Accounting 1 Chapters 8 - 9 Test

25 July 2022
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31 test answers
question
The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the financial scandals of the early 2002s.
answer
True
question
Internal control is enhanced by separating the control of a transaction from the record-keeping function.
answer
True
question
If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.
answer
True
question
In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement.
answer
False
question
A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you must add $90 to the bank statement balance.
answer
True note: 342 + 99 = 432.
question
If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.
answer
False
question
In establishing a petty cash fund, a check is written for the amount of the fund and is recorded as a debit to Accounts Payable and a credit to Petty Cash.
answer
False
question
Expenditures from a petty cash fund are documented by a petty cash receipt.
answer
True
question
When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since the fund was last replenished.
answer
False Credit Cash
question
Generally Accepted Accounting Principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts.
answer
False Matching Principle
question
Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period.
answer
True
question
Allowance for Doubtful Accounts is a liability account.
answer
False
question
At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $500. Net credit sales for the period totaled $800,000. If bad debt expense is estimated at 1% of net credit sales, the amount of bad debt expense to be recorded in the adjustment entry is $8,500.
answer
False
question
When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is violated.
answer
False
question
The maturity value of a 12%, 60-day note for $5,000 is $5600.
answer
False (5000 x 0.12 x 60/360) = 100 5000 + 100 = 5100.
question
The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
answer
False
question
The number of days' sales in receivables is an estimate of the length of time the accounts receivables have been outstanding.
answer
True
question
When a clerk enters a sale and the customer can see the amount displayed and is given a cash receipt, this is an example of a preventive control.
answer
True
question
When companies sell their receivables to other companies, the transaction is called factoring.
answer
True note: The people we are selling are called factors.
question
Which one of the following below reflects a weak internal control system?
answer
a single employee is responsible for collecting and recording of cash.
question
The debit balance in Cash Short and Over at the end of an accounting period is reported as:
answer
an expense on the income statement.
question
A check drawn by a company for $340 in payment of a liability was recorded in the journal as $450. This item would be included on the bank reconciliation as a(n):
answer
addition to the balance per the company's records.
question
The amount of deposits in transit is included on the bank reconciliation as a(n):
answer
addition to the balance per bank statement.
question
A $150 petty cash fund has cash of $44 and receipts of $94. The journal entry to replenish the account would include a:
answer
debit to Cash Over and Short for $13.
question
A note receivable due in 18 months is listed on the balance sheet under the caption:
answer
investments.
question
The two methods of accounting for uncollectible receivables are the allowance method and the:
answer
direct write-off method.
question
One of the weaknesses of the direct write-off method is that it:
answer
violates the matching principle.
question
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?
answer
$289,000
question
A debit balance in the allowance for Doubtful Accounts:
answer
indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. note: Write-off is less than the Allowance method.
question
The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles:
answer
does not affect net income in the period it is collected.
question
Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit:
answer
Allowance for Doubtful Accounts and credit Accounts Receivables.
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question
The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the financial scandals of the early 2002s.
answer
True
question
Internal control is enhanced by separating the control of a transaction from the record-keeping function.
answer
True
question
If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.
answer
True
question
In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement.
answer
False
question
A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you must add $90 to the bank statement balance.
answer
True note: 342 + 99 = 432.
question
If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.
answer
False
question
In establishing a petty cash fund, a check is written for the amount of the fund and is recorded as a debit to Accounts Payable and a credit to Petty Cash.
answer
False
question
Expenditures from a petty cash fund are documented by a petty cash receipt.
answer
True
question
When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since the fund was last replenished.
answer
False Credit Cash
question
Generally Accepted Accounting Principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts.
answer
False Matching Principle
question
Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period.
answer
True
question
Allowance for Doubtful Accounts is a liability account.
answer
False
question
At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $500. Net credit sales for the period totaled $800,000. If bad debt expense is estimated at 1% of net credit sales, the amount of bad debt expense to be recorded in the adjustment entry is $8,500.
answer
False
question
When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is violated.
answer
False
question
The maturity value of a 12%, 60-day note for $5,000 is $5600.
answer
False (5000 x 0.12 x 60/360) = 100 5000 + 100 = 5100.
question
The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
answer
False
question
The number of days' sales in receivables is an estimate of the length of time the accounts receivables have been outstanding.
answer
True
question
When a clerk enters a sale and the customer can see the amount displayed and is given a cash receipt, this is an example of a preventive control.
answer
True
question
When companies sell their receivables to other companies, the transaction is called factoring.
answer
True note: The people we are selling are called factors.
question
Which one of the following below reflects a weak internal control system?
answer
a single employee is responsible for collecting and recording of cash.
question
The debit balance in Cash Short and Over at the end of an accounting period is reported as:
answer
an expense on the income statement.
question
A check drawn by a company for $340 in payment of a liability was recorded in the journal as $450. This item would be included on the bank reconciliation as a(n):
answer
addition to the balance per the company's records.
question
The amount of deposits in transit is included on the bank reconciliation as a(n):
answer
addition to the balance per bank statement.
question
A $150 petty cash fund has cash of $44 and receipts of $94. The journal entry to replenish the account would include a:
answer
debit to Cash Over and Short for $13.
question
A note receivable due in 18 months is listed on the balance sheet under the caption:
answer
investments.
question
The two methods of accounting for uncollectible receivables are the allowance method and the:
answer
direct write-off method.
question
One of the weaknesses of the direct write-off method is that it:
answer
violates the matching principle.
question
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?
answer
$289,000
question
A debit balance in the allowance for Doubtful Accounts:
answer
indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. note: Write-off is less than the Allowance method.
question
The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles:
answer
does not affect net income in the period it is collected.
question
Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit:
answer
Allowance for Doubtful Accounts and credit Accounts Receivables.