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Exam 7: Financial Assets

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Question 61

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A good system of internal control will include all of the following except:

A) Preparing a pro-forma financial statement on a monthly basis.
B) Separating the handling of cash from the maintenance of accounting records.
C) Making all major payments by check.
D) Reconciling bank statements with accounting records.

E) A) and B)
F) None of the above

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Question 62

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In preparing the bank reconciliation,certain transactions recorded by the depositor may not have been recorded by the bank.Which of the following is an example of this type of transaction?

A) Service charges.
B) Outstanding checks.
C) Credit for interest earned.
D) Charges for NSF checks.

E) A) and D)
F) B) and D)

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Question 63

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Financial assets--effects of transactions Five events involving financial assets are described below: (a.)Received dividends earned on investment in marketable securities. (b.)Invested excess cash in marketable securities. (c.)Determined that a specific account receivable is worthless and wrote it off against the allowance for doubtful accounts. (d.)Made sale of merchandise for cash. (e.)Sold available for sale marketable securities at a loss.Cash proceeds from the sale were equal to the current market value reflected in the last balance sheet. Indicate the effects of each independent transaction or adjusting entry upon the financial measurements shown in the column headings below.Use the code letters,I for increase,D for decrease,and NE for no effect.

Bank reconciliation--computations and journal entry The Cash account in the ledger of Pine Golf Club shows a balance of $11,925 at December 31,2015.The December 31 bank statement shows a balance of $10,440.The only reconciling items consist of: Bank service charges of $32. Deposit in transit of $1,813. NSF check from customer L.Diamond in the amount of $126. Error in recording check no.970 for utilities: check was written in the amount of $834 but was recorded in Pine's accounting records as $384. Outstanding checks. (a)What is the amount of the adjusted cash balance at December 31,2015? $_______________ (b)What is the total amount of outstanding checks at December 31,2015? $________________ (c)Record the journal entry necessary,if any,to adjust Pine's Golf Club accounting records at December 31,2015.(An explanation is not required; a single compound journal entry is acceptable.)

In reconciling a bank statement,which of the following items could cause the cash per the bank statement to be greater than the balance of cash shown in the depositor's accounting records?

While preparing the bank reconciliation,an accountant discovered that a $426 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $462.In preparing the bank reconciliation the appropriate action to correct this error would be to:

Efficient management of cash includes which of the following concepts?

The Allowance for Doubtful Accounts is called a valuation account,or contra-asset account,and normally has a credit balance.

The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments.This item:

Under the allowance method,when a receivable that had been previously written off is collected:

When an Allowance for Doubtful Accounts is used,accounts receivable are valued in the balance sheet at their estimated net realizable value.

Compensating balances are not included in the amount of cash listed on a balance sheet.

Which of the following items would cause cash per the bank statement to be larger than the balance of cash shown in the accounting records?

If the allowance method is used,the recovery of an account receivable previously written-off results in a gain being recorded on the income statement.

Stanley,Inc.'s 2015 income statement reported net sales of $6,000,000,uncollectible accounts expense of $160,000,and net income of $700,000.Stanley's average accounts receivable during 2015 amounted to $1,200,000.Using 360 days to a year,Stanley's

Accounts receivable turnover rate During 2015,Larsen Company's accounts receivable averaged $750,000.Larsen's 2015 income statement reported net sales of $6,780,000,uncollectible accounts expense of $160,000,and net income of $768,000.(Assume 365 days in a year.) Using the information,compute the following for Larsen Company: (a)Accounts receivable turnover: (Round to the nearest two decimals.) (b)Average number of days to collect accounts receivable (Round to nearest day,if necessary): (Round to the nearest %.)

Which of the following does not contribute toward achieving internal control over cash?

At the start of the current year,Minuteman Corporation had a credit balance in the Allowance for Doubtful Accounts of $1,800.During the year a monthly provision of 2% of sales was made for uncollectible accounts.Sales for the year were $600,000,and $5,600 of accounts receivable were written off as worthless.No recoveries of accounts previously written off were made during the year.The year-end financial statements should show:

In preparing a bank reconciliation,a service charge shown on the bank statement should be:

Oceanside Company uses the balance sheet approach in estimating uncollectible accounts expense.Its Allowance for Doubtful Accounts has a $1,200 credit balance prior to adjusting entries.It has just completed an aging analysis of accounts receivable at December 31,2015.This analysis disclosed the following information: What is the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31,2015?