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Redwing Company sold inventory costing $500 to a customer on account for $700.Which of the following correctly describes the collection of $686 cash when the customer takes advantage of a sales discount?


A) Operating expenses increase $14.
B) Accounts receivable decreases $686.
C) Current assets decrease $14.
D) Gross profit is not affected.

E) A) and C)
F) A) and D)

Correct Answer

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When preparing the statement of cash flows,the reason that net sales revenue is adjusted for the change in accounts receivables is to convert net sales to cash collected from customers,since accounts receivable represents sales revenue not collected from customers at the beginning and end of the accounting year.

A) True
B) False

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Which of the following does not correctly describe the following journal entry? Which of the following does not correctly describe the following journal entry? A) Current assets decrease. B) Gross profit decreases. C) Net sales decreases. D) Net income is not affected.


A) Current assets decrease.
B) Gross profit decreases.
C) Net sales decreases.
D) Net income is not affected.

E) C) and D)
F) None of the above

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Effective internal control of cash should include the separation of the duties for receiving and disbursing cash.

A) True
B) False

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Which of the following would be included in Latimer Company's sales in 2019?


A) Goods shipped from a supplier in 2019 with terms of FOB shipping point.Latimer received the goods in 2019.
B) Goods shipped to customers in 2019 with terms of FOB destination.The customer received the goods in 2020.
C) Goods shipped to customers in 2018 with terms of FOB destination.The customer received the goods in 2019.
D) Goods shipped to customers in 2018 with terms of FOB shipping point.The customer received the goods in 2019.

E) C) and D)
F) A) and D)

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The Rye Corporation has provided the following information: • Total sales were $1,200,000. • Beginning net accounts receivable was $45,000. • Ending net accounts receivable was $65,000. • Sales returns and allowances totaled $100,000. - What was Rye's average collection period? (Use 365 days a year)


A) 16.73 days.
B) 19.75 days.
C) 36.50 days.
D) 18.25 days.

E) A) and B)
F) A) and C)

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Cash equivalents such as treasury bills are reported as investments on the balance sheet.

A) True
B) False

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Which of the following correctly describes credit terms of 2/10,n/30?


A) A two percent discount for early payment is available if the invoice is paid before the tenth day of the month following the month the sale.
B) A two percent discount for early payment is available if the invoice is paid within ten days of the date of sale.
C) A ten percent discount for early payment is available if the invoice is paid within two days of the date of the invoice.
D) A two percent discount for early payment is available if the invoice is paid after the tenth day,but before the thirtieth day of the invoice date.

E) All of the above
F) A) and C)

Correct Answer

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When preparing a bank reconciliation,which of the following would be deducted from the company's cash balance?


A) Interest income paid by the bank.
B) The dollar amount of deposits in transit.
C) The dollar amount of outstanding checks.
D) The bank service charges included on the bank statement.

E) B) and C)
F) A) and C)

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Redwing Company sold inventory costing $500 to a customer on account for $700.Which of the following does not correctly describe the collection of $686 cash when the customer takes advantage of a sales discount?


A) Gross profit decreases $14.
B) Accounts receivable decrease $700.
C) Net sales decrease $14.
D) Net income is not affected.

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

Correct Answer

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Cyclone Inc.reported the following figures from its financial statements for the years 2018 through 2020: Cyclone Inc.reported the following figures from its financial statements for the years 2018 through 2020: A.Calculate the accounts receivable turnover for 2020 and 2019. B.Calculate the average collection period for 2020 and 2019. A.Calculate the accounts receivable turnover for 2020 and 2019. B.Calculate the average collection period for 2020 and 2019.

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A.2020 = 9.01 = Net sales $717,422 ÷ Ave...

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When a credit sale is made with terms of 2/10,n/30 on May 10 and the customer's check is received on May 19,which of the following is true about the May 19 journal entry?


A) The debit to cash will equal the credit to accounts receivable because the discount was recorded on May 10.
B) There will be a debit to sales discounts on May 10.
C) The debit to cash will be less than the credit to accounts receivable on May 19.
D) There will be a credit to sales discounts on May 19.

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

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Prior year financial statements are adjusted when it is determined that prior year bad debt expense was too low.

A) True
B) False

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When a depositor receives a bank statement indicating that there was a "NSF check," the depositor should do which of the following?


A) Reduce the cash account per the books for the amount of the "NSF check."
B) Reduce the cash account per the bank statement for the amount of the "NSF check."
C) Debit allowance for doubtful accounts for the amount of the check.
D) Increase the sales returns and allowances account.

E) A) and D)
F) C) and D)

Correct Answer

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When using the allowance method,the year-end journal entry to record bad debt expense reduces the accounts receivable account and increases net income.

A) True
B) False

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Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method?


A) Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method? A) B) C) D)
B) Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method? A) B) C) D)
C) Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method? A) B) C) D)
D) Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method? A) B) C) D)

E) A) and D)
F) A) and C)

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Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection?


A) Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection? A) B) C) D)
B) Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection? A) B) C) D)
C) Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection? A) B) C) D)
D) Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection? A) B) C) D)

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

Correct Answer

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The Soft Company has provided the following information after year-end adjustments: • Allowance for doubtful accounts was $11,000 at the beginning of the year and $30,000 at the end of the year. • Accounts receivable were $80,000 at the beginning of the year and $420,000 at the end of the year. • Accounts written off as uncollectible totaled $20,000. • Net sales totaled $2,700,000. • Sales discounts were $100,000. What was the amount of Soft's bad debt expense for the year?


A) $39,000.
B) $1,000.
C) $19,000.
D) $20,000.

E) A) and B)
F) All of the above

Correct Answer

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The Tanner Company's April 30 pre-reconciliation cash balance on its books was $35,000.While preparing the April 30 bank reconciliation,Tanner determined that outstanding checks total $11,000,deposits in transit total $7,000,and bank service charges are $50.Assuming there are no other reconciling items,what was Tanner's April 30 cash balance per the bank statement?


A) $31,000.
B) $30,950.
C) $38,950.
D) $39,000.

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

Correct Answer

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Which of the following statements is false?


A) The journal entry to record bad debt expense decreases current assets.
B) The journal entry to record bad debt expense decreases retained earnings.
C) The journal entry to write off an uncollectible account receivable decreases operating income.
D) The journal entry to write off an uncollectible account receivable does not affect current assets.

E) A) and B)
F) All of the above

Correct Answer

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