Question 1

Internal control over cash transactions
(a.) Describe three measures contributing to strong internal control over cash receipts.
(b.) Describe three measures contributing to effective internal control over cash disbursements.

Accepted Answer

The answer of Internal control over cash transactions
(a.) Describe three...

Question 2

Note receivable--journal entries
On September 1, 2010, Dental Equipment Corporation sold equipment priced at $350,000 in exchange for a six-month note receivable with an annual interest rate of 12%, all due at maturity.
(a.) Prepare the December 31, 2010 (fiscal year-end), adjusting entry made by Dental with regard to this note receivable.
(b.) Prepare the entry made by Dental on March 1, 2011(maturity date of note), to record collection of note and interest.
(a) 2010 General Journal
Dec. 31
(b) 2011 March 1
(c.) Assume that on March 1, 2011, the maker of the note defaults and Dental does not collect the note. Prepare the entry to be made to Dental on March 1, 2011, in this situation.
(c) 2011 March 1

Accepted Answer

The answer of Note receivable--journal entries
On September 1, 2010, Dental...

Question 3

Reporting cash in the balance sheet
(a.) The first asset shown in the balance sheet of many companies is labeled "cash and cash equivalents." Explain the term "cash equivalent" and give two examples. Why are cash and cash equivalents listed first in the balance sheet?
(b.) The December bank statement for Kowal Publishing Co. reports a balance of $13,847.59 at December 31, 2009. Kowal's accounting records, however, show a balance of $15,245.47 in the same bank account prior to preparation of the bank reconciliation.
Which amount should be included in the amount of cash reported in Kowal's balance sheet at December 31, 2009? Explain your answer.

Accepted Answer

The answer of Reporting cash in the balance sheet
(a.) The...

Question 4

Bank reconciliation
(A.) You are to complete the June 30 bank reconciliation for Silver Company using the following information:
(B.) Give in general journal form the entry or entries necessary to correct Silver's accounting records as of June 30. (Explanations may be omitted; one compound journal entry is acceptable.)
 $\begin{array}{|c|l|c|c|l|c|}
\hline 1 & \text { Outstanding checks:.. } & & 3 & \text { Deposit in transit. } & \$ 2,325 \
\hline & \text { No. } 479 & \$ 527 & 4 & \text { Note collected by bank } & \
\hline & \text { No. } 486  & 390 & & \text { As agent of Silver } & \
\hline & \text { No. } 490& 650 & & \text { (no interest) } & \$ 2,000 \
\hline 2 & \text { Check no. } 485 \text { (for Repairs } & & 5 & \text { NSF check } & \
\hline & \text { Expense was written for } & & & \text { of D. Chan } & \$ 995 \
\hline & \$ 323 \text { but erroneously } & & 6 & \text { Bank service charge } & \$ 45 \
\hline & \text { recorded in Silver's } & & & & \
\hline & \text { records as } \$ 233 & & & & \
\hline & \text { Difference } & 90 & & & \
\hline
\end{array}$
 $\begin{array}{c}
\text { SILVER CO. } \
\text { Bank Reconciliation } \
\text { June } 30,20\underline{\quad\quad}
\
\begin{array}{|l|c|}
\hline \text { Balance per bank statement, June } 30 \ldots \ldots \ldots \ldots \ldots & \$ 9,079 \
\hline \text { Add: } & \
\hline \text { Deduct: } & \
\hline \text { Adjusted balance } & \
\hline \text { Balance per depositor's records, June } 30 \ldots \ldots \ldots & \$ 8.967 \
\hline \text { Add: } & \$ \
\hline \text { Deduct: } & \
\hline \text { Adjusted balance (as above) }& \$ \
\hline
\end{array}\end{array}$

Accepted Answer

The answer of Bank reconciliation
(A.) You are to complete the...

Question 5

Balance sheet method-journal entries
The general ledger controlling account for Accounts Receivable has a balance of $120,500 at year-end before adjustment. The company uses the balance sheet approach to estimate uncollectible accounts. By aging the individual customers' accounts, it was determined that the doubtful accounts amounted to $5,020. Prepare the year-end adjusting entry for uncollectible accounts under each of the following independent assumptions.
(a.) Allowance for Doubtful Accounts has a credit balance of $2,850.
(b.) Allowance for Doubtful Accounts has a debit balance of $925.

Accepted Answer

The answer of Balance sheet method-journal entries
The general ledger controlling...

Question 6

Bank reconciliation-classification
Indicate how the following items would be treated in a bank reconciliation. You may choose from the following answers:
(A) Deducted from the balance per accounting records.
(B) Added to balance per accounting records.
(C) Deducted from balance per bank statement.
(D) Added to balance per bank statement.

Accepted Answer

The answer of Bank reconciliation-classification
Indicate how the following items would...

Question 7

Financial assets-effects of transactions
Five events involving financial assets are described below:
(a.) Sold merchandise on account.
(b.) Sold available-for-sale marketable securities at a gain. Cash proceeds from the sale were equal to the current market value of the securities reflected in the last balance sheet.
(c.) Collected an account receivable.
(d.) Adjusted the allowance for doubtful accounts to reflect the portion of accounts receivable estimated to be uncollectible at year-end.
(e.) Made mark-to-market adjustment reducing the balance in the available-for-sale marketable securities account to reflect a decrease in the market value of securities owned.
Indicate the effects of each independent transaction or adjusting entry upon the financial measurements shown in the four column headings below. Use the code letters, I for increase, D for decrease, and NE for no effect.
 $$\begin{array} { | c | c | c | c | c | } 
\hline & & & \text { Net Cash Flow } & \text { Net Cash Flow } \
\hline & & \text { Net } & \text { from Operating } & \text { (from Any } \
\hline \text { Transaction } & \text { Current Assets } & \text { Income } & \text { Activities } & \text { Source) } \
\hline \text { A } & & & & \
\hline \text { B } & & & & \
\hline \text { C } & & & & \
\hline \text { D } & & & & \
\hline \text { E } & & & & \
\hline & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of Financial assets-effects of transactions
Five events involving financial...

Question 8

Notes receivable-computations
Complete the following statements about promissory notes and interest by entering amounts in the spaces provided. (Use 360 days in one year.)
 $\begin{array}{l}
(a)\text { The interest on } \$ 70,000 \text { for } 100 \text { days at } 14 \% \text { is } &\$\underline{\quad\quad}
\
(b)\text { The interest on } \$ 80,000 \text { for } 90 \text { days at } 14 \% \text { is } &\$\underline{\quad\quad}\
(c)\text { The interest on } \$ 3,200 \text { for } 45 \text { days at } 18 \% \text { is }&\$\underline{\quad\quad} \
(d)\text { A } 90 \text {-day note dated September } 20 \text { will mature on } &\underline{\quad\quad}\
(e)\text { If interest expense on a } 15 \% \text {, one-year note is } &\$\underline{\quad\quad}\
\$ 8,000 \text {, the amount of the note is } \
(f)\text { The maturity value of a } 12 \%, 60 \text {-day note for } &\$\underline{\quad\quad}\
\$ 40,000 \text { is } 
\end{array}$

Accepted Answer

The answer of Notes receivable-computations
Complete the following statements about promissory...

Question 9

Accounts receivable turnover rate
During 2010, Larsen Company's accounts receivable averaged $750,000. Larsen's 2010 income statement reported net sales of $6,780,000, uncollectible accounts expense of $160,000, and net income of $768,000. (Assume 365 days in a year.)
Using the information, compute the following for Larsen Company:
(a) Accounts receivable turnover: (Round to the nearest two decimals.)
(b) Average number of days to collect accounts receivable (round to nearest day, if necessary): (Round to the nearest %.)

Accepted Answer

The answer of Accounts receivable turnover rate
During 2010, Larsen Company's...

Question 10

Write-off of uncollectible account receivable
On January 10, Winston, Inc.'s trial balance included the following accounts:
On January 11, Len Palmer, a major customer, declares bankruptcy and thus, Winston determines that a receivable from Palmer in the amount of $3,400 is worthless.
(a) In the space provided, prepare the journal entry that Winston should record to write-off the account receivable from Len Palmer on January 11.
(b) Compute the net realizable value of Winston's accounts receivable at each of the following dates:
January 10 (before write-off of Palmer's account) $_______________
January 11 (immediately after write-off of Palmers' account) $_______________
 $\begin{array}{|c|c|c|}
\hline & \text { Debit } & \text { Credit } \
\hline\text { Accounts Receivable.. } & 220,000 & \
\hline \text { Allowance for Doubtful Accounts } & & \$ 7,200 \
\hline
\end{array}$   $\begin{array}{|l|l|}
\hline 20 \_ & \quad\quad\text {General Journal }\quad\quad\quad\quad \
\hline \text { Jan. } 11 & \
\hline
\end{array}$

Accepted Answer

The answer of Write-off of uncollectible account receivable
On January 10,...

Question 11

Uncollectible accounts--two methods
At the end of the year the unadjusted trial balance of Angel Provisions included the following accounts:
(a.) If Angel uses the balance sheet approach to estimate uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $6,075, what will the uncollectible accounts expense for the year be?
(b.) If the income statement approach to estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 1% of net credit sales, what is the amount of uncollectible accounts expense for the year?
 $$\begin{array} { | l | l | l | } 
\hline & \text { Debit } & \text { Credit } \
\hline \text { Sales } ( 80 \% \text { represent credit sales) } & & \$ 780,575 \
\hline \text { Accounts Receivable } & \$ 101,475 & \
\hline \text { Allowance for Doubtful Accounts } & & \$ 1,218 \
\hline
\end{array}$$

Accepted Answer

The answer of Uncollectible accounts--two methods
At the end of the...

Question 12

Financial assets
(a.) Briefly explain what is meant by the term "financial assets."
(b.) List the three major categories of assets comprising a company's financial assets. For each category, indicate the basis for valuation in the balance sheet.

Accepted Answer

The answer of Financial assets
(a.) Briefly explain what is meant...

Question 13

Cash management
(a.) What is meant by the term "cash management"?
(b.) Identify at least three basic objectives of effective cash management.

Accepted Answer

The answer of Cash management
(a.) What is meant by the...

Question 14

Bank reconciliation--computation and journal entry
The Cash account in the ledger of Arnaz Company showed a balance of $13,307 at March 31.
The bank statement, however, showed a balance of $9,936 at the same date. The only reconciling items consisted of a $4,902 deposit in transit, a bank service charge of $36, outstanding checks totaling $2,600, and an NSF check from L. Ball, one of Arnaz' customers.
(a) What is the amount of the adjusted cash balance on March 31?
(b) What is the amount of the NSF check?
(c) Record the journal entry necessary, if any, to adjust Arnaz Company's accounting records at March 31:

Accepted Answer

The answer of Bank reconciliation--computation and journal entry
The Cash account...

Question 15

Bank reconciliation
At March 31, the balance of the Cash account according to the records of Fisher Company was $7,261. The March 31 bank statement showed a balance of $8,798. You are to prepare the bank reconciliation of Fisher Company at March 31, using the following supplementary information:
(a.) Deposit in transit at March 31, $6,772.
(b.) Outstanding checks: no. 120, $140; no. 121, $932; no. 127, $307; no. 134, $2,200.
(c.) Service charge by bank, $50.
(d.) A note receivable for $5,050 left by Fisher Company with bank for collection that had been collected and credited to company's account. No interest involved.
(e.) A check for $90 drawn by a customer, Stuart Sands, but deducted from Fisher's account by the bank and returned with the notation "NSF."
(f.) Fisher's check no. 480, issued in payment of $970 worth of office equipment, correctly written in the amount of $970 but erroneously recorded in Fisher's accounting records as $790.
 $\text {Fisher Company}$
$\text {Bank Reconciliation}$
$\text {March 31, 20}$
$\begin{array}{|l|l|}
\hline \text { Balance per bank statement, March 31 } & \$\quad \
\hline \text { Add: } & \
\hline \text { Deduct: } & \
\hline & \underline{\$} \
\hline \text { Adjusted balance } & \
\hline & \$ \
\hline \text { Balance per depositor's records } & \
\hline \text { Add: } & \
\hline \text { Deduct: } & \
\hline & \$ \
\hline \text { Adjusted balance (as above) } &\
\hline
\end{array}$

Accepted Answer

The answer of Bank reconciliation
At March 31, the balance of...

Question 16

At December 31, 2009, Laconia Industries' portfolio of investments in available-for-sale marketable securities consisted of the following:
(a.) Illustrate the presentation of marketable securities and unrealized holding gain (or loss) in Laconia's financial statements at December 31, 2009. Indicate the financial statement and section in which each item appears.
(b.) Assume that on March 15, 2010, Laconia made the following sales of securities:
(1) Sold 5,000 shares of its investment in Crown, Inc., at a price of $20 per share.
(2) Sold 1,000 shares of its investment in Plastic Dots at a price of $45 per share.
Compute the gain or loss recognized in Laconia's 2010 income statement for each sale:
(1). Sale of 5,000 shares of Crown: $____________ Gain/Loss
(2). Sale of 1,000 shares of Plastic Dots: $____________ Gain/Loss
(c.) At December 31, 2010, the market values of these stocks are: Crown, $21 per share; Plastic Dots, $42 per share. Complete the following schedule showing cost and current market value of securities owned by Laconia at the end of 2010.
(d.) Illustrate the presentation of marketable securities and unrealized holding gain (or loss) in Laconia's financial statements at December 31, 2010. (Follow same format as in part a.)
 $\begin{array}{|c|c|c|}
\hline&& \text { Current }  \
\hline &\text { Cost } & \text { Market } \
\hline && \text { Value } \
\hline \text { Crown, Inc. }(10,000 \text { shares; cost, } \$ 10 \text { per share; } \
\text { Market value } \$ 16 \text { per share) }
 & \$ 100,000 & 160,000 \
\hline\
\hline \text { Plastic Dots  (5,000  shares; cost \$ 50 per share; }\
\text { Market value  \$ 47 per share)}&\$ 250.000 & 235.000\
\hline
\end{array}$  $$\begin{array} { | l | c | c | } 
\hline & & \text { Current } \
\hline & \text { Cost } & \text { Market } \
\hline & & \text { Value } \
\hline \text { Crown } & & \
\hline & & \
\hline \text { Plastic Dots } & & \
\hline
\end{array}$$

Accepted Answer

The answer of At December 31, 2009, Laconia Industries' portfolio...

Question 17

Bank reconciliation-classification
Indicate how the following items would be treated in Aladdin's, Inc.'s bank reconciliation. Choose from the following answers:
(a.) Deducted from the balance per accounting records.
(b.) Added to balance per accounting records.
(c.) Deducted from balance per bank statement.
(d.) Added to balance per bank statement.

Accepted Answer

The answer of Bank reconciliation-classification
Indicate how the following items would...

Question 18

Bank reconciliation--computations and journal entry
The Cash account in the ledger of Pine Golf Club shows a balance of $11,925 at December 31, 2009. The December 31 bank statement shows a balance of $10,440. The only reconciling items consist of:
Bank service charges of $32.
Deposit in transit of $1,813.
NSF check from customer L. Diamond in the amount of $126.
Error in recording check no. 970 for utilities: check was written in the amount of $834 but was recorded in Pine's accounting records as $384.
Outstanding checks.
(a) What is the amount of the adjusted cash balance at December 31, 2009?
$_______________
(b) What is the total amount of outstanding checks at December 31, 2009?
$_______________
(c) Record the journal entry necessary, if any, to adjust Pine's Golf Club accounting records at December 31, 2006. (An explanation is not required; a single compound journal entry is acceptable.)

Accepted Answer

The answer of Bank reconciliation--computations and journal entry
The Cash account...

Question 19

Balance sheet method-computations
Rainbow Company uses the balance sheet approach to estimate uncollectible accounts. By aging the customers' accounts, it was estimated that $7,325 of the company's month-end accounts receivable would prove to be uncollectible. Determine the amount that should be debited to the Uncollectible Accounts Expense account in the month-end adjusting entry under each of the following independent assumptions:
(a.) Before making any adjustment, the Allowance for Doubtful Accounts has
a $635 credit balance. $_______________
(b.) Before making any adjustment, the Allowance for Doubtful Accounts
has a debit balance of $720. $_______________

Accepted Answer

The answer of Balance sheet method-computations
Rainbow Company uses the balance...

Question 20

Financial assets--effects of transactions
Five events involving financial assets are described below:
(a.) Received dividends earned on investment in marketable securities.
(b.) Invested excess cash in marketable securities.
(c.) Determined that a specific account receivable is worthless and wrote it off against the allowance for doubtful accounts.
(d.) Made sale of merchandise for cash.
(e.) Sold available-for-sale marketable securities at a loss. Cash proceeds from the sale were equal to the current market value reflected in the last balance sheet.
Indicate the effects of each independent transaction or adjusting entry upon the financial measurements shown in the four column headings below. Use the code letters, I for increase, D for decrease, and NE for no effect.
 $$\begin{array} { | c | c | c | c | c | } 
\hline & & & \text { Net Cash Flow } & \text { Net Cash Flow } \
\hline & & \text { Net } & \text { from Operating } & \text { (from Any } \
\hline \text { Transaction } & \text { Current Assets } & \text { Income } & \text { Activities } & \text { Source) } \
\hline \text { A } & & & & \
\hline \text { B } & & & & \
\hline \text { C } & & & & \
\hline \text { D } & & & & \
\hline \text { E } & & & & \
\hline & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of Financial assets--effects of transactions
Five events involving financial...

Quiz 7: Financial Assets

Internal control over cash transactions (a.) Describe three measures contributing to strong internal control over cash receipts. (b.) Describe three measures contributing to effective internal control over cash disbursements.

Financial assets (a.) Briefly explain what is meant by the term "financial assets." (b.) List the three major categories of assets comprising a company's financial assets. For each category, indicate the basis for valuation in the balance sheet.

Cash management (a.) What is meant by the term "cash management"? (b.) Identify at least three basic objectives of effective cash management.