Question 1

The WD Co. reported revenue of $23,402 million for 20X3. Their trade receivables balance was $3,999 million in 20X3 and $3,633 million in 20X2. How much cash was collected from customers?
A) $23,036
B) $23,306
C) $23,402
D) $23,768

Accepted Answer

Calculation: $23,402 - ($3,999 - $3,633) = $23,036.

Question 2

In 20X3, A Co. reported product sales revenue of $2,514.4 million and trade receivables of $319.9 million for 20X3 and $269.0 million in 20X2. What was the cash flow generated by sales?
A) $2,194.5 million
B) $2,463.5 million
C) $2,514.4 million
D) $2,565.3 million

Accepted Answer

Calculation: $2,514.4 - ($319.9 - $269) = $2,463.5.

Question 3

If C Co.'s trade receivables balance was $1,666 million in 20X2 and $1,798 million in 20X3, what would be the impact on the statement of cash ﬂows?
A) A decrease in cash ﬂow from investing activities
B) An increase in cash ﬂow from operating activities
C) An increase in cash ﬂow from investing activities
D) A decrease in cash ﬂow from operating activities

Accepted Answer

An increase in trade receivables indicates that more sales are being made on credit rather than cash. This means that less cash is being received in the period, leading to a decrease in cash flow from operating activities.

Question 4

A high receivables turnover ratio indicates
A) the company's sales are increasing.
B) customers are making payments very quickly.
C) customers are making payments slowly.
D) a large proportion of the company's sales are on credit.

Accepted Answer

A high receivables turnover ratio suggests that customers are paying off their debts quickly, indicating efficient credit and collection processes. It does not directly indicate increasing sales, the speed at which customers are paying slowly, or the proportion of sales made on credit.

Question 5

An NSF cheque should appear in which section of the bank reconciliation?
A) Addition to the balance per books.
B) Deduction from the balance per books.
C) Addition to the balance per bank.
D) Deduction from the balance per bank.

Accepted Answer

An NSF (Non-Sufficient Funds) cheque is a cheque that cannot be processed because the account holder does not have enough funds. It should be deducted from the balance per books because the company would have initially recorded the cheque as a deposit, increasing its cash balance. When the cheque is returned, the company needs to reverse this entry, decreasing its cash balance.

Question 6

Outstanding cheques from the prior period which clear the bank in the current period
A) should be added to the balance per books.
B) should be deducted from the balance per books.
C) should be deducted from the balance per bank.
D) do not affect the current period's bank reconciliation.

Accepted Answer

Outstanding checks from the prior period that clear in the current period have already been accounted for in the previous period's bank reconciliation. Therefore, they do not affect the current period's bank reconciliation, as they are part of the normal clearing process and the bank balance would have already been adjusted accordingly.

Question 7

On the April 30 bank reconciliation, a deposit made by a company to its bank account on April 18 will appear as a(n)
A) addition to the balance per books.
B) deduction from the balance per books.
C) deduction from the balance per bank.
D) this will not affect the current period's bank reconciliation.

Accepted Answer

A deposit made by a company to its bank account on April 18 would have already been processed and reflected in the bank's records by April 30, assuming normal processing times. Therefore, it would not affect the current period's bank reconciliation as both the company's records and the bank's records should already include this transaction.

Question 8

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to
A) add $270 to the balance per bank.
B) add $270 to the balance per books.
C) deduct $270 from the balance per books.
D) deduct $270 from the balance per bank.

Accepted Answer

The answer of If a cheque correctly written and paid...

Question 9

In 20X3, G CO. reported product sales of $717.8 million and trade receivables of $79.4 million. In 20X2, product sales were $584.9 million and trade receivables were $71.4 million. What was its receivables turnover ratio for 20X3?
A) 8.19
B) 8.64
C) 9.04
D) 9.52

Accepted Answer

Calculation: $717.8 ÷ {($79.4 + $71.4) ÷ 2} = 9.52.

Question 10

To aid internal control, the individual authorized to sign cheques should be which of the following?
A) Supervisor of receiving.
B) Accounts payable bookkeeper.
C) Treasurer.
D) Purchasing agent.

Accepted Answer

The treasurer is typically responsible for an organization's financial matters, including the authorization and signing of checks. This role is separate from the operational duties of receiving, bookkeeping, and purchasing, helping to maintain a system of checks and balances within the company's financial operations.

Question 11

For accounting purposes, cash includes which of the following?
A) IOU's received from employees.
B) A post-dated cheque received from a customer.
C) Balances on deposit in banks.
D) A note received from a customer in settlement of an overdue trade account receivable.

Accepted Answer

Cash, for accounting purposes, includes currency on hand and demand deposits with banks or financial institutions. Balances on deposit in banks are considered cash because they are available on demand. IOUs, post-dated cheques, and notes receivable are not considered cash because they are not available for immediate use and typically represent future inflows of cash.

Question 12

On a bank reconciliation, which of the following would be deducted from the balance per bank?
A) Outstanding cheques.
B) Deposits in transit.
C) Electronic payment by a customer on account.
D) Bank service charges.

Accepted Answer

Outstanding cheques are deducted from the balance per bank in a bank reconciliation because they have been recorded by the company but not yet cleared by the bank, thus they decrease the bank's balance to match the company's records.

Question 13

Profit for T Co. in 20X3 was $59,156 (in thousands). There was a deduction from profit on the statement of cash flows for $2,781 (in thousands) for the change in trade receivables. The trade receivables balance on December 31, 20X3 was $79,024 (in thousands). How much was the trade receivables balance on December 31, 20X2?
A) $56,375
B) $61,937
C) $76,243
D) $81,805

Accepted Answer

Calculation: $79,024 - $2,781 = $76,243.

Question 14

Cawthra Limited gathered the following reconciling information in preparing its June bank reconciliation: $$\begin{array} { | l | r | } 
\hline \text { Cash balance per books, June 30 } & \$ 12,000 \
\hline \text { Electronic collection of account } & 6,000 \
\hline \text { Outstanding cheques } & 9,000 \
\hline \text { Deposits in transit } & 4,500 \
\hline \text { Bank service charge } & 75 \
\hline \text { NSF cheque } & 1,200 \
\hline
\end{array}$$ The adjusted cash balance per books at June 30 is
A) $8,775.
B) $12,000.
C) $16,500.
D) $16,725.

Accepted Answer

The answer of Cawthra Limited gathered the following reconciling information...

Question 15

Vida Corporation gathered the following reconciling information in preparing its July bank reconciliation: $$\begin{array} { | l | r | } 
\hline \text { Cash balance per books, July 31 } & \$ 3,500 \
\hline \text { Deposits in transit } & 150 \
\hline \text { Electronic collection of account receivable } & 850 \
\hline \text { Bank charge for cheque printing } & 20 \
\hline \text { Outstanding cheques } & 2,000 \
\hline \text { NSF cheque } & 170 \
\hline
\end{array}$$ The adjusted cash balance per books at July 31 is
A) $4,160.
B) $4,010.
C) $2,460.
D) $2,310.

Accepted Answer

The adjusted cash balance per books is $4,160. This is calculated by adding the deposits in transit and the electronic collection of account receivable to the cash balance per books, and then subtracting the bank charge for cheque printing, the outstanding cheques, and the NSF cheque.

Question 16

Which of the following would not be considered an element of good internal control?
A) Require monthly reconciliation of bank accounts with the cash account.
B) Require that all cash receipts be deposited on a daily basis.
C) Require that the individual who handles cash receipts be responsible for the accounting function related to those funds.
D) Require that approval for cash payments and the signing of cheques be assigned to different individuals.

Accepted Answer

Requiring that the individual who handles cash receipts also be responsible for the accounting function related to those funds violates the principle of segregation of duties, which is a key element of good internal control. This could lead to potential fraud or errors not being detected.

Question 17

Cash equivalents typically include investments with original maturities of which of the following?
A) One month or less.
B) Three months or less.
C) One year or less.
D) One year or the operating cycle, whichever is longer.

Accepted Answer

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. They typically include investments with original maturities of three months or less.

Question 18

On Eli Corp's June bank reconciliation, cheques outstanding totaled $5,400. In July, the corporation issued cheques totaling $38,900. The July bank statement shows that $26,300 in cheques cleared the bank in July. A cheque from one of Eli Corp's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding cheques on Eli's July bank reconciliation should be
A) $7,200.
B) $12,600.
C) $17,700.
D) $18,000.

Accepted Answer

Outstanding cheques in June: $5,400Cheques issued in July: $38,900Cheques cleared in July: $26,300Outstanding cheques at the end of July = Outstanding cheques from June + Cheques issued in July - Cheques cleared in July= $5,400 + $38,900 - $26,300 = $18,000. The NSF cheque does not affect the calculation of outstanding cheques.

Question 19

Which of the following is required for effective control of cash?
A) One person handles the receipts and disbursements of cash.
B) Cheques be pre-numbered.
C) Cash be deposited monthly in a bank.
D) A reconciliation of the bank balance with the cash balance be prepared twice a year.

Accepted Answer

Pre-numbered cheques are a control measure to ensure all transactions are recorded and traceable, reducing the risk of fraud or error.

Question 20

Which of the following is not a reconciling item when preparing a bank reconciliation?
A) Bank service charges not recorded by the corporation.
B) Outstanding cheques.
C) Interest collected on a note receivable by the bank and recorded by the corporation.
D) Outstanding deposits.

Accepted Answer

Interest collected on a note receivable by the bank and recorded by the corporation is not a reconciling item because it is an event that has already been recorded by both the bank and the corporation, thus not requiring any adjustment in the reconciliation process.

Quiz 6: Merchandising Operations and the Multistep Income Statement

The WD Co. reported revenue of $23,402 million for 20X3. Their trade receivables balance was $3,999 million in 20X3 and $3,633 million in 20X2. How much cash was collected from customers?

In 20X3, A Co. reported product sales revenue of $2,514.4 million and trade receivables of $319.9 million for 20X3 and $269.0 million in 20X2. What was the cash flow generated by sales?

If C Co.'s trade receivables balance was $1,666 million in 20X2 and $1,798 million in 20X3, what would be the impact on the statement of cash ﬂows?

A high receivables turnover ratio indicates

An NSF cheque should appear in which section of the bank reconciliation?

Outstanding cheques from the prior period which clear the bank in the current period

On the April 30 bank reconciliation, a deposit made by a company to its bank account on April 18 will appear as a(n)

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to

In 20X3, G CO. reported product sales of $717.8 million and trade receivables of $79.4 million. In 20X2, product sales were $584.9 million and trade receivables were $71.4 million. What was its receivables turnover ratio for 20X3?

To aid internal control, the individual authorized to sign cheques should be which of the following?

For accounting purposes, cash includes which of the following?

On a bank reconciliation, which of the following would be deducted from the balance per bank?

Which of the following would not be considered an element of good internal control?

Cash equivalents typically include investments with original maturities of which of the following?

Which of the following is required for effective control of cash?

Which of the following is not a reconciling item when preparing a bank reconciliation?