Question 1

The cash records and the bank statement of Frankel Company showed the following at the end of February 2014: Outstanding checks as of the beginning of February 2014, $8,000; checks written by Frankel Company according to its books during February 2014, $50,000; and checks cleared by the bank during February 2014, $54,000. How much were the outstanding checks at the end of February 2014?

Accepted Answer

The outstanding checks at the end of February 2014 are calculated as follows: Starting with $8,000 of outstanding checks at the beginning, plus $50,000 in checks written during February, totaling $58,000. Since $54,000 cleared, the remaining outstanding checks are $58,000 - $54,000 = $4,000.

Question 2

Which of the following statements does not correctly describe the allowance for doubtful accounts balance?

Accepted Answer

The allowance for doubtful accounts balance is not reported on the balance sheet as a stockholders' equity account, as it is a contra-asset account.

Question 3

CHS Company has just finished preparing its bank reconciliation. If CHS did everything correctly, which items would have been included as an addition to the company's cash account?

Accepted Answer

The answer of CHS Company has just finished preparing its...

Question 4

At year-end, Chief Company has a balance of $10,000 in accounts receivable of which $1,000 is more than 30 days overdue. Chief has a credit balance of $100 in the allowance for doubtful accounts before any year-end adjustments. Chief estimates that 1% of current accounts and 10% of accounts over thirty days are uncollectible. How much is bad debt expense?

Accepted Answer

The answer of At year-end, Chief Company has a balance...

Question 5

When a depositor receives a bank statement indicating that there was a "NSF check," the depositor should do which of the following?

Accepted Answer

NSF stands for "non-sufficient funds," which means that the person who wrote the check did not have enough money in their account to cover the check amount. Therefore, the depositor should reduce their cash account per their own books by the amount of the NSF check, as the deposit should not have been counted as part of their available funds.

Question 6

Which of the following accounts is not a contra-revenue account?

Accepted Answer

Allowance for doubtful accounts is not a contra-revenue account, it is a contra-asset account. The other options (A, B, and C) are all examples of contra-revenue accounts.

Question 7

The Roscoe Company's March 31, 2014 bank statement balance was $70,000. As of March 31, 2014, outstanding checks total $22,000 and deposits in transit total $15,000. How much was Roscoe's March 31, 2014 cash balance on Roscoe's books?

Accepted Answer

To find the cash balance on Roscoe's books, we need to adjust the bank statement balance by deducting outstanding checks and adding deposits in transit. 
Adjusted cash balance = Bank statement balance - Outstanding checks + Deposits in transit 
Adjusted cash balance = $70,000 - $22,000 + $15,000 
Adjusted cash balance = $63,000

Question 8

Woodland Company uses the allowance method to account for bad debts. During 2014, a customer became bankrupt and a receivable of $10,000 was deemed uncollectible. Which of the following journal entries records the uncollectible account write-off?

Accepted Answer

The answer of Woodland Company uses the allowance method to...

Question 9

The Tanner Company's April 30, 2014 pre-reconciliation cash balance on its books was $35,000. While preparing the April 30 bank reconciliation, Tanner determined that outstanding checks total $11,000, deposits in transit total $7,000, and bank service charges are $50. How much was Tanner's April 30, 2014 cash balance per the bank statement?

Accepted Answer

To find the cash balance per the bank statement, we need to add deposits in transit and subtract outstanding checks from the bank's cash balance. 
Starting with the pre-reconciliation cash balance on Tanner's books of $35,000: 
- Add deposits in transit of $7,000 
- Subtract outstanding checks of $11,000 
- Subtract bank service charges of $50 
$35,000 + $7,000 - $11,000 - $50 = $31,950 
Therefore, Tanner's April 30, 2014 cash balance per the bank statement was $38,950.

Question 10

Which of the following statements pertaining to bank reconciliations is false?

Accepted Answer

The answer of Which of the following statements pertaining to...

Question 11

Which of the following demonstrates a poor internal control procedure?

Accepted Answer

In option A, the same individual (the bookkeeper) is responsible for both handling cash deposits and recording related journal entries, which violates the principle of segregation of duties. This lack of separation can increase the risk of errors or fraud. Effective internal controls require that different individuals handle different aspects of financial transactions to provide checks and balances.

Question 12

A deposit in transit on a bank reconciliation should be:

Accepted Answer

A deposit in transit is an amount that has been recorded in the company's books but not yet reflected in the bank statement. Therefore, it should be added to the bank statement balance to reconcile the two balances.

Question 13

Dillon Company uses the allowance method to account for bad debts. The entry to write-off a bad account (one that will never be collected) should be:

Accepted Answer

Option D represents the correct entry to write off a bad account using the allowance method. This entry reduces both the accounts receivable and the allowance for doubtful accounts by the same amount, reflecting the fact that the account is now considered uncollectible. Options A, B, and C all contain errors such as not reducing the allowance account or not specifying the customer account that is being written off.

Question 14

Linetech Company's bank statement showed an ending balance of $8,000. Items appearing in the bank reconciliation included: outstanding checks, $500; deposits in transit, $1,000; bank service charges, $50; and Driver Company's $250 check erroneously deducted from Linetech's bank account by the bank. How much is the correct cash balance at the end of the month?

Accepted Answer

Starting with the bank statement balance of $8,000:
- Add deposits in transit of $1,000
- Subtract outstanding checks of $500
- Subtract bank service charges of $50
- Add the erroneously deducted check of $250
The corrected balance is $8,750.

Question 15

Oakwood Company had accounts receivable of $750,000 and an allowance for doubtful accounts of $21,500 just prior to writing off as worthless a customer's $5,000 account receivable. The net realizable value of Oakwood's accounts receivable as shown by the accounting records before and after the write-off was as follows:

Accepted Answer

The answer of Oakwood Company had accounts receivable of $750,000...

Question 16

When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What percent (rounded) would this savings amount to on an annual basis?

Accepted Answer

The terms 2/15, n/40 mean the customer can take a 2% discount if they pay within 15 days, otherwise, the full amount is due in 40 days. The difference in days is 25 (40-15), so the customer essentially gets a 2% return on their money in 25 days. To annualize this return, we use the formula: Annualized Return = (Discount / (1 - Discount)) * (365 / Days). Plugging in the values: (0.02 / (1 - 0.02)) * (365 / 25) = 0.0204 * 14.6 ≈ 29.2%.

Question 17

Upon completing an aging analysis of accounts receivable, the accountant for Rosco Works prepared and aging of accounts receivable and estimated that $5,000 of the $98,000 accounts receivable balance would be uncollectible. The allowance for doubtful accounts had a $400 debit balance at year-end prior to adjustment. How much is bad debt expense?

Accepted Answer

The estimated amount of uncollectible accounts is $5,000, which means that the bad debt expense should be increased by this amount.

To adjust the allowance account, the debit balance of $400 should also be taken into account.

Therefore, the calculation for bad debt expense is:

Estimated uncollectible accounts ($5,000) + existing debit balance in allowance ($400) = $5,400 (Option B)

Question 18

When using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet at the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will

Accepted Answer

When a receivable is written off under the allowance method, it involves reducing the accounts receivable and the allowance for doubtful accounts by the amount of the receivable written off. This action does not change the net realizable value of accounts receivable because the allowance for doubtful accounts had already accounted for the potential loss.

Question 19

Dally Company has just finished preparing its bank reconciliation. If everything was done correctly, which of the following items would be reported as a deduction from the company's ending balance per the bank?

Accepted Answer

The answer of Dally Company has just finished preparing its...

Question 20

The Conner Company's August 31, 2014 cash balance on its books was $90,000. As of August 31, outstanding checks total $44,000 and deposits in transit total $30,000. How much was Conner's August 31, 2014 cash balance on Conner's bank statement?

Accepted Answer

To find the cash balance on Conner's bank statement, we need to adjust the cash balance on Conner's books by adding deposits in transit and subtracting outstanding checks. 
Adjusted cash balance = Cash balance on books + Deposits in transit - Outstanding checks 
Adjusted cash balance = $90,000 + $30,000 - $44,000 
Adjusted cash balance = $76,000 
Therefore, the answer is (D) $104,000, as this is the adjusted cash balance on Conner's bank statement.

Quiz 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash