Question 1

Significant influence of one company over another has been defined by the accounting profession as the ownership of what minimum percent of the second company's stock?

Accepted Answer

Significant influence is generally indicated by the ownership of 20% or more of the voting stock of another company. This level of ownership suggests that the investor has the ability to exert influence over the financial and operating policies of the investee.

Question 2

The gross accounts receivable less the allowance for doubtful accounts is known as the __________.

Accepted Answer

The answer of The gross accounts receivable less the allowance...

Question 3

The contra-asset account used to reduce accounts receivable to its net realizable value is __________.

Accepted Answer

The answer of The contra-asset account used to reduce accounts...

Question 4

What is the impact on the cash flow statement from a decrease in accounts receivable,assuming the indirect method is used?

Accepted Answer

A decrease in accounts receivable means that more cash has been collected from customers. This increase in cash is reflected in the operating activities section of the cash flow statement, causing an increase in cash flow from operating activities.

Question 5

Over the life of a note,the maker of a note recognizes a __________ on the balance sheet and __________ on the income statement.

Accepted Answer

The answer of Over the life of a note,the maker...

Question 6

What is the impact on the cash flow statement from an increase in short-term notes receivable,assuming the indirect method is used?

Accepted Answer

An increase in short-term notes receivable means that the company has lent money to its customers, which is an operating activity. However, this increase shows up as an increase in accounts receivable on the balance sheet, not as cash received. Therefore, it is added back to net income in the operating activities section of the cash flow statement. This takes a while for the company to receive its cash, so as a result, cash flow from operating activities decreases.

Question 7

The comparative balance sheets of Midnite Corp.for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018.How will this change be reported on Midnite's statement of cash flows,if Midnite uses the indirect method?

Accepted Answer

An increase in short-term trade notes receivable represents cash that was not collected and thus reduces the cash flow from operating activities. In the indirect method, this increase is deducted from net income to reconcile it to net cash provided by operating activities.

Question 8

The accounts receivable turnover ratio is computed by dividing __________ by average accounts receivable.

Accepted Answer

The answer of The accounts receivable turnover ratio is computed...

Question 9

On July 1,2017,Overlin Corp.purchased $100,000 of 8% bonds at face value.Interest is paid annually on June 30.If the accounting year for Overlin ends at December 31,2017,what will be reported with respect to the bonds on that date?

Accepted Answer

Since Overlin Corp. purchased the bonds at face value, the carrying value of the bonds will be the same as the face value, which is $100,000. However, since the interest payment date is on June 30, interest income for the six months ending December 31, 2017, has not yet been received, so it must be accrued. Therefore, choice C is correct. The cash received in interest and any loss on the bonds will not be reported until the interest payment date, so choices B and D are incorrect. Choice A is incorrect because the carrying value remains the same as the face value.

Question 10

The mechanism that keeps track of the balances owed by individual customers is called a(n)__________.

Accepted Answer

The answer of The mechanism that keeps track of the...

Question 11

The __________ the accounts receivable turnover ratio,the quicker each dollar of accounts receivable can be collected.

Accepted Answer

The answer of The __________ the accounts receivable turnover ratio,the...

Question 12

On February 1,2017,Vermont Corp.pays $50,000 for shares of Stream,Inc.common stock and another $1,000 in commissions. ​
Assume that Vermont sells the Stream stock on May 20,2017,for $53,000.In this case,Vermont recognizes a(n)

Accepted Answer

Vermont Corp. initially invested $51,000 ($50,000 for shares + $1,000 in commissions) and sold the stock for $53,000, realizing a gain of $2,000. This gain increases both assets (from the sale proceeds) and stockholders' equity (from the realized gain).

Question 13

A(n)__________ categorizes the various accounts receivable amounts by the length of time outstanding.

Accepted Answer

The answer of A(n)__________ categorizes the various accounts receivable amounts...

Question 14

Accountants use the __________ to overcome the deficiencies of the direct write-off method for bad debts.

Accepted Answer

The answer of Accountants use the __________ to overcome the...

Question 15

A general ledger account that is supported by a subsidiary ledger is called a(n)__________.

Accepted Answer

The answer of A general ledger account that is supported...

Question 16

Which one of the following is an investing activity on the statement of cash flows?

Accepted Answer

Purchase of long-term investments is an investing activity as it involves the acquisition of long-term assets, such as securities or property, which are not intended for immediate sale. Collection of accounts receivable, receipt of interest, and receipt of dividends are all examples of cash inflows from operating activities.

Question 17

A(n)__________ is a written promise to repay a definite sum of money either upon demand or at a fixed or determinable date in the future.

Accepted Answer

The answer of A(n)__________ is a written promise to repay...

Question 18

The comparative balance sheets for Flagler Co.for 2018 and 2017 indicate that accounts receivable decreased during 2018.Flagler uses the indirect method of preparing the Operating Activities section of its statement of cash flows.How will the decrease in accounts receivable be reported on the statement of cash flows?

Accepted Answer

The decrease in accounts receivable indicates that less cash was received from customers during the year. However, this is not reflected in net income as it is a non-cash item. Therefore, it must be added back to net income in the Operating Activities section using the indirect method. This is because the decrease in accounts receivable represents an increase in cash that was not included in net income.

Question 19

Which of the following statements is true regarding dividend income?

Accepted Answer

Dividend income is reported on the income statement as it represents earnings received by the company from its investments in other companies' stock. It is considered a form of revenue or income for the company receiving the dividend.

Question 20

Sweetson Enterprises' comparative balance sheets included accounts receivable of $220,300 at December 31,2017,and $200,900 at December 31,2018.Sales reported on Sweetson's 2018 income statement amounted to $2,350,000.What is the amount of cash collections that Sweetson will report in the Operating Activities category of its 2018 statement of cash flows assuming that the direct method is used? ​

Accepted Answer

To calculate cash collections, start with sales and adjust for the change in accounts receivable: $2,350,000 + ($220,300 - $200,900) = $2,369,400.

Quiz 7: Receivables and Investments

Significant influence of one company over another has been defined by the accounting profession as the ownership of what minimum percent of the second company's stock?

The gross accounts receivable less the allowance for doubtful accounts is known as the __________.

The contra-asset account used to reduce accounts receivable to its net realizable value is __________.

What is the impact on the cash flow statement from a decrease in accounts receivable,assuming the indirect method is used?

Over the life of a note,the maker of a note recognizes a on the balance sheet and on the income statement.

What is the impact on the cash flow statement from an increase in short-term notes receivable,assuming the indirect method is used?

The comparative balance sheets of Midnite Corp.for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018.How will this change be reported on Midnite's statement of cash flows,if Midnite uses the indirect method?

The accounts receivable turnover ratio is computed by dividing __________ by average accounts receivable.

On July 1,2017,Overlin Corp.purchased $100,000 of 8% bonds at face value.Interest is paid annually on June 30.If the accounting year for Overlin ends at December 31,2017,what will be reported with respect to the bonds on that date?

The mechanism that keeps track of the balances owed by individual customers is called a(n)__________.

The __________ the accounts receivable turnover ratio,the quicker each dollar of accounts receivable can be collected.

On February 1,2017,Vermont Corp.pays $50,000 for shares of Stream,Inc.common stock and another $1,000 in commissions. Assume that Vermont sells the Stream stock on May 20,2017,for $53,000.In this case,Vermont recognizes a(n)

A(n)__________ categorizes the various accounts receivable amounts by the length of time outstanding.

Accountants use the __________ to overcome the deficiencies of the direct write-off method for bad debts.

A general ledger account that is supported by a subsidiary ledger is called a(n)__________.

Which one of the following is an investing activity on the statement of cash flows?

A(n)__________ is a written promise to repay a definite sum of money either upon demand or at a fixed or determinable date in the future.

Which of the following statements is true regarding dividend income?

Quiz 7: Receivables and Investments

Significant influence of one company over another has been defined by the accounting profession as the ownership of what minimum percent of the second company's stock?

The gross accounts receivable less the allowance for doubtful accounts is known as the __________.

The contra-asset account used to reduce accounts receivable to its net realizable value is __________.

What is the impact on the cash flow statement from a decrease in accounts receivable,assuming the indirect method is used?

Over the life of a note,the maker of a note recognizes a __________ on the balance sheet and __________ on the income statement.

What is the impact on the cash flow statement from an increase in short-term notes receivable,assuming the indirect method is used?

The comparative balance sheets of Midnite Corp.for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018.How will this change be reported on Midnite's statement of cash flows,if Midnite uses the indirect method?

The accounts receivable turnover ratio is computed by dividing __________ by average accounts receivable.

On July 1,2017,Overlin Corp.purchased $100,000 of 8% bonds at face value.Interest is paid annually on June 30.If the accounting year for Overlin ends at December 31,2017,what will be reported with respect to the bonds on that date?

The mechanism that keeps track of the balances owed by individual customers is called a(n)__________.

The __________ the accounts receivable turnover ratio,the quicker each dollar of accounts receivable can be collected.

On February 1,2017,Vermont Corp.pays $50,000 for shares of Stream,Inc.common stock and another $1,000 in commissions. ​ Assume that Vermont sells the Stream stock on May 20,2017,for $53,000.In this case,Vermont recognizes a(n)

A(n)__________ categorizes the various accounts receivable amounts by the length of time outstanding.

Accountants use the __________ to overcome the deficiencies of the direct write-off method for bad debts.

A general ledger account that is supported by a subsidiary ledger is called a(n)__________.

Which one of the following is an investing activity on the statement of cash flows?

A(n)__________ is a written promise to repay a definite sum of money either upon demand or at a fixed or determinable date in the future.

Which of the following statements is true regarding dividend income?

Over the life of a note,the maker of a note recognizes a on the balance sheet and on the income statement.

On February 1,2017,Vermont Corp.pays $50,000 for shares of Stream,Inc.common stock and another $1,000 in commissions. Assume that Vermont sells the Stream stock on May 20,2017,for $53,000.In this case,Vermont recognizes a(n)