Classroom Response System Questions to accompany Needles/Powers,  Financial Accounting , Ninth Edition CHAPTER 7
Instructor Notes <ul><li>all content comes from Study Guide and Test Bank </li></ul><ul><li>“notes page ” view displays ex...
Question 1 <ul><li>Because Tamara Company’s sales are concentrated in the summer, its managers must carefully plan for bor...
Question 1 <ul><li>Because Tamara Company’s sales are concentrated in the summer, its managers must carefully plan for bor...
Question 2 <ul><li>Loans to a company’s officers should not be included in Accounts Receivable on the balance sheet.  </li...
Question 2 <ul><li>Loans to a company’s officers should not be included in Accounts Receivable on the balance sheet.  </li...
Question 3 <ul><li>When a customer overpays, his or her account on the company’s books has a credit balance.  </li></ul><u...
Question 3 <ul><li>When a customer overpays, his or her account on the company’s books has a credit balance.  </li></ul><u...
Question 4 <ul><li>Trade credit  refers to sales that wholesalers and retailers make on credit.  </li></ul><ul><ul><li>T <...
Question 4 <ul><li>Trade credit  refers to sales that wholesalers and retailers make on credit.  </li></ul><ul><ul><li>T *...
Question 5 <ul><li>When a note is discounted at a bank, the maker must make good on the note if the payee defaults.  </li>...
Question 5 <ul><li>When a note is discounted at a bank, the maker must make good on the note if the payee defaults.  </li>...
Question 6 <ul><li>The figure for receivable turnover is a component in the calculation of days’ sales uncollected.  </li>...
Question 6 <ul><li>The figure for receivable turnover is a component in the calculation of days’ sales uncollected.  </li>...
Question 7 <ul><li>The use of a major credit card (e.g., MasterCard) is an example of factoring with recourse. </li></ul><...
Question 7 <ul><li>The use of a major credit card (e.g., MasterCard) is an example of factoring with recourse. </li></ul><...
Question 8 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per bank?  </li></...
Question8 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per bank?  </li></u...
Question 9 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is  </li></ul><ul><ul><li>$600. </li></u...
Question 9 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is  </li></ul><ul><ul><li>$600. *Correct...
Question 10 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per books?  </li>...
Question 10 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per books?  </li>...
Question 11 <ul><li>Accounts receivable are an example of a cash equivalent.  </li></ul><ul><ul><li>T </li></ul></ul><ul><...
Question 11 <ul><li>Accounts receivable are an example of a cash equivalent.  </li></ul><ul><ul><li>T </li></ul></ul><ul><...
Question 12 <ul><li>An  imprest system  refers to the mechanics of a petty cash fund.  </li></ul><ul><ul><li>T </li></ul><...
Question 12 <ul><li>An  imprest system  refers to the mechanics of a petty cash fund.  </li></ul><ul><ul><li>T *Correct An...
Question 13 <ul><li>A check that is outstanding for two consecutive months should be included in both months’ bank reconci...
Question 13 <ul><li>A check that is outstanding for two consecutive months should be included in both months’ bank reconci...
Question 14 <ul><li>Which of the following would  not  be included in Cash or Cash Equivalents?  </li></ul><ul><ul><li>Nin...
Question 14 <ul><li>Which of the following would  not  be included in Cash or Cash Equivalents?  </li></ul><ul><ul><li>Nin...
Question 15 <ul><li>An example of a cash equivalent is  </li></ul><ul><ul><li>a 120-day time deposit. </li></ul></ul><ul><...
Question 15 <ul><li>An example of a cash equivalent is  </li></ul><ul><ul><li>a 120-day time deposit. </li></ul></ul><ul><...
Question 16  <ul><li>Which of the following would  not  be a valid reason to keep some currency on hand at a place of busi...
Question 16  <ul><li>Which of the following would  not  be a valid reason to keep some currency on hand at a place of busi...
Question 17 <ul><li>The matching rule  </li></ul><ul><ul><li>necessitates the recording of an estimated amount for bad deb...
Question 17 <ul><li>The matching rule  </li></ul><ul><ul><li>necessitates the recording of an estimated amount for bad deb...
Question 18 <ul><li>Which of the following methods of recording uncollectible accounts expense would best be described as ...
Question 18 <ul><li>Which of the following methods of recording uncollectible accounts expense would best be described as ...
Question 19 <ul><li>A successful credit policy balances an acceptable level of credit losses with the potential for profit...
Question 19 <ul><li>A successful credit policy balances an acceptable level of credit losses with the potential for profit...
Question 20 <ul><li>Because bad debt losses are incurred to generate sales, they should be charged against the sales that ...
Question 20 <ul><li>Because bad debt losses are incurred to generate sales, they should be charged against the sales that ...
Question 21 <ul><li>Under the direct charge-off method, Allowance for Uncollectible Accounts does not exist. </li></ul><ul...
Question 21 <ul><li>Under the direct charge-off method, Allowance for Uncollectible Accounts does not exist. </li></ul><ul...
Question 22  <ul><li>The direct charge-off method makes no attempt to match bad-debt losses with revenues.  </li></ul><ul>...
Question 22  <ul><li>The direct charge-off method makes no attempt to match bad-debt losses with revenues.  </li></ul><ul>...
Question 23 <ul><li>The goal of a successful credit policy is to maximize the  </li></ul><ul><li>potential profit on total...
Question 23 <ul><li>The goal of a successful credit policy is to maximize the  </li></ul><ul><li>potential profit on total...
Question 24 <ul><li>The allowance for uncollectible accounts is necessary because  </li></ul><ul><ul><li>a liability resul...
Question 24 <ul><li>The allowance for uncollectible accounts is necessary because  </li></ul><ul><ul><li>a liability resul...
Question 25 <ul><li>Each of the following is a characteristic of a promissory  note  except   </li></ul><ul><ul><li>a paye...
Question 25 <ul><li>Each of the following is a characteristic of a promissory  note  except   </li></ul><ul><ul><li>a paye...
Question 26 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is  </li></ul><ul><ul><li>$600. </li></...
Question 26 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is  </li></ul><ul><ul><li>$600. </li></...
Question 27 <ul><li>Interest of 5 percent on $700 for 90 days would be computed as follows:  700 × .05 × 90.  </li></ul><u...
Question 27 <ul><li>Interest of 5 percent on $700 for 90 days would be computed as follows:  700 × .05 × 90.  </li></ul><u...
Question 28 <ul><li>A note dated December 14 and due February 14 has a duration of 60 days.  </li></ul><ul><ul><li>T </li>...
Question 28 <ul><li>A note dated December 14 and due February 14 has a duration of 60 days.  </li></ul><ul><ul><li>T </li>...
Question 29 <ul><li>The maturity value of an interest-bearing note equals principal plus interest.  </li></ul><ul><ul><li>...
Question 29 <ul><li>The maturity value of an interest-bearing note equals principal plus interest.  </li></ul><ul><ul><li>...
Question 30 <ul><li>Each of the following is a characteristic of a promissory note  except  a(n)   </li></ul><ul><ul><li>m...
Question 30 <ul><li>Each of the following is a characteristic of a promissory note  except  a(n)   </li></ul><ul><ul><li>m...
Question 31 <ul><li>Which of the following statements is  false  regarding promissory notes?  </li></ul><ul><ul><li>They a...
Question 31 <ul><li>Which of the following statements is  false  regarding promissory notes?  </li></ul><ul><ul><li>They a...
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Chapter 7: Cash and Receivables

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  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 1 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 1 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 5 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 5 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 6 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 6 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True False Question 8 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True False Question 8 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 9 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 9 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 11 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 11 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 18 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 18 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Multiple Choice Question 3 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Multiple Choice Question 3 Learning Objective 1
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Multiple Choice Question Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Multiple Choice Question Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Multiple Choice Question 10 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Multiple Choice Question 10 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 17 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 17 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 19 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 19 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 21 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 21 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 87 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 87 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 88 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 88 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 89 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 89 Learning Objective 2
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 4 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 4 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 5 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 5 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, True/False Question 48 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, True/False Question 48 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, True/False Question 49 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, True/False Question 49 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 1 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 1 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, True/ False Question 51 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, True/ False Question 51 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question104 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question104 Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Question Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Question Learning Objective 3
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 8 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 8 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 9 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, Self-Test Question 9 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 7 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 7 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 10 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 10 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 13 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Study Guide Chapter 7, True/False Question 13 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 135 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 135 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 136 Learning Objective 4
  • Source: Needles/Powers, Financial Accounting, 9th ed. Test Bank Chapter 7, Multiple Choice Question 136 Learning Objective 4
  • Chapter 7: Cash and Receivables

    1. 1. Classroom Response System Questions to accompany Needles/Powers, Financial Accounting , Ninth Edition CHAPTER 7
    2. 2. Instructor Notes <ul><li>all content comes from Study Guide and Test Bank </li></ul><ul><li>“notes page ” view displays exact source of content </li></ul>
    3. 3. Question 1 <ul><li>Because Tamara Company’s sales are concentrated in the summer, its managers must carefully plan for borrowing needs and short-term investments. This is an example of management’s responsibility to </li></ul><ul><ul><li>finance receivables. </li></ul></ul><ul><ul><li>manage cash needs during seasonal cycles. </li></ul></ul><ul><ul><li>set reasonable credit policies. </li></ul></ul><ul><ul><li>finance purchases of long-term assets. </li></ul></ul>
    4. 4. Question 1 <ul><li>Because Tamara Company’s sales are concentrated in the summer, its managers must carefully plan for borrowing needs and short-term investments. This is an example of management’s responsibility to </li></ul><ul><ul><li>finance receivables. </li></ul></ul><ul><ul><li>manage cash needs during seasonal cycles. *Correct Answer </li></ul></ul><ul><ul><li>set reasonable credit policies. </li></ul></ul><ul><ul><li>finance purchases of long-term assets. </li></ul></ul>
    5. 5. Question 2 <ul><li>Loans to a company’s officers should not be included in Accounts Receivable on the balance sheet. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    6. 6. Question 2 <ul><li>Loans to a company’s officers should not be included in Accounts Receivable on the balance sheet. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    7. 7. Question 3 <ul><li>When a customer overpays, his or her account on the company’s books has a credit balance. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    8. 8. Question 3 <ul><li>When a customer overpays, his or her account on the company’s books has a credit balance. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    9. 9. Question 4 <ul><li>Trade credit refers to sales that wholesalers and retailers make on credit. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    10. 10. Question 4 <ul><li>Trade credit refers to sales that wholesalers and retailers make on credit. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    11. 11. Question 5 <ul><li>When a note is discounted at a bank, the maker must make good on the note if the payee defaults. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    12. 12. Question 5 <ul><li>When a note is discounted at a bank, the maker must make good on the note if the payee defaults. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F *Correct Answer </li></ul></ul><ul><ul><li>Hint: The payee must make good if the maker defaults. </li></ul></ul>
    13. 13. Question 6 <ul><li>The figure for receivable turnover is a component in the calculation of days’ sales uncollected. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    14. 14. Question 6 <ul><li>The figure for receivable turnover is a component in the calculation of days’ sales uncollected. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    15. 15. Question 7 <ul><li>The use of a major credit card (e.g., MasterCard) is an example of factoring with recourse. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    16. 16. Question 7 <ul><li>The use of a major credit card (e.g., MasterCard) is an example of factoring with recourse. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F *Correct Answer </li></ul></ul><ul><ul><li>Hint: Major credit cards involve factoring without recourse. </li></ul></ul>
    17. 17. Question 8 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per bank? </li></ul><ul><ul><li>Deposits in transit </li></ul></ul><ul><ul><li>Bank service charge </li></ul></ul><ul><ul><li>Outstanding checks </li></ul></ul><ul><ul><li>Interest earned </li></ul></ul>
    18. 18. Question8 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per bank? </li></ul><ul><ul><li>Deposits in transit *Correct Answer </li></ul></ul><ul><ul><li>Bank service charge </li></ul></ul><ul><ul><li>Outstanding checks </li></ul></ul><ul><ul><li>Interest earned </li></ul></ul>
    19. 19. Question 9 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is </li></ul><ul><ul><li>$600. </li></ul></ul><ul><ul><li>$5,850. </li></ul></ul><ul><ul><li>$6,600. </li></ul></ul><ul><ul><li>$6,150. </li></ul></ul>
    20. 20. Question 9 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is </li></ul><ul><ul><li>$600. *Correct Answer </li></ul></ul><ul><ul><li>$5,850. </li></ul></ul><ul><ul><li>$6,600. </li></ul></ul><ul><ul><li>$6,150. </li></ul></ul>
    21. 21. Question 10 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per books? </li></ul><ul><ul><li>Note receivable collected by bank </li></ul></ul><ul><ul><li>NSF check from customer </li></ul></ul><ul><ul><li>Deposit made, but not shown on bank statement </li></ul></ul><ul><ul><li>Issued check for $52, but recorded it for $25 </li></ul></ul>
    22. 22. Question 10 <ul><li>On a bank reconciliation, which of the following items would be added to the balance per books? </li></ul><ul><ul><li>Note receivable collected by bank </li></ul></ul><ul><ul><li>NSF check from customer *Correct Answer </li></ul></ul><ul><ul><li>Deposit made, but not shown on bank statement </li></ul></ul><ul><ul><li>Issued check for $52, but recorded it for $25 </li></ul></ul>
    23. 23. Question 11 <ul><li>Accounts receivable are an example of a cash equivalent. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    24. 24. Question 11 <ul><li>Accounts receivable are an example of a cash equivalent. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F *Correct Answer </li></ul></ul><ul><ul><li>Hint: Accounts Receivable are a short-term financial asset but not a cash equivalent. </li></ul></ul>
    25. 25. Question 12 <ul><li>An imprest system refers to the mechanics of a petty cash fund. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    26. 26. Question 12 <ul><li>An imprest system refers to the mechanics of a petty cash fund. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    27. 27. Question 13 <ul><li>A check that is outstanding for two consecutive months should be included in both months’ bank reconciliations. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    28. 28. Question 13 <ul><li>A check that is outstanding for two consecutive months should be included in both months’ bank reconciliations. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    29. 29. Question 14 <ul><li>Which of the following would not be included in Cash or Cash Equivalents? </li></ul><ul><ul><li>Ninety-day U.S. Treasury bills held </li></ul></ul><ul><ul><li>Deposits in bank checking accounts </li></ul></ul><ul><ul><li>Checks and money orders received from customers </li></ul></ul><ul><ul><li>Six-month certificates of deposit held </li></ul></ul>
    30. 30. Question 14 <ul><li>Which of the following would not be included in Cash or Cash Equivalents? </li></ul><ul><ul><li>Ninety-day U.S. Treasury bills held </li></ul></ul><ul><ul><li>Deposits in bank checking accounts </li></ul></ul><ul><ul><li>Checks and money orders received from customers </li></ul></ul><ul><ul><li>Six-month certificates of deposit held *Correct Answer </li></ul></ul>
    31. 31. Question 15 <ul><li>An example of a cash equivalent is </li></ul><ul><ul><li>a 120-day time deposit. </li></ul></ul><ul><ul><li>notes receivable. </li></ul></ul><ul><ul><li>accounts receivable. </li></ul></ul><ul><ul><li>a 60-day certificate of deposit. </li></ul></ul>
    32. 32. Question 15 <ul><li>An example of a cash equivalent is </li></ul><ul><ul><li>a 120-day time deposit. </li></ul></ul><ul><ul><li>notes receivable. </li></ul></ul><ul><ul><li>accounts receivable. </li></ul></ul><ul><ul><li>a 60-day certificate of deposit. *Correct Answer </li></ul></ul>
    33. 33. Question 16 <ul><li>Which of the following would not be a valid reason to keep some currency on hand at a place of business? </li></ul><ul><ul><li>To pay small, unforeseen expenses </li></ul></ul><ul><ul><li>To make up for any imbalance in the books </li></ul></ul><ul><ul><li>To advance money to sales reps for travel expenses </li></ul></ul><ul><ul><li>To provide money for cash registers </li></ul></ul>
    34. 34. Question 16 <ul><li>Which of the following would not be a valid reason to keep some currency on hand at a place of business? </li></ul><ul><ul><li>To pay small, unforeseen expenses </li></ul></ul><ul><ul><li>To make up for any imbalance in the books *Correct Answer </li></ul></ul><ul><ul><li>To advance money to sales reps for travel expenses </li></ul></ul><ul><ul><li>To provide money for cash registers </li></ul></ul>
    35. 35. Question 17 <ul><li>The matching rule </li></ul><ul><ul><li>necessitates the recording of an estimated amount for bad debts. </li></ul></ul><ul><ul><li>is violated when the allowance method is used. </li></ul></ul><ul><ul><li>results in the recording of an exact amount for losses from bad debts. </li></ul></ul><ul><ul><li>requires that losses from bad debts be recorded whenever a customer defaults. </li></ul></ul>
    36. 36. Question 17 <ul><li>The matching rule </li></ul><ul><ul><li>necessitates the recording of an estimated amount for bad debts. *Correct Answer </li></ul></ul><ul><ul><li>is violated when the allowance method is used. </li></ul></ul><ul><ul><li>results in the recording of an exact amount for losses from bad debts. </li></ul></ul><ul><ul><li>requires that losses from bad debts be recorded whenever a customer defaults. </li></ul></ul>
    37. 37. Question 18 <ul><li>Which of the following methods of recording uncollectible accounts expense would best be described as an income statement method? </li></ul><ul><ul><li>Accounts receivable aging method </li></ul></ul><ul><ul><li>Direct charge-off method </li></ul></ul><ul><ul><li>Percentage of net sales method </li></ul></ul><ul><ul><li>Both a and b </li></ul></ul>
    38. 38. Question 18 <ul><li>Which of the following methods of recording uncollectible accounts expense would best be described as an income statement method? </li></ul><ul><ul><li>Accounts receivable aging method </li></ul></ul><ul><ul><li>Direct charge-off method </li></ul></ul><ul><ul><li>Percentage of net sales method *Correct Answer </li></ul></ul><ul><ul><li>Both a and b </li></ul></ul>
    39. 39. Question 19 <ul><li>A successful credit policy balances an acceptable level of credit losses with the potential for profit from total credit sales. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    40. 40. Question 19 <ul><li>A successful credit policy balances an acceptable level of credit losses with the potential for profit from total credit sales. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    41. 41. Question 20 <ul><li>Because bad debt losses are incurred to generate sales, they should be charged against the sales that they helped generate. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    42. 42. Question 20 <ul><li>Because bad debt losses are incurred to generate sales, they should be charged against the sales that they helped generate. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    43. 43. Question 21 <ul><li>Under the direct charge-off method, Allowance for Uncollectible Accounts does not exist. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    44. 44. Question 21 <ul><li>Under the direct charge-off method, Allowance for Uncollectible Accounts does not exist. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    45. 45. Question 22 <ul><li>The direct charge-off method makes no attempt to match bad-debt losses with revenues. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    46. 46. Question 22 <ul><li>The direct charge-off method makes no attempt to match bad-debt losses with revenues. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    47. 47. Question 23 <ul><li>The goal of a successful credit policy is to maximize the </li></ul><ul><li>potential profit on total credit sales while </li></ul><ul><ul><li>limiting credit losses to an acceptable level. </li></ul></ul><ul><ul><li>minimizing the number of credit customers. </li></ul></ul><ul><ul><li>keeping credit sales as low as possible. </li></ul></ul><ul><ul><li>selling only to customers who will pay. </li></ul></ul>
    48. 48. Question 23 <ul><li>The goal of a successful credit policy is to maximize the </li></ul><ul><li>potential profit on total credit sales while </li></ul><ul><ul><li>limiting credit losses to an acceptable level. *Correct Answer </li></ul></ul><ul><ul><li>minimizing the number of credit customers. </li></ul></ul><ul><ul><li>keeping credit sales as low as possible. </li></ul></ul><ul><ul><li>selling only to customers who will pay. </li></ul></ul>
    49. 49. Question 24 <ul><li>The allowance for uncollectible accounts is necessary because </li></ul><ul><ul><li>a liability results when a credit sale is made. </li></ul></ul><ul><ul><li>when recording uncollectible accounts expense, it is not possible to predict specifically which accounts will not be collected. </li></ul></ul><ul><ul><li>management should know how many credit losses have been sustained over the years. </li></ul></ul><ul><ul><li>uncollected accounts that are written off must be accumulated in a separate account. </li></ul></ul>
    50. 50. Question 24 <ul><li>The allowance for uncollectible accounts is necessary because </li></ul><ul><ul><li>a liability results when a credit sale is made. </li></ul></ul><ul><ul><li>when recording uncollectible accounts expense, it is not possible to predict specifically which accounts will not be collected. *Correct Answer </li></ul></ul><ul><ul><li>management should know how many credit losses have been sustained over the years. </li></ul></ul><ul><ul><li>uncollected accounts that are written off must be accumulated in a separate account. </li></ul></ul>
    51. 51. Question 25 <ul><li>Each of the following is a characteristic of a promissory note except </li></ul><ul><ul><li>a payee who has an unconditional right to receive a definite amount on a definite date. </li></ul></ul><ul><ul><li>an amount to be paid that can be determined on the date the note is signed. </li></ul></ul><ul><ul><li>a due date that can be determined on the date the note is signed. </li></ul></ul><ul><ul><li>a maker who agrees to pay a definite sum subject to conditions to be determined at a later date. </li></ul></ul>
    52. 52. Question 25 <ul><li>Each of the following is a characteristic of a promissory note except </li></ul><ul><ul><li>a payee who has an unconditional right to receive a definite amount on a definite date. </li></ul></ul><ul><ul><li>an amount to be paid that can be determined on the date the note is signed. </li></ul></ul><ul><ul><li>a due date that can be determined on the date the note is signed. </li></ul></ul><ul><ul><li>a maker who agrees to pay a definite sum subject to conditions to be determined at a later date. *Correct Answer </li></ul></ul>
    53. 53. Question 26 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is </li></ul><ul><ul><li>$600. </li></ul></ul><ul><ul><li>$5,850. </li></ul></ul><ul><ul><li>$6,600. </li></ul></ul><ul><ul><li>$6,150. </li></ul></ul>
    54. 54. Question 26 <ul><li>The maturity value of a $6,000, three-month note at 10 percent is </li></ul><ul><ul><li>$600. </li></ul></ul><ul><ul><li>$5,850. </li></ul></ul><ul><ul><li>$6,600. </li></ul></ul><ul><ul><li>$6,150. *Correct Answer </li></ul></ul>
    55. 55. Question 27 <ul><li>Interest of 5 percent on $700 for 90 days would be computed as follows: 700 × .05 × 90. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    56. 56. Question 27 <ul><li>Interest of 5 percent on $700 for 90 days would be computed as follows: 700 × .05 × 90. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F *Correct Answer </li></ul></ul><ul><ul><li>Hint: The computation is 700 × .05 × 90/365. </li></ul></ul>
    57. 57. Question 28 <ul><li>A note dated December 14 and due February 14 has a duration of 60 days. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    58. 58. Question 28 <ul><li>A note dated December 14 and due February 14 has a duration of 60 days. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F *Correct Answer </li></ul></ul><ul><ul><li>Hint: It has a duration of 62 days. </li></ul></ul>
    59. 59. Question 29 <ul><li>The maturity value of an interest-bearing note equals principal plus interest. </li></ul><ul><ul><li>T </li></ul></ul><ul><ul><li>F </li></ul></ul>
    60. 60. Question 29 <ul><li>The maturity value of an interest-bearing note equals principal plus interest. </li></ul><ul><ul><li>T *Correct Answer </li></ul></ul><ul><ul><li>F </li></ul></ul>
    61. 61. Question 30 <ul><li>Each of the following is a characteristic of a promissory note except a(n) </li></ul><ul><ul><li>maturity date that can be determined on the date the note is signed. </li></ul></ul><ul><ul><li>payee who has an unconditional right to receive a definite amount on a definite date. </li></ul></ul><ul><ul><li>maker who agrees to pay a definite sum subject to certain conditions. </li></ul></ul><ul><ul><li>amount to be paid that can be determined on the date the note is signed. </li></ul></ul>
    62. 62. Question 30 <ul><li>Each of the following is a characteristic of a promissory note except a(n) </li></ul><ul><ul><li>maturity date that can be determined on the date the note is signed. </li></ul></ul><ul><ul><li>payee who has an unconditional right to receive a definite amount on a definite date. </li></ul></ul><ul><ul><li>maker who agrees to pay a definite sum subject to certain conditions. *Correct Answer </li></ul></ul><ul><ul><li>amount to be paid that can be determined on the date the note is signed. </li></ul></ul>
    63. 63. Question 31 <ul><li>Which of the following statements is false regarding promissory notes? </li></ul><ul><ul><li>They are sometimes used to extend past-due accounts. </li></ul></ul><ul><ul><li>They can be resold to banks. </li></ul></ul><ul><ul><li>They must be held by the maker until maturity. </li></ul></ul><ul><ul><li>They are often received upon the sale of machinery and automobiles. </li></ul></ul>
    64. 64. Question 31 <ul><li>Which of the following statements is false regarding promissory notes? </li></ul><ul><ul><li>They are sometimes used to extend past-due accounts. </li></ul></ul><ul><ul><li>They can be resold to banks. </li></ul></ul><ul><ul><li>They must be held by the maker until maturity. *Correct Answer </li></ul></ul><ul><ul><li>They are often received upon the sale of machinery and automobiles. </li></ul></ul>
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