Accy 111 Chapter 7

15 Questions

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Accounting Quizzes & Trivia

Choose the answer. True or False


Questions and Answers
  • 1. 
    Cash equivalents would include investments in marketable equity securities as long as management intends to sell the securities in the next three months.
    • A. 

      T

    • B. 

      F

  • 2. 
    From a financial accounting perspective, the main purposes of a system of internal control are to improve the accuracy and reliability of accounting information and to safeguard assets. 
    • A. 

      T

    • B. 

      F

  • 3. 
    In a good system of internal control, the person who initiates a transaction should be allowed to effectively control the processing of the transaction through its final inclusion in the accounting records
    • A. 

      T

    • B. 

      F

  • 4. 
    Depending on the circumstances, the classification of a compensating balance may be either current or noncurrent, and the arrangement should be disclosed in the notes.
    • A. 

      T

    • B. 

      F

  • 5. 
    The net method of accounting for cash discounts requires adjusting entries for discounts taken. 
    • A. 

      T

    • B. 

      F

  • 6. 
     Recognizing sales returns when they occur could result in an overstatement of income in the period of the related sale
    • A. 

      T

    • B. 

      F

  • 7. 
    The income statement approach to estimating bad debts requires an adjusting entry at the end of the period to reduce receivables to net realizable value.
    • A. 

      T

    • B. 

      F

  • 8. 
    Using the balance sheet approach, bad debt expense is an indirect result of estimating the net realizable value of accounts receivable.
    • A. 

      T

    • B. 

      F

  • 9. 
    Discounts on notes receivable are recognized as interest earned over the term of the related note
    • A. 

      T

    • B. 

      F

  • 10. 
    Unless specific sales criteria are met, the factoring of accounts receivable with recourse is accounted for as a loan.
    • A. 

      T

    • B. 

      F

  • 11. 
    Securitization of receivables is a type of secured borrowing.
    • A. 

      T

    • B. 

      F

  • 12. 
    The receivables turnover ratio provides a way for an analyst to assess the effectiveness of a company in managing its investment in receivables.
    • A. 

      T

    • B. 

      F

  • 13. 
     In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges. 
    • A. 

      T

    • B. 

      F

  • 14. 
     In a bank reconciliation, adjustments to the book balance could include adding or subtracting company errors
    • A. 

      T

    • B. 

      F

  • 15. 
     The journal entry to record the replenishment of a petty cash fund includes a credit to the petty cash fund. 
    • A. 

      T

    • B. 

      F