ACC 318 Ch 7: Practice || 100% Verified Solutions.
Q 7.3:
How should Trinitron Inc. report an IOU from Julius Corporation?
A. As an investment
B. As a receivable
C. As cash
D. As petty cash correct answers B
Q 7.1:
A _____ would be properly classified as cash.
A. bond sinking fund composed entirely of cash
B. certificate of deposit
C. post-dated check on hand
D. savings account correct answers D
Q 7.4:
Which of the following is most like the SEC definition for a compensating balance?
A. The portion of any demand deposit, time deposit, or certificate of deposit maintained by a
corporation which constitutes support for existing borrowing arrangements of the corporation
with the lending institution.
B. An amount of capital stock held in the company's treasury equal to outstanding loan
commitments.
C. A savings account maintained at the bank equal to the amount of all outstanding loans.
, D. A balance held in a time or demand deposit account that is equal to the interest currently due
on a loan. correct answers A
Q 7.5:
In addition to being a short-term, highly liquid investment that is readily convertible into known
amounts of cash, which of the following is also true of cash equivalents?
A. It is likely they will be recorded as temporary investments in the future.
B. They bear an interest rate that is at least equal to the prime rate of interest at the date of
liquidation.
C. They are acceptable as a means to pay current liabilities.
D. They have current market values that are greater than the original cost. correct answers A
Miles Corporation sold land to South Ridge Inc. for $200,000 cash and a zero interest-bearing
note with a face amount of $600,000. The fair value of the land at the date of sale was $690,000.
What value should be assigned to the note receivable by South Ridge?
A. $600,000
B. $490,000
C. $400,000
D. $590,000 correct answers B
Hat Trick Manufacturing sold equipment to Puck & Co., taking in exchange a zero interest
bearing note. The equipment had a fair market value of $36,000 and the face amount of the note
was $40,000. How should Hat Trick Manufacturing present the note in a balance sheet prepared
immediately after receipt of the note?
A. At face amount plus the anticipated net earnings related to the note.
B. At face amount plus implicit interest.
C. At face amount less implicit interest.
D. At face amount without adjustment. correct answers C
Q 7.3:
How should Trinitron Inc. report an IOU from Julius Corporation?
A. As an investment
B. As a receivable
C. As cash
D. As petty cash correct answers B
Q 7.1:
A _____ would be properly classified as cash.
A. bond sinking fund composed entirely of cash
B. certificate of deposit
C. post-dated check on hand
D. savings account correct answers D
Q 7.4:
Which of the following is most like the SEC definition for a compensating balance?
A. The portion of any demand deposit, time deposit, or certificate of deposit maintained by a
corporation which constitutes support for existing borrowing arrangements of the corporation
with the lending institution.
B. An amount of capital stock held in the company's treasury equal to outstanding loan
commitments.
C. A savings account maintained at the bank equal to the amount of all outstanding loans.
, D. A balance held in a time or demand deposit account that is equal to the interest currently due
on a loan. correct answers A
Q 7.5:
In addition to being a short-term, highly liquid investment that is readily convertible into known
amounts of cash, which of the following is also true of cash equivalents?
A. It is likely they will be recorded as temporary investments in the future.
B. They bear an interest rate that is at least equal to the prime rate of interest at the date of
liquidation.
C. They are acceptable as a means to pay current liabilities.
D. They have current market values that are greater than the original cost. correct answers A
Miles Corporation sold land to South Ridge Inc. for $200,000 cash and a zero interest-bearing
note with a face amount of $600,000. The fair value of the land at the date of sale was $690,000.
What value should be assigned to the note receivable by South Ridge?
A. $600,000
B. $490,000
C. $400,000
D. $590,000 correct answers B
Hat Trick Manufacturing sold equipment to Puck & Co., taking in exchange a zero interest
bearing note. The equipment had a fair market value of $36,000 and the face amount of the note
was $40,000. How should Hat Trick Manufacturing present the note in a balance sheet prepared
immediately after receipt of the note?
A. At face amount plus the anticipated net earnings related to the note.
B. At face amount plus implicit interest.
C. At face amount less implicit interest.
D. At face amount without adjustment. correct answers C
