Question 1

Outstanding cheques are deposits that a company has recorded but the bank has not.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the acid-test ratio from one year to the next indicates the company's liquidity position is likely improving.

Accepted Answer

A) True 
 B)False

Question 3

If the balance on the bank statement does not equal the balance in the company's Cash account, then you can conclude that:

Accepted Answer

A)   the bank made an error
B)   both the company accountant and the bank made errors
C)   the company accountant made an error in the accounting process
D)   there are some reconciling items that, when identified, will explain the differences between the balancesE) A) and D)
F) None of the above

Question 4

In a bank reconciliation, a bank error:

Accepted Answer

A)   may be added or deducted from the bank balance on the bank statement
B)   must be added to the bank balance on the bank statement
C)   may be added or deducted from the bank balance in the general ledger
D)   must be deducted from the bank balance on the bank statementE) A) and D)
F) B) and D)

Question 5

When a note matures, the payee should record:

Accepted Answer

A)   interest expense
B)   interest revenue
C)   unearned revenue
D)   interest payableE) C) and D)
F) A) and B)

Question 6

In a bank reconciliation, there might be items which have been recorded by the company that have not yet been recorded by the bank. Examples of such items would include:

Accepted Answer

A)   bank service charges
B)   deposits in transit
C)   bank collections
D)   NSF chequesE) A) and D)
F) None of the above

Question 7

Once the bank reconciliation has been completed, journal entries must be made for the book side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 8

Using the aging-of-accounts-receivable method, you estimate that total uncollectible accounts are $3,800. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of
$1,100. The amount of the adjusting entry should be:

Accepted Answer

A)   $1,100
B)   $3,800
C)   $4,900
D)   $2,700E) B) and C)
F) A) and B)

Question 9

Factoring receivables involves selling them at a discounted price.

Accepted Answer

A) True 
 B)False

Question 10

The account that shows the amount of accounts receivable that the business does not expect to collect is:

Accepted Answer

A)   Sales Discounts
B)   Allowance for Uncollectible Accounts
C)   Sales Returns and Allowances
D)   net Accounts ReceivableE) All of the above
F) A) and D)

Question 11

Two major types of receivable include: account receivables and notes payable.

Accepted Answer

A) True 
 B)False

Question 12

Under the aging-of-accounts-receivable method:

Accepted Answer

A)   the balance in accounts receivable prior to adjustment must be considered
B)   the balance in Allowance for Uncollectible Accounts prior to adjustment must be considered
C)   the balance in Allowance for Uncollectible Accounts prior to adjustment is ignored
D)   the balance in Bad Debt Expense prior to adjustment must be consideredE) None of the above
F) A) and B)

Question 13

In a bank reconciliation, a deposit in transit is:

Accepted Answer

A)   added to the bank balance in the general ledger
B)   deducted from the bank balance on the bank statement
C)   added to the bank balance on the bank statement
D)   deducted from the bank balance in the general ledgerE) All of the above
F) B) and D)

Question 14

The number of days it takes to collect the average amount of receivables is called:

Accepted Answer

A)   the current ratio
B)   the acid-test ratio
C)   days' sales in receivables
D)   the quick ratioE) A) and C)
F) None of the above

Question 15

The category "Other Receivables" on the balance sheet includes:

Accepted Answer

A)   Accounts Receivable, Interest Receivable
B)   Notes Receivable
C)   Notes Receivable, Accounts Receivable, Interest Receivable
D)   Interest Receivable, Dividend Receivable, Advances to EmployeesE) C) and D)
F) None of the above

Question 16

Bank charges are deducted from the ending bank balance in the general ledger when preparing the bank reconciliation.

Accepted Answer

A) True 
 B)False

Question 17

The asset requiring the highest level of safekeeping is:

Accepted Answer

A)   Inventory
B)   Cash
C)   Accounts Receivable
D)   Capital AssetsE) None of the above
F) C) and D)

Question 18

When preparing a bank reconciliation, which of the following items would be subtracted from the bank balance on the bank statement?

Accepted Answer

A)   bank service charges
B)   deposits in transit
C)   EFT cash payments
D)   outstanding chequesE) All of the above
F) B) and D)

Question 19

The interest on a $50,000 note at 9% for 4 months is:

Accepted Answer

A)   $18,000
B)   $4,500
C)   $1,500
D)   $1,125E) A) and D)
F) B) and D)

Question 20

On December 31, 2020, James Company has an accounts receivable balance of $324,000 before any year-end adjustments. The Allowance for Doubtful Accounts has a $1,100 credit balance. The company prepares the following aging schedule for accounts receivable:

Accepted Answer

A)   $12,160
B)   $1,570
C)   $9,960
D)   $11,060E) All of the above
F) A) and B)

Exam 4: Cash and Receivables

In a bank reconciliation, a bank error:

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In a bank reconciliation, there might be items which have been recorded by the company that have not yet been recorded by the bank. Examples of such items would include:

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An increase in the acid-test ratio from one year to the next indicates the company's liquidity position is likely improving.

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The account that shows the amount of accounts receivable that the business does not expect to collect is:

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Two major types of receivable include: account receivables and notes payable.

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Using the aging-of-accounts-receivable method, you estimate that total uncollectible accounts are $3,800. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $1,100. The amount of the adjusting entry should be:

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The interest on a $50,000 note at 9% for 4 months is:

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When preparing a bank reconciliation, which of the following items would be subtracted from the bank balance on the bank statement?

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The number of days it takes to collect the average amount of receivables is called:

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The category "Other Receivables" on the balance sheet includes:

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Outstanding cheques are deposits that a company has recorded but the bank has not.

Correct AnswerverifiedShow Answer

Bank charges are deducted from the ending bank balance in the general ledger when preparing the bank reconciliation.

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In a bank reconciliation, a deposit in transit is:

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The asset requiring the highest level of safekeeping is:

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When a note matures, the payee should record:

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Once the bank reconciliation has been completed, journal entries must be made for the book side of the reconciliation.

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On December 31, 2020, James Company has an accounts receivable balance of $324,000 before any year-end adjustments. The Allowance for Doubtful Accounts has a $1,100 credit balance. The company prepares the following aging schedule for accounts receivable:

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If the balance on the bank statement does not equal the balance in the company's Cash account, then you can conclude that:

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Under the aging-of-accounts-receivable method:

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Factoring receivables involves selling them at a discounted price.

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