1 Travel advances should be reported as a receivables b cash because they represent the equivalent of money c investments d none of these answers are correct 2 In which account are postage stamps classified a Cash b Receivables c Office supplies d Inventory 3 Bank overdrafts if material should be a reported as a current liability b reported as a deduction from the current asset section c reported as a deduction from cash d netted against cash and a net cash amount reported 4 Which of the following should be recorded in the category trade receivables a advances to officers and employees b income tax refunds receivable c Open accounts resulting from short term extensions of credit to customers d claims against insurance companies for casualties sustained 5 If a company employs the gross method of recording accounts receivable from customers then sales discounts taken should be reported as a an item of other expense in the income statement b a deduction from accounts receivable in determining the net realizable value of accounts receivable c sales discounts forfeited in the cost of goods sold section of the income statement d a deduction from sales in the income statement 6 Of the approaches to record cash discounts related to accounts receivable which is more theoretically correct a Gross approach b Net approach c Allowance approach d All three approaches are theoretically correct 7 Why is the allowance method preferred over the direct write off method of accounting for bad debts a Allowance method is used for tax purposes b Improved matching of bad debt expense with revenue c Estimates are used d Determining worthless accounts under direct write off method is difficult to do 8 How can accounting for bad debts be used for earnings management a Determining which accounts to write off b Changing the percentage of sales recorded as bad debt expense c Using an aging of the accounts receivable balance to determine bad debt expense d Reversing previous write offs 9 What is the normal journal entry for recording bad debt expense under the allowance method a Debit Allowance for Doubtful Accounts credit Accounts Receivable b Debit Allowance for Doubtful Accounts credit Bad Debt Expense c Debit Bad Debt Expense credit Allowance for Doubtful Accounts d Debit Accounts Receivable credit Allowance for Doubtful Accounts 10 What is the normal journal entry when writing off an account as uncollectible under the allowance method a Debit Allowance for Doubtful Accounts credit Bad Debt Expense b Debit Allowance for Doubtful Accounts credit Accounts Receivable c Debit Bad Debt Expense credit Allowance for Doubtful Accounts d Debit Accounts Receivable credit Allowance for Doubtful Accounts 11 Assuming that the ideal measure of short term receivables in the balance sheet is the discounted value of the cash to be received in the future failure to follow this practice usually does not make the balance sheet misleading because a most short term receivables are not interest bearing b the allowance for uncollectible accounts includes a discount element c the amount of the discount is not material d most receivables can be sold to a bank or factor 12 Which of the following methods of determining annual bad debt expense best achieves the matching concept a Balance sheet approach b Percentage of average accounts receivable c Income statement approach d Direct write off 13 At the beginning of 2013 Gannon Company received a three year zero interest bearing 1 000 trade note The market rate for equivalent notes was 8 at that time Gannon reported this note as a 1 000 trade note receivable on its 2013 year end statement of financial position and 1 000 as sales revenue for 2013 What effect did this accounting for the note have on Gannon s net earnings for 2013 2014 2015 respectively a Overstate overstate understate b Overstate understate understate c Overstate overstate overstate d None of these answer choices are correct 14 Antique Company has notes receivable that have a fair value of 920 000 and a carrying amount of 710 000 Antique decides on December 31 2014 to use the fair value option for these recently acquired receivables The adjusting entry to record this change will include a a debit to Unrealized Holding Gain or Loss Income for 210 000 b credit to Notes Receivable for 210 000 c credit to Unrealized Holding Gain or Loss Income for 210 000 d debit to Notes Receivable for 920 000 15 Which of the following is true when accounts receivable are factored without recourse a The transaction may be accounted for either as a secured borrowing or as a sale depending upon the substance of the transaction b The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables c The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables d The financing cost interest expense should be recognized ratably over the collection period of the receivables 16 Which of the following items should be included in accounts receivable reported on the balance sheet a Notes receivable b Interest receivable c Allowance for doubtful accounts d Advances to related parties and officers 17 Lawrence Company has cash in bank of 22 000 restricted cash in a separate account of 4 000 and a bank overdraft in an account at another bank of 2 000 Lawrence should report cash of a 20 000 b 22 000 c 25 000 d 26 000 18 Kaniper Company has the following items at year end Cash in bank Petty cash Short term paper with maturity of 2 months Postdated checks 35 000 500 8 200 2 100 Kaniper should report cash and cash equivalents of a 35 000 b 35 500 c 43 700 d 45 800 35 000 500 8 200 43 700 19 ABC made a 15 000 sale on account with the following terms 1 10 n 30 If ABC uses the gross method to record sales made on credit what is are the debit s in the journal entry to record the sale a Debit Accounts Receivable for 14 850 b Debit Accounts Receivable for 14 850 and Sales Discounts for 150 c Debit Accounts Receivable for 15 000 d Debit Accounts Receivable for 15 000 and Sales Discounts for 150 20 On July 22 Peter sold 15 500 of inventory items on credit with the terms 2 15 net 30 Payment on 10 000 sales was received on August 1 and the remaining payment was received on August 12 Assuming Peter uses the gross method of accounting for sales discounts which one of the following entries was made on August 1 to record the cash received a Cash 9 800 Sales Discount 200 Accounts