Intacc theories and problems exam with correct answers 2024

Savings accounts are usually classified as cash on the balance sheet. - answer-True Certificates of deposit are usually classified as cash on the balance sheet. - answer-False Companies include postdated checks and petty cash funds as cash. - answer-False Cash equivalents are investments with original maturities of six months or less - answer-False Bank overdrafts are always offset against the cash account in the balance sheet. - answer-False Short-term, highly liquid investments may be included with cash on the balance sheet. - answer-True All claims held against customers and others for money, goods, or services are reported as current assets. - answer-False Trade receivables include notes receivable and advances to officers and employees - answer-False Trade discounts are used to avoid frequent changes in catalogs and to alter prices for different quantities purchased. - answer-True In the gross method, sales discounts are reported as a deduction from sales. - answer-True The net amount reported for short-term receivables is not affected when a specific account receivable is determined to be uncollectible - answer-True The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over valuation of accounts receivable. - answer-False The percentage-of-sales method results in a more accurate valuation of receivables on the balance sheet. - answer-False Companies record and report long-term notes receivable at the present value of the cash they expect to collect - answer-True When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value. - answer-False Notes receivable are generally reported as noncurrent assets - answer-False Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been. - answer-True When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss. - answer-False For receivables sold with recourse, the seller guarantees payment to the purchaser if the debtor fails to pay - answer-True The receivables turnover ratio is computed by dividing net sales by the ending net receivables. - answer-False Consider the following: Cash in Bank - checking account of $13,500, Cash on hand of $500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling $124,000. How much should be reported as cash in the balance sheet? - answer-$ 14,000 On January 1, 2010, Lynn Company borrows $2,000,000 from National Bank at 11% annual interest. In addition, Lynn is required to keep a compensatory balance of $200,000 on deposit at National Bank which will earn interest at 5%. The effective interest that Lynn pays on its $2,000,000 loan is - answer-11.6% Kennison Company has cash in bank of $10,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of - answer-$ 10,000 Kaniper Company has the following items at year-end: Cash in bank $20,000 Petty cash 300 Short-term paper with maturity of 2 months 5,500 Postdated checks 1,400 Kaniper should report cash and cash equivalents of - answer-$ 25,800 Lawrence Company has cash in bank of $15,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of - answer-$ 15,000 Steinert Company has the following items at year-end: Cash in bank $30,000 Petty cash 500 Short-term paper with maturity of 2 months 8,200 Postdated checks 2,100 Steinert should report cash and cash equivalents of - answer-$ 38,700 If a company purchases merchandise on terms of 1/10, n/30, the cash discount available is equivalent to what effective annual rate of interest (assuming a 360-day year)? - answer-18% AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue? - answer-$ 9,900 AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? - answer-$ 10,000 AG Inc. made a $10,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? - answer-$ 9,800 Wellington Corp. has outstanding accounts receivable totaling $2.54 million as of December 31 and sales on credit during the year of $12.8 million. There is also a debit balance of $6,000 in the allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? - answer-$ 122,000 Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year? - answer-$ 508,000 Wellington Corp. has outstanding accounts receivable totaling $3 million as of December 31 and sales on credit during the year of $15 million. There is also a debit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? - answer-$ 240,000 At the close of its first year of operations, December 31, 2010, Ming Company had accounts receivable of $540,000, after deducting the related allowance for doubtful accounts. During 2010, the company had charges to bad debt expense of $90,000 and wrote off, as uncollectible, accounts receivable of $40,000. What should the company report on its balance sheet at December 31, 2010, as accounts receivable before the allowance for doubtful accounts? - answer-$ 590,000 Before year-end adjusting entries, Dunn Company's account balances at December 31, 2010, for accounts receivable and the related allowance for uncollectible accounts were $600,000 and $45,000, respectively. An aging of accounts receivable indicated that $62,500 of the December 31 receivables are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is - answer-$ 537,500 During the year, Kiner Company made an entry to write off a $4,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $50,000 and the balance in the allowance account was $4,500. The net realizable value of accounts receivable after the write-off entry was - answer-$ 45,500 The following information is available for Murphy Company: Allowance for doubtful accounts at December 31, 2009 $ 8,000 Credit sales during 2010 400,000 Accounts receivable deemed worthless and written off during 2010 9,000 As a result of a review and aging of accounts receivable in early January 2011, however, it has been determined that an allowance for doubtful accounts of $5,500 is needed at December 31, 2010. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2010? - answer-$ 6,500 Lankton Company has the following account balances at year-end: Accounts receivable $60,000 Allowance for doubtful accounts 3,600 Sales discounts 2,400 Lankton should report accounts receivable at a net amount of - answer-$ 56,400 Smithson Corporation had a 1/1/10 balance in the Allowance for Doubtful Accounts of $10,000. During 2010, it wrote off $7,200 of accounts and collected $2,100 on accounts previously written off. The balance in Accounts Receivable was $200,000 at 1/1 and $240,000 at 12/31. At 12/31/10, Smithson estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2010? - answer-$ 7,100 Black Corporation had a 1/1/10 balance in the Allowance for Doubtful Accounts of $12,000. During 2010, it wrote off $8,640 of accounts and collected $2,520 on accounts previously written off. The balance in Accounts Receivable was $240,000 at 1/1 and $288,000 at 12/31. At 12/31/10, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/10? - answer-$ 14,400 Shelton Company has the following account balances at year-end: Accounts receivable $80,000 Allowance for doubtful accounts 4,800 Sales discounts 3,200 Shelton should report accounts receivable at a net amount of - answer-$ 75,200