Exam (elaborations)
Test bank For Intermediate Accounting Exam 3 (11th Edition by David Spiceland)
- Course
- Institution
Test bank For Intermediate Accounting Exam 3 (11th Edition by David Spiceland)
[Show more]
Content preview
Test bank For Intermediate AccountingExam 3 (11th Edition by David
Spiceland)
Travel advances should be reported as
a. receivables.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these answers are correct. - ANSreceivables.
In which account are postage stamps classified?
a. Cash.
b. Receivables.
c. Office supplies.
d. Inventory. - ANSOffice supplies.
Bank overdrafts, if material, should be
a. reported as a current liability.
b. reported as a deduction from the current asset section.
c. reported as a deduction from cash.
d. netted against cash and a net cash amount reported. - ANSreported as a current liability.
Which of the following should be recorded in the category "trade receivables"
a. advances to officers and employees.
b. income tax refunds receivable.
c. Open accounts resulting from short-term extensions of credit to customers.
d. claims against insurance companies for casualties sustained. - ANSOpen accounts resulting
from short-term extensions of credit to customers.
If a company employs the gross method of recording accounts receivable from customers, then
sales discounts taken should be reported as
a. an item of "other expense" in the income statement.
b. a deduction from accounts receivable in determining the net realizable value of accounts
receivable.
c. sales discounts forfeited in the cost of goods sold section of the income statement.
d. a deduction from sales in the income statement. - ANSa deduction from sales in the income
statement.
,Of the approaches to record cash discounts related to accounts receivable, which is more
theoretically correct?
a. Gross approach.
b. Net approach.
c. Allowance approach.
d. All three approaches are theoretically correct. - ANSNet approach.
Why is the allowance method preferred over the direct write-off method of accounting for bad
debts?
a. Allowance method is used for tax purposes.
b. Improved matching of bad debt expense with revenue.
c. Estimates are used.
d. Determining worthless accounts under direct write-off method is difficult to do. - ANSImproved
matching of bad debt expense with revenue.
How can accounting for bad debts be used for earnings management?
a. Determining which accounts to write-off.
b. Changing the percentage of sales recorded as bad debt expense.
c. Using an aging of the accounts receivable balance to determine bad debt expense.
d. Reversing previous write-offs. - ANSChanging the percentage of sales recorded as bad debt
expense
What is the normal journal entry for recording bad debt expense under the allowance method?
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts. - ANSDebit Bad Debt
Expense, credit Allowance for Doubtful Accounts.
What is the normal journal entry when writing-off an account as uncollectible under the
allowance method?
a. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
b. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts - ANSDebit Allowance for
Doubtful Accounts, credit Accounts Receivable.
Assuming that the ideal measure of short-term receivables in the balance sheet is the
discounted value of the cash to be received in the future, failure to follow this practice usually
does not make the balance sheet misleading because
a. most short-term receivables are not interest-bearing.
b. the allowance for uncollectible accounts includes a discount element.
c. the amount of the discount is not material.
, d. most receivables can be sold to a bank or factor. - ANSthe amount of the discount is not
material.
Which of the following methods of determining annual bad debt expense best achieves the
matching concept?
a. Balance sheet approach
b. Percentage of average accounts receivable
c. Income statement approach
d. Direct write-off - ANSIncome statement approach
At the beginning of 2013, Gannon Company received a three-year zero-interest-bearing $1,000
trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note
as a $1,000 trade note receivable on its 2013 year-end statement of financial position and
$1,000 as sales revenue for 2013. What effect did this accounting for the note have on
Gannon's net earnings for 2013, 2014, 2015, respectively?
a. Overstate, overstate, understate.
b. Overstate, understate, understate.
c. Overstate, overstate, overstate.
d. None of these answer choices are correct. - ANSOverstate, understate, understate.
Antique Company has notes receivable that have a fair value of $920,000 and a carrying
amount of $710,000. Antique decides on December 31, 2014, to use the fair value option for
these recently-acquired receivables. The adjusting entry to record this change will include a:
a. debit to Unrealized Holding Gain or LossIncome for $210,000.
b. credit to Notes Receivable for $210,000.
c. credit to Unrealized Holding Gain or LossIncome for $210,000.
d. debit to Notes Receivable for $920,000. - ANScredit to Unrealized Holding Gain or
LossIncome for $210,000.
Which of the following is true when accounts receivable are factored without recourse?
a. The transaction may be accounted for either as a secured borrowing or as a sale, depending
upon the substance of the transaction.
b. The receivables are used as collateral for a promissory note issued to the factor by the owner
of the receivables.
c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the
receivables.
d. The financing cost (interest expense) should be recognized ratably over the collection period
of the receivables. - ANSThe factor assumes the risk of collectibility and absorbs any credit
losses in collecting the receivables.
Which of the following items should be included in accounts receivable reported on the balance
sheet?
a. Notes receivable.
b. Interest receivable.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AllLegitExams. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75632 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now