Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

(S.O. 5) The advantage of relating a company'bsa d debt expense to its accounts receivable is that this approach:GUaAW>gives a reasonably correct measure of receivables in the balance sheet.relates bad debt expense to the period of sale.is the only generally accepted method of valuing accounts
(S.O. 2) A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and is acceptable as a means top ay current liabilities.has a current market value that igsr eater than its original cost bears an interest rate that is at least equal to the
(S.O. 2) Etheredge Company held an IOU at December 31, 2012. The IOU should be reported as A. an investment.B. petty cash.(G. cash.D. a receivable.
(S.O. 1) Kari, Inc.'s book balance on December 31, 2012, was $5,000. In addition, Kari had the following items on its premises on December 31:Check payable to Kan, Inc., dated January 3, 2013, included in December 31 book balance $ 200 LET £ bs Postage stamps on hand not included in December 31
(S.O. 11) Ifa receivable is deemed to be individually impaired, the impairment loss is measured as the difference between the carrying value of the receivable and its fair value.
(S.O. 10) When preparing a bank reconciliation for the purpose of arriving at a correct cash balance, NSF (not sufficient funds) checks are subtracted from the balance per books.
(S.O. 10) Of the two bank reconciliation formats used by a business entity, the more widely used form reconciles both the bank balance and the book balance to a correct cash balance.
(S.O. 10) A bank reconciliation is an integral part of the system of internal control over cash.
(S.O. 10) If cash proves out short in a petty cash fund, the shortage is debited to the Cash Over and Short account.
(S.O. 10) The replenishment of the petty cash fund under an imprest system requires a debit to the Petty Cash account for the amount of the replenishment.
(S.O. 8) The present value of a note is measured by the fair value of the property, goods, or services exchanged for the note or by an amount that reasonably approximates the market value of nee note.
(S.O. 8) Factoring is the term used to describe the pledging of receivables as collateral for a loan.
(S.O. 8) If receivables are sold with recourse, the seller guarantees payment to the purchaser in the event the debtor does not pay.rn
(S.O.7) A trade receivable due two years hence should never be classified as a current asset.nl a a A
(S.O.5) The inclusion in the income statement of all returannsd |aI llloowwaanncceess nade during the period is en ST not acceptable accounting practice aas s omeo f the returns and aalllloo wances resulted from sales of av ouan‘period and, thus, th1mee a tchingc oncepti s violated. f \M ONO CON
(S.O.5) The percentage-of-receivables approach is also referred to as the income statement approach.oil eat 12. (S.O. 5) It is improper to offset assets and liabilities in the balance sheet, except wherea righotf offset exists. ae
(S.O. 5) Because the collectibility of receivables is considered a_loss contingency, the allowance method for recording bad debts is appropriate only in situations where it is probable that_an asset_ been impaired and that the amount of the loss can be reasonably estimated.aN
(S.O. 5) The direct write-off method used in recording uncollectible accounts receivable allows the expense associated with bad debts always to be recorded in the accounting period iinn which the sale was made. } ;
(S.O. 4) When a sale and the related receivable are initially recorded at the gross amount, sales discounts will be recognized in the accounts only when payment is received within the discount- period,
(S.O. 3) Accounts receivable are frequently accepted from customers who need to extend the payment period of an outstanding note receivable.
(S.O. 2) Bank overdrafts occur when a check is written for less than the amount in the cash account.
(S.O. 2) Bond sinking fund cash should not_be classified as a current asset because its use is restricted.
(S.O. 2) Legally restricted deposits held as compensating balances against short-term borrowing arrangements should be stated separately among the cash and cash items in current assets.‘
(S.O. 1) Because the bank has the legal right to, demand notice before withdrawal, savings accounts usually are not classified on an entity's balance sheet as cash.
(S.O. 1) Postage stamps on hand are classified as part of cash.
(S.O. 1) Cash consists of coin, currency, money market funds, certificates of deposit and other available funds on deposit at the bank.
Describe the accounting for a loan impairment.
Explain common techniques employed to control cash.
Describe how to report and analyze receivables.*
Explain accounting issues related to disposition of accounts and notes receivable.
Explain the fair value option.
Explain accounting issues related to recognition and valuation of notes receivable.
Explain accounting issues related to valuation of accounts receivable.
Explain accounting issues related to recognition of accounts receivable.
Define receivables and identify the different types of receivables.
Indicate how to report cash and related items.
Identify items considered cash.
How much should Mark set aside now, assuming that he can earn 8% interest compounded annually, so he can withdraw$10,000 at the end of each year for the next 10 years?
How much should Karen deposit on each birthday beginning on her twentieth birthday to accumulate$50,000 on her 50th birthday, assuming that she can earn 12%interest compounded annually (no deposit on her fiftieth birthday)?
At what annually compounded interest rate must Dave invest$25,331 to provide $50,000 at the end of 6 years?
If Pat has $15,000 in a bank earning 6% interest compounded annually, how much can he withdraw at the end of each year for the next 8 years?
If Daisy invests $3,000 at 8%, with interest computed on the principal plus undistributed interest, how much will she have at the end of 10 years (annual compounding)?
How many years will it take to accumulate $20,000 if Brent invests $1,845 at 10%?
What amount should Gay invest now at 12% to provide 5 payments of $5,000 at the end of each year, starting 3 years from now?
What rate of interest must Connie earn on an investment of $60,000 to be able to withdraw $9,000 at the beginning of each year for the next 10 years?
How much should Bob deposit at the end of each 6-month period to accumulate $20,000 when he graduates in 4 years assuming that he can earn an annual rate of 10% compounded semiannually?
How much will Tom receive if he invests $1,000 for 1 year at 5%?
(S.O. 7) Sharon Walsh has developed and patented a computer chip that allows telecommunications in race cars to become more efficient. She agrees to sell the patent to Pensca for five annual payments of $50,000 each. The payments are to begin three years from today. Given an annual rate of 6%, what
(S.O. 6) Jeanie Pearson plans to buy a golf course in 10 years. Because of cash flow problems, Jeanie is able to budget deposits of $900,000 that are expected to earn 10%annually only at the end of the seventh, eighth, ninth, and ies periods. What future amount will Jeanie accumulate at the end of
(S.O. 6) Kimberly Nelson, a computer programmer, wishes to create her own retirement fund. Kimberly deposits $4,000 today in a fixed rate savings account that earns 5% interest.She plans to deposit $4,000 every year for the next 24 years (total of 25 deposits). How much cash will she have
(S.O. 5) If J.J. Morse put $1,000 in a 12% savings account today, what amount of cash would be available 3 years from now?A. $1,0x 0.71017 8 B. $1,x0 .7101780 x 3 C. $1,000/.71178 D. ($1,000/.89286) x 3
(S.O. 5) What amount should Spencer Forman have in his 6% bank account today before withdrawal if he needs $3,000 each year for three years with the first withdrawal to be made today and each subsequent withdrawal at one-year intervals? (He is to have exactly a zero balance in his bank account
(S.O. 5) What amount should be deposited in a bank today at an interest rate of 10% to grow to $2,000 four years from today?A. $2,000/0.68301 B. $2,000 x 0.90909 x 3 C. ($2,000 x 0.90909) + ($2,000 x 0.82645) + ($2,000 x 0.75132) + ($2,000 x 0.68301)D. $2,000 x 0.68301
(S.O. 5) Bob Geimer plans on going on vacation to Asia in four years. The trip will cost$4,000. He proposes to finance the trip by investing a sum of money now at 9% compound interest. How much should Bob invest now in order to obtain his goal of $4,000?A. $2,474.67 6 $2,654.35 RUA \ygoio ood ‘C)
(S.O. 3) Which of the following transactions would best use the present value of an annuity due of 1 table. ;A. Diamond Bar, Inc. rents a truck for 5 years with annual rental payments of $20,000 to be made at the beginning of each year.B. Michener Co. rents a warehouse for 7 years with annual
(S.O. 3) On June 1, 2012, Walsh Company sold some equipment to Fischer Company. The two companies entered into an installment sales contract at a rate 8of% . The contract required 8 equal annual payments with the first payment due on June 1, 2012. What type of compound interest table 1s appropriate
(S.0. 3) Which of the following tables would show the largest value for an interest rate of 10% for 8 periods?A. Future amount of | table.B. Present value of | table.C. Future amount of an ordinary annuity of | table.D. Present value of an ordinary annuity of | table.
(S.O. 7) The valuation of a sum as of an earlier date involves a determination of present value; the valuation of a sum as of a later date involves a determination of a future value.
(S.O. 7) The future amount of a deferred annuity is normally greater than the future amount of an annunoit detferyre d.
(S.O. 7) The number of rents exceeds the number of discount periods under the present value of anN Oor didansaar y anntuease ity.
(S.O. 7) The present value of an ordinary annuity is the present value of series of rents to be made at equal intervals in the future.
(S.O. 6) Periodic interest earnings under an ordinary annuity will always be lower by one period's interest than the interest earned by an annuity due.
(S.O. 6) The ordinary annuity table may be used to compute the periodic rents when the desired future amount and the present value of the annuity are not known.
(S.O. 6) An annuity is classified as an ordinary annuity if the rents occur at the end of the period; it is classified as an annuity due if the rents occur at the beginning of the period.
(S.O. 6) An annuity requires that periodic rents always be the same even though the interval between the rents may vary.eS
(S.O. 4) Present value is the amount that must be invested now to produce a known future SS a —al amount.
(S.O. 3) If interest is compounded quarterly and the annual interest rate is 8%, the compounding period interest rate is 4%.SS t
(S.O. 2) The growth in principal is the same under both compound and simple interest if only one AocoEm porundidng peOerTi oddna nia s ia nvoalve d.
(S.O. 2) The major difference between compound interest and simple interest lies in the fact. . aS eee eey eee d that compound interest is computed twice each year, whereas simple interest is computed only once.
(S.O. 2) In the formula for compound interest, the number of periods refers to the number of moenthes an obleigeati on wiEllE bee oou tstatndeiang .
(S.O. 2) The amount of interest on a $1,000, 6%, 6-month note is the same as the amount of interest on a $1,000, 3%, 1-year note.
(S.O. 1) Present value techniques can be used in valuing receivables and payables that carry no stated interest rate.SES
(S.0.3) The following accounts appeared on the trial balance of Elbert Company at December 31,2012. All accounts have normal balances.Notes Payable $ 64,000 Accumulated Depreciation - Bldg. 261,000 Supplies on Hand 12,600 Accrued Salaries and Wages 11,400 Investments in Debt Securities* 93,800 Cash
(S.0.2) Indicate the most preferred balance sheet classification of each item in Group B by inserting the appropriate letter from Group A in the space provided.Current assets.Property, plant and Equipment Long-term investments Intangible assets Other assets Current liabilities Long-term liabilities
(S.O.1 and 2) On December 31, 2012, the total assets of Allen, Inc. were $91,000, and liabilities& were $48,000. Allen, Inc. began business January 1, 2008, and had an average net income of $16,000 per year. Total dividends paid for the five-year period were $63,850..cals HOMO Instructions: Compute
(S.0.1) Schwigert Corporation had a balance in accounts receivable on September 1, 2012, of ($33,000. All sales are made on account. During September the corporation collected $30,800 from customers, and at the end of September the accountants receivable totaled $27,500.Instructions: Compute the
(S.O. 10) Lindsey Corp. is concerned with measuring its ability to meet interest payments as they come due. Lindsey Corp. would most likely use which following ratio?Payout ratio.Inventory turnover.Times interest earned.s|a ws Price earnings ratio.
(S.O. 10) Amy Carlson Company had current assets of $12,000, current liabilities of $20,000, net sales of $40,000, cost of goods sold of $24,000, and net income of $8,000. What is Amy Carlson's profit margin on sales?A. 80%.B. 60%.C. 50%.D. 20%.
(S.O. 9) Which of the following reflects proper use of the term "reserve" in the preparation of _ financial statements?A. The term used to describe amounts deducted from assets, such as "reserve for depreciation."B. The initial term used in connection with an estimated liability, such as "estimated
(S.O. 8) Which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure?A. Current assets.B. Current liabilities.ee Plant assets.D. Long-term liabilities.
(S.O. 7) One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility. Which of the following explanations is a description of financial flexibili y?A. The nearness to cash of assets and liabilities.B. The firm's ability to respond and adapt to financial
(S.O. 5) How would the two items shown below be handled in arriving at cash provided by operations in the statement of cash flows?Increase in Increase in Accounts Receivable Accounts Payable Ee.A. Add to net income Add to net income ee B. Deduct from net income Deduct from net income CAS W.C. Add
(S.O. 5) The payment of cash dividends to the common shareholders would be reported on a company's statement of cash flows under the classification of Operating Activities.Financing Activities.Investing Activities.vaw> Significant Transactions.
(S.0. 5) Which of the following would not be considered a basic source of information useful in preparing a statement of cash flows?Selected transaction data.Comparative balance sheéts.An analysis of sales by territory.VOWS The current income statement.
(S.O.4) The statement of cash flows provides answers to all of the following questions except:Where did the cash come from during the period?What was the cash used for during the period?What is the impact of inflation on the cash balance at the end of the year?vow> What was the change in the cash
(S.O. 2) How are the following items handled in computing the total stockholders' equity section of the balance sheet?Treasury Additional Stock Paid-in Capital A. Added Added B. Added Subtracted GS Subtracted Added D. Subtracted Subtracted
(S.O. 2) If a company converted a short-term note payable into a long-term note payable, this transaction would increase both working capital and net income.decrease only working capital.increase only working capital.vOm> decrease both working capital and owners' equity.
(S.O. 2) A characteristic of all assets and liabilities comprising working capital is that they are A. monetary.B. marketable.GC, current.D. cash equivalents.
(S.O. 2) A liability to be paid next year would not be included in the current liability section of the balance sheet if the debt is expected to be refinanced through another long-term issue, or the operating cycle is less than one year.the liability is to be paid with cash that the company expects
(S.O. 2) One of the main reasons for separating liabilities into current and long-term is:GaAwWS to provide decision makers with information regarding currently maturing debts.to separate large and small debts.to separate capital into its component parts.to separate total equity into its two basic
(S.O.2) Prepaid expenses are included in the current assets section of the balance sheet because A. they will be converted into cash within one year or the operating cycle, whichever is longer.if they had not been already paid they would require the use of cash during the next year or operating
(S.O. 2) Of the following items, the one which should be classified as a current asset is trade installment receivables normally collectible in 20 months.a deposit on equipment ordered, delivery of which will be made within 7 months.cash designated for the redemption of callable bonds.cash
(S.O. 2) Which of the following items should never be included in the current section of the balance Receivable from a customer outstanding for more than a year.Deferred income taxes resulting from interperiod tax allocation.Three-year premium for fire insurance on plant and equipment.A pension
(S.O. 2) Of the following statements, which best illustrates the fact that the formal distinction made between current and noncurrent assets is somewhat arbitrary?Cash in a checking account is a current asset, while cash in a savings account is more permanent and is normally classified as
(S.O. 2) Which of the following is not a current asset?Prepaid property taxes that relate to the next operating period.The cash surrender value of a life insurance policy carried by a corporation on its president.Marketable securities purchased as a temporary investment of cash.Installment notes
(S.O. 2) If$1,240 cash and a $4,760 note are given in exchange for a delivery truck to be used in a business:A. assets and liabilities will change by the same amount.B. owners' equity will be increased.Gs assets will increase and liabilities decrease.D. assets and liabilities will increase but by
(S.O. 2) For accounting purposes the "operating cycle concept"A. has become obsolete.B. affects the income statement but not the balance sheet.Gc permits some assets to be classified as current even though they are more than one year removed from becoming cash.D. causes the distinction between
(S.O. 1) The primary purpose of the balance sheet is to reflect the firm's potential for growth in stock values in the stock market.items of value, debts, and net worth. S the value of items owned by the firm.cOw> the status of the firm's assets in case of forced liquidation of the firm.
(S.O. 1) One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is:failure to reflect current value information.the extensive use of separate classifications.an extensive use of estimates.GOS failure to include items of financial value that
(S.O. 1) Solvency refers to:A. the ability of an enterprise to pay its debts as they mature.B. the amount of time that is expected to elapse until an asset is realized.o the amount of time that is expected to elapse until a liability has to be paid.D: the amount of time that is expected to elapse

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Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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