ACG 3131 Exam 3 Study Questions and Correct Answers
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Course
ACG 3131
Institution
ACG 3131
Cash -Most liquid asset -Standard medium of exchange -Basis for measuring and accounting for all items -Current asset -Examples: coin, currency, available funds on deposit at the bank, money orders, certified checks, cashier's checks, personal checks, bank drafts and savings accounts
Cash equivale...
ACG 3131 Exam 3 Study Questions and
Correct Answers
Cash ✅-Most liquid asset
-Standard medium of exchange
-Basis for measuring and accounting for all items
-Current asset
-Examples: coin, currency, available funds on deposit at the bank, money orders,
certified checks, cashier's checks, personal checks, bank drafts and savings accounts
Cash equivalents ✅-Short-term, highly liquid investments that are both-
(a) readily convertible to cash, and
(b) so near their maturity that they present insignificantrisk of changes in interest rates.
Examples: Treasury bills, Commercial paper, and Money market funds.
Restricted cash ✅Companies segregate __________ from "regular" cash if the amount
is considered material.
Examples, restricted for:(1) plant expansion, (2) retirement of long-term debt, and (3)
compensating balances. Companies classify __________ either in current assets or
long-term assets depending on date of availability or disbursement
Bank overdraft ✅Company writes a check for more than the amount in its cash
account.
-Generally reported as a current liability.
-Offset against other cash accounts only when accounts are with the same bank
Recievables ✅Claims held against customers and others for money, goods, or
services
Accounts Receivable ✅Oral promises of the purchaser to pay for goods and services
sold
Notes Receivable ✅Written promises to pay a sum of money on a specified future date
-can be a negotiable instrument which may be transferred to other parties
Current liability ✅bank overdrafts are reported as a ___________
Nontrade receivables ✅1. Advances to officers and employees.
2. Deposits to cover potential damages or losses.
3. Deposits as a guarantee of performance or payment.
4. Dividends and interest receivable.
, 5. Claims against: Insurance companies for casualties sustained; defendants under suit;
governmental bodies for tax refunds; common carriers for damaged or lost goods.
Accounts Receivable
Receivable ✅Travel advances record as a ____________
Trade discount ✅-Reductions from the list price
-Not recognized in the accounting record
-Customers are billed net of discounts
Cash discount ✅Inducements for prompt payment
-Gross Method vs. Net Method
-Payment terms are 2/10, n/30
Gross method ✅recorded originally without discount
Net method ✅recorded originally with discount
Uncollectible Accounts Receivable ✅An ________________ is a loss of revenue that
requires, through proper entry in the accounts,
-a decrease in the asset accounts receivable and
-a related decrease in income and stockholders' equity
Direct write off ✅Theoretically deficient:
-No matching.
-Receivable not stated at cash realizable value.
-Not GAAP when material in amount
Allowance method ✅Losses are Estimated:
-Percentage-of-receivables.
-GAAP requires when material in amount.
Percentage-of-receivables approach ✅Estimate the balance in the allowance account
based on a percentage of accounts receivables.
-Reports receivables at net realizable value. Companies may apply this method using
-one composite rate on total receivables, or
-an aging schedule using different rates
Interest-bearing ✅has a stated rate of interest
Zero bearing interest ✅interest included in face amount
Notes Receivable ✅________ generally originate from:
-Customers who need to extend payment period ofan outstanding receivable.
-High-risk or new customers.
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