Multiple Choice Questions
1. Which of the following items should be classified under the heading of cash on the balance sheet?
Postdated checks Certificates of deposit
a. Yes ...... Yes
b. Yes ...... No
c. No ...... No
d. No ...... Yes
2. Greenfield Company had the following cash balances at December 31, 2007:
Cash in banks ............... $1,500,000
Petty cash funds (all funds were
reimbursed on December 31, 2007) ...... 20,000
Cash legally restricted for additions to
plant (expected to be disbursed in 2009) ..... 2,000,000
Cash in banks includes $500,000 of compensating balances against short-term borrowing arrangements at December 31, 2007. The compensating balances are not legally restricted as to withdrawal by Greenfield. In the current assets section of Greenfield€™s December 31, 2007 balance sheet, what total amount should be reported as cash?
a. $1,020,000
b. $1,520,000
c. $3,020,000
d. $3,520,000
3. On January 1, 2007, King Company€™s Allowance for Doubtful Accounts had a credit balance of $15,000. During 2007 King, (1) charged $32,000 to bad debt expense, (2) wrote off $23,000 of uncollectible accounts receivable, and (3) unexpectedly recovered $6,000 of bad debts written off in the prior year. The Allowance for Doubtful Accounts balance at December 31, 2007 should be:
a. $47,000
b. $32,000
c. $30,000
d. $24,000
4. A company is in its first year of operations and has never written off any accounts receivable as uncollectible. When the allowance method of recognizing bad debt expense is used, the entry to recognize that expense
a. Increases net income
b. Decreases current assets
c. Has no effect on current assets
d. Has no effect on net income
5. Tallent Company received a $30,000, 6-month, 10% interest-bearing note from a customer. After holding the note for two months, Tallent was in need of cash and discounted the note at the United National Bank at a 12% discount rate. The amount of cash received by Tallent from the bank was
a. $31,260
b. $30,870
c. $30,300
d. $30,240
6. When the accounts receivable of a company are sold outright to a company that normally buys accounts receivable of other companies without recourse, the accounts receivable have been
a. Factored
b. Assigned
c. Pledged
d. Collateralized
7. A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on
a. Direct write-off
b. Aging the trade receivable accounts
c. Credit sales
d. The balance in the trade receivable accounts
8. Prior to adjustments, Barrett Company€™s account balances at December 31, 2007 for Accounts Receivable and the related Allowance for Doubtful Accounts were $1,200,000 and $60,000, respectively. An aging of accounts receivable indicated that $106,000 of the December 31, 2007 receivables may be uncollectible. The net realizable value of accounts receivable was
a. $1,034,000
b. $1,094,000
c. $1,140,000
d. $1,154,000
9. Marmol Corporation uses the allowance method for bad debts. During 2007 Marmol charged $30,000 to bad debt expense and wrote off $25,200 of uncollectible accounts receivable. These transactions resulted in a decrease in working capital of
a. $0
b. $4,800
c. $25,200
d. $30,000
10. The following bank reconciliation is presented for the Kingston Company for the month of November 2007:

Data for the month of December 2007 follow:
Per bank_____________________________
December deposits ...... $26,100
December disbursements ...... 22,420
Balance, 12/31/07 ........ 21,720
All items that were outstanding as of November 30 cleared through the bank in December, including the bank credit. In addition, $2,500 in checks were outstanding as of
December 31, 2007. What is the balance of cash per books at December 31, 2007?
a. $19,220
b. $19,240
c. $21,720
d.$24,220

Transcribed Image Text:

Balance per bank statement, 1/30/07 Add: Deposit in transit $18,040 4,150 $22,190 Less: Outstanding checks Bank credit recorded in errOr 6,300 20 (6,320) Balance per books, 11/30/07 $15,870