market rate of interest.

Accepted Answer

The answer of If a note receivable was issued at...

Question 16

The accounts receivable turnover ratio is calculated by dividing
A)gross sales by ending net trade receivables.
B)gross sales by average net trade receivables.
C)net sales by ending net trade receivables.
D)net sales by average net trade receivables.

Accepted Answer

The accounts receivable turnover ratio measures how many times a company collects its average accounts receivable balance during a specific period, usually a year. This ratio is calculated by dividing the gross sales by the average net trade receivables. Choice A and C use ending net trade receivables, which doesn't give an accurate representation of the company's performance throughout the entire year. Choice D uses net sales, which doesn't account for the company's uncollectible accounts. Therefore, choice B is the best answer.

Question 17

If a petty cash fund is established in the amount of $350, and contains $300 in cash and $45 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts:
A)Petty Cash, $45.
B)Petty Cash, $50.
C)Cash, $45; Cash Over and Short, $5.
D)Cash, $50.

Accepted Answer

The answer of If a petty cash fund is established...

Question 18

The journal entries related to a bank reconciliation
A)are taken from the "balance per bank" section only.
B)may include a credit to Office Expense for bank service charges.
C)may include a debit to Accounts Receivable for an NSF cheque.
D)may include a debit to Accounts Payable for an NSF cheque.

Accepted Answer

The answer of The journal entries related to a bank...

Question 19

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the net method, the entry to record the sale is
A)a debit and credit of $7,671.60 to both Accounts Receivable and Sales respectively.
B)a debit and credit of $8,438.76 to Accounts Receivable and Sales respectively.
C)a debit and credit of $8,524 to Accounts Receivable and Sales respectively.
D)debits of $8,438.76 and $85.24 to Accounts Receivable and "Forfeited Sales Discounts"
Respectively, and a credit to Sales for the total.

Accepted Answer

The answer of Macaroon Corp.has sold goods at terms 1/10,...

Question 20

Twinkie Ltd.assigned $500,000 of Accounts Receivable to Friendly Finance as security for a loan of $420,000.Friendly charged a 2% commission on the amount of the loan; the interest rate on the note was 10%.During the first month, Twinkie collected $110,000 of the assigned accounts, after deducting $380 of discounts.As well, Twinkie accepted returns worth $1,350 and wrote off assigned accounts totalling $3,700.The amount of cash Twinkie received from Friendly at the time of the transfer was
A)$378,000.
B)$410,000.
C)$411,600.
D)$420,000.

Accepted Answer

The answer of Twinkie Ltd.assigned $500,000 of Accounts Receivable to...

Quiz 1: Intermediate Accounting Volume 1

A Cash Over and Short account is

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon has used the net method, and payment was received within the discount period, the entry to record the payment would include

The ratio that is used to assess the liquidity of accounts receivable is the

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the gross method, the entry to record the sale is

Fudge Ltd.receives a four-year, $100,000 zero-interest bearing note.The present value of this note is $65,873.10.What is the implicit rate of interest?

Fudge Ltd.receives a four-year, $100,000 zero-interest bearing note.The present value of this note is $65,873.10.Assuming the note was issued on January 1, 2013, and the effective interest method is used, the interest income to be recognized for calendar 2013 will be

Which of the following is INCORRECT regarding factoring of receivables?

Fudge Ltd.receives a four-year, $100,000 zero-interest bearing note.The present value of this note is $65,873.10.Interest income to be recognized for calendar 2014 will be

If receivables are used as collateral in borrowing transactions

If a note receivable was issued at an amount that is less than its face value, then

If a note receivable was issued at an amount that is more than its face value, then

The accounts receivable turnover ratio is calculated by dividing

If a petty cash fund is established in the amount of $350, and contains $300 in cash and $45 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts:

The journal entries related to a bank reconciliation

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the net method, the entry to record the sale is