ACCT 301 EXAM 2 QUESTIONS WITH VERIFIED
ANSWERS
Cash Definition - Answers - Most liquid asset. Medium of exchange. Basis for
measurement nad accounting for all other items.
Cash Equivalents Definition + Examples - Answers - Short term. Highly liquid (rapidly
convertible). Contain insignificant risk due to coming liquidation. Generally to be sold
within 3 months. T-bills, money market funds
(Trade) Receivable Definition - Answers - Claims held against customers and others for
money, goods, or services
Accounts Receivable - Answers - Oral promises by the purchaser to pay for goods and
services sold.
Note Receivable - Answers - Formal credit arrangements between parties (borrower
and lender). Written promise to pay a certain amount on a specified future date.
Non-Trade Receivables - Answers - Arise from a variety of transactions. Advances,
deposits, dividends, etc.
Walmart sales are: Cisco: Bank of America: - Answers - Non-trade, Acc Receivable,
Notes Receivable
2/10 n/30 - Answers - 2% if paid in 10 days, total due in 30 otherwise
Discount Methods: - Answers - Gross. Net.
Gross Method for discounts - Answers - Ignores discount upon sale, recognizes when
paid.
Net Method for discounts - Answers - Nets discount upon sale against full sale amount.
This is the preferred method.
Discounts/Premium have what balance? - Answers - Dr. Cr.
Entry for increase in Bad Debt Expense - Answers - Dr. Bad Debt Expense (+)
Cr. Allowance for doubtful accounts (+)
, When Bad Debt Expense is incurred, what is affected? - Answers - Income statement-
(expense) and the balance sheet-(loss of asset)
Failure to record Bad Debt Expense results in: - Answers - An overstatement of Assets
or Share Holders Equity
Approaches for Bad Debt Expense: - Answers - Allowance: % of Sales and % of
Receivables
% of sales is known as: - Answers - Income Statement Approach for collecting bad debt
(Allowance)
% of receivables is known as: - Answers - Balance Sheet Approach for collecting bad
debt (Allowance)
Difference between Allowance and Direct Write-Off - Answers - Write off simply credits
A/R whereas Allowance would credit...allowance
Net Realizable Value - Answers - Net amount the company expects to receive in cash.
Generally in this case we're talking about cash to be received from Accounts
Receivable.
Note is greater/lower than Face Value - Answers - Premium. Discount.
Note Receivables are recorded at ____ and the sales are ____ - Answers - Maturity
Value, Present Value
Journalizing: Receiving a discount note to sell something - Answers - Note Receivable
Sales
Discount
Why would a company transfer their receivables - Answers - They need cash or
billing/collecting is too expensive
2 Ways to transfer A/R - Answers - Secured Borrowing and Sale of A/R
Secured Barrowing - Answers - ...
Finance Expense - Answers - Dr Balance. Generally used when accepting a note
payable. Ties in with secured borrowing.
Take out a note payable with charge - Answers - Cash
Finance Expense
Note Parable
ANSWERS
Cash Definition - Answers - Most liquid asset. Medium of exchange. Basis for
measurement nad accounting for all other items.
Cash Equivalents Definition + Examples - Answers - Short term. Highly liquid (rapidly
convertible). Contain insignificant risk due to coming liquidation. Generally to be sold
within 3 months. T-bills, money market funds
(Trade) Receivable Definition - Answers - Claims held against customers and others for
money, goods, or services
Accounts Receivable - Answers - Oral promises by the purchaser to pay for goods and
services sold.
Note Receivable - Answers - Formal credit arrangements between parties (borrower
and lender). Written promise to pay a certain amount on a specified future date.
Non-Trade Receivables - Answers - Arise from a variety of transactions. Advances,
deposits, dividends, etc.
Walmart sales are: Cisco: Bank of America: - Answers - Non-trade, Acc Receivable,
Notes Receivable
2/10 n/30 - Answers - 2% if paid in 10 days, total due in 30 otherwise
Discount Methods: - Answers - Gross. Net.
Gross Method for discounts - Answers - Ignores discount upon sale, recognizes when
paid.
Net Method for discounts - Answers - Nets discount upon sale against full sale amount.
This is the preferred method.
Discounts/Premium have what balance? - Answers - Dr. Cr.
Entry for increase in Bad Debt Expense - Answers - Dr. Bad Debt Expense (+)
Cr. Allowance for doubtful accounts (+)
, When Bad Debt Expense is incurred, what is affected? - Answers - Income statement-
(expense) and the balance sheet-(loss of asset)
Failure to record Bad Debt Expense results in: - Answers - An overstatement of Assets
or Share Holders Equity
Approaches for Bad Debt Expense: - Answers - Allowance: % of Sales and % of
Receivables
% of sales is known as: - Answers - Income Statement Approach for collecting bad debt
(Allowance)
% of receivables is known as: - Answers - Balance Sheet Approach for collecting bad
debt (Allowance)
Difference between Allowance and Direct Write-Off - Answers - Write off simply credits
A/R whereas Allowance would credit...allowance
Net Realizable Value - Answers - Net amount the company expects to receive in cash.
Generally in this case we're talking about cash to be received from Accounts
Receivable.
Note is greater/lower than Face Value - Answers - Premium. Discount.
Note Receivables are recorded at ____ and the sales are ____ - Answers - Maturity
Value, Present Value
Journalizing: Receiving a discount note to sell something - Answers - Note Receivable
Sales
Discount
Why would a company transfer their receivables - Answers - They need cash or
billing/collecting is too expensive
2 Ways to transfer A/R - Answers - Secured Borrowing and Sale of A/R
Secured Barrowing - Answers - ...
Finance Expense - Answers - Dr Balance. Generally used when accepting a note
payable. Ties in with secured borrowing.
Take out a note payable with charge - Answers - Cash
Finance Expense
Note Parable
