Question 1

The total of cash in the petty cash box plus the amount of the petty cash ticket receipts should total the beginning amount of the petty cash fund.

Accepted Answer

This is true because the petty cash box and receipts should always equal the beginning amount of the petty cash fund to ensure that all funds are accounted for. Any discrepancies should be investigated and reconciled.

Question 2

Quicksilver Co.has cash of $33,000;net Accounts Receivable of $41,000;short-term investments of $15,000 and inventory of $25,000.It also has $30,000 in current liabilities and $50,000 in long-term liabilities.The current ratio for Quicksilver Co.is:

Accepted Answer

Current ratio = Current assets / Current liabilitiesCurrent assets = Cash + Net Accounts Receivable + Short-term investments + InventoryCurrent assets = $33,000 + $41,000 + $15,000 + $25,000 = $114,000Current ratio = $114,000 / $30,000 = 3.80

Question 3

Lionworks Company has cash of $143,000;net Accounts Receivable of $89,000;short-term investments of $35,000 and prepaid expenses of $40,000.It also has $50,000 in current liabilities and $80,000 in long-term liabilities.The quick ratio for Lionworks Company is:

Accepted Answer

The quick ratio is calculated by subtracting the inventories from current assets and then dividing by current liabilities. Since the problem does not provide information about inventories, we can assume that Lionworks Company does not have any. Thus, the quick assets are equal to cash, net accounts receivable, short-term investments, and prepaid expenses, which total $307,000 ($143,000 + $89,000 + $35,000 + $40,000). The quick ratio is therefore:

Quick ratio = (Quick assets) / (Current liabilities)
Quick ratio = $307,000 / $50,000
Quick ratio = 5.34

Therefore, the best choice is C) 5)34.

Question 4

Piper Inc.has cash of $56,000;net Accounts Receivable of $67,000;short-term investments of $12,000 and inventory of $40,000.It also has $45,000 in current liabilities and $75,000 in long-term liabilities.The current ratio for Piper Inc.is:

Accepted Answer

The answer of Piper Inc.has cash of $56,000;net Accounts Receivable...

Question 5

A company with a quick ratio of 1.23 means that the company:

Accepted Answer

The quick ratio is a measure of a company's ability to meet its short-term obligations. A quick ratio of 1.23 means that the company has $1.23 in quick assets for every $1.00 in current liabilities. This means that the company has enough quick assets to cover its current liabilities.

Question 6

A company with an Accounts Receivable turnover of 11.78 would be collecting its receivables about:

Accepted Answer

An Accounts Receivable turnover of 11.78 means that the company is collecting its receivables 11.78 times in a year (or 12 months). Therefore, on average, the company is collecting its receivables once a month (12/11.78). Option B is the closest to this frequency.

Question 7

A petty cash fund may be established for minor expenditures,such as postage.

Accepted Answer

Petty cash funds are commonly established for minor expenses, such as postage, office supplies, and other small purchases.

Question 8

Gallego & Co.reported sales of $515,000;beginning net Accounts Receivable of $212,000 and ending net Accounts Receivable of $224,000.Gallego & Co.'s Accounts Receivable turnover is:

Accepted Answer

The answer of Gallego & Co.reported sales of $515,000;beginning net...

Question 9

Valdez Company reported sales of $343,000;beginning net Accounts Receivable of $89,000 and ending
Net Accounts Receivable of $111,000.Valdez Company's Accounts Receivable turnover is:

Accepted Answer

The answer of Valdez Company reported sales of $343,000;beginning net...

Question 10

The journal entry to record the set-up of a petty cash fund is to debit Petty Cash and to credit Cash.

Accepted Answer

When setting up a petty cash fund, the initial entry to record the transfer of cash to the fund is to debit the Petty Cash account and credit the Cash account. This increases the balance of the Petty Cash account and reduces the balance of the Cash account by the same amount.

Question 11

Lionworks Company has cash of $143,000;net Accounts Receivable of $89,000;short-term investments of $35,000 and prepaid expenses of $40,000.It also has $50,000 in current liabilities and $80,000 in long-term liabilities.The current ratio for Lionworks Company is:

Accepted Answer

The answer of Lionworks Company has cash of $143,000;net Accounts...

Question 12

Quick assets include cash,Accounts Receivable,and prepaid expenses.

Accepted Answer

Quick assets include cash and accounts receivable but do not include prepaid expenses, as quick assets are those that can be quickly converted into cash without losing value, and prepaid expenses cannot be easily converted into cash.

Question 13

Piper Inc.has cash of $56,000;net Accounts Receivable of $67,000;short-term investments of $12,000 and inventory of $40,000.It also has $45,000 in current liabilities and $75,000 in long-term liabilities.The quick ratio for Piper Inc.is:

Accepted Answer

The answer of Piper Inc.has cash of $56,000;net Accounts Receivable...

Question 14

Gallego & Co.reported sales of $515,000;beginning net Accounts Receivable of $212,000 and ending net Accounts Receivable of $224,000.Gallego & Co.'s receivable collection period (rounded to the nearest day)is:

Accepted Answer

The answer of Gallego & Co.reported sales of $515,000;beginning net...

Question 15

A company with a current ratio of 2.75 means that the company:

Accepted Answer

The current ratio is calculated by dividing the company's current assets by its current liabilities. Therefore, a current ratio of 2.75 means that for every $1 of current liabilities, the company has $2.75 of current assets available to meet those liabilities. Choice B is the only option that accurately reflects this relationship.

Question 16

If a company has n/90-credit terms,you would expect its Accounts Receivable turnover to be:

Accepted Answer

The answer of If a company has n/90-credit terms,you would...

Question 17

A petty cash fund is established by making a check payable to Petty Cash,cashing the check,and placing the funds in the cash register.

Accepted Answer

A petty cash fund is established by making a check payable to Petty Cash, cashing the check, and placing the funds in a separate petty cash box or drawer, not in the cash register.

Question 18

A company with 5.6 Accounts Receivable turnover means that the company:

Accepted Answer

The Accounts Receivable turnover ratio by itself, without industry comparison or trend analysis, does not indicate if it is good or bad, nor does it directly suggest that the company needs to tighten its credit terms.

Question 19

Quicksilver Co.has cash of $33,000;net Accounts Receivable of $41,000;short-term investments of $15,000 and inventory of $25,000.It also has $30,000 in current liabilities and $50,000 in long-term liabilities.The quick ratio for Quicksilver Co.is:

Accepted Answer

The answer of Quicksilver Co.has cash of $33,000;net Accounts Receivable...

Question 20

Valdez Company reported sales of $343,000;beginning net Accounts Receivable of $89,000 and ending net Accounts Receivable of $111,000.Valdez Company's receivable collection period (rounded to the nearest day)is:

Accepted Answer

The receivable collection period is calculated as (Average Accounts Receivable / Sales) * 365. The average accounts receivable is ($89,000 + $111,000) / 2 = $100,000. Thus, ($100,000 / $343,000) * 365 = 106 days.

Quiz 7: Cash and Receivables