1. Bank overdrafts, if material, should be reported as a deduction from the current asset section. reported as a deduction from cash. netted against cash and a net cash amount reported. reported as a current liability. a. b. c. d. The accounting for cash discounts and trade discounts are 2. the same always recorded net. not the same. tied to the timing of cash collections on the account. a. b. c. d. 3. What is the normal journal entry when writing-off an account as uncollectible 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 4. Which of the following is not true? The imprest petty cash system in effect adheres to the rule of disbursement by check. Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end. The Petty Cash account is debited when the fund is replenished. All of these are not true. a. b. c. d. 5. A Cash Over and Short account is not generally accepted. is debited when the petty cash fund proves out over. is debited when the petty cash fund proves out short. is a contra account to Cash. a. b. c. d. Kennison Company has cash in bank of $15,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of 6. a. $14,000. b. $17,000. c. $15,000. d. $18,000. 7. In preparing its August 31, 20x2 bank reconciliation, Bing Corp. has available the following information: Balance per bank statement, 8/31/x2 Deposit in transit, 8/31/x2 Return of customer's check for insufficient funds, 8/30/x2 Outstanding checks, 8/31/x2 Bank service charges for August $18,650 3,900 600 2,750 100 At August 31, 20x2, Bing's correct cash balance is a. $19,800. b. $19,100. c. $19,200 d. $17,500. 8. Ace Co. prepared an aging of its accounts receivable at December 31, 20x2 and determined that the net realizable value of the receivables was $600,000. Additional information is available as follows: Allowance for uncollectible accounts at 1/1/x2-credit balance Accounts written off as uncollectible during 20x2 Accounts receivable at 12/31/x2 Uncollectible accounts recovered during 20x2 $68,000 46,000 650,000 10,000 For the year ended December 31, 20x2, Ace's uncollectible accounts expense would be a. $50,000. b. $46,000. c. $32,000. d. $18,000. AG Inc. made a $15,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? 9. Debit Accounts Receivable for $14,700. Debit Accounts Receivable for $14,700 and Sales Discounts for $300. Debit Accounts Receivable for $15,000. Debit Accounts Receivable for $15,000 and Sales Discounts for $300. a. b. c. d. 10. Becky had net sales (all on account) in 2018 of $600,000. At December 31, 2018, before adjusting entries, the balances in selected accounts were: accounts receivable $750,000 debit, and allowance for doubtful accounts $1,500 debit. Becky estimates that 3% of its net sales will prove to be uncollectible. What is the net realizable value of the receivables reported on the financial statements at December 31, 2018? a. $133,500 b. $732,000 $730,500 $733,500 c. d. Ex. 1-Bank Reconciliation and Adjusting Entries The cash account of Green Co. showed a ledger balance of $8,650.90 on November 30, 2018. The bank statement as of that date showed a balance of $10,667.00. Upon comparing the statement with the cash records, the following facts were determined. There were bank service charges for November of $30. A bank memo stated that Solo's note for $1,500 and interest of $61 had been collected on November 3, and the bank had made a charge of $8 on the collection. (No entry had been made on Green's books when Solo's note was sent to the bank for collection.) Receipts for November 30 for $1,170 were not deposited until December 4. Checks outstanding on November 30 totaled $2,361.20. The bank had charged Green Co.'s account for a customer's uncollectible check amounting to $318.00 on November 29 A customer's check for $210 had been entered as $240 in the cash receipts journal by Green on November 21. Check no. 8560 in the amount of $580 had been entered in the cash journal as $850, and check no. 8572 in the amount of $688.00 had been entered as $68.80. Both checks had been issued to pay for purchases of inventory on account. 1. 2. 3. 4. 5. 6. 7. Instructions (a) Prepare a bank reconciliation dated November 30, 2018, proceeding to a correct cash balance. (b) Prepare any entries necessary to make the books correct and complete. Ex. 2-Entries for bad debt expense. A trial balance before adjustment included the following Debit $90,000 Credit Accounts receivable Allowance for doubtful accounts Sales Sales discount Sales returns and allowances 830 $350,000 3,000 8,000 Give journal entries assuming that the estimate of uncollectible is determined by taking (1) 5% of gross accounts receivable and (2) 1% of net sales. Ex. 3-Accounts receivable assigned Accounts receivable in the amount of $350,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $300,000. The finance company charged a 4% commission on the face amount of the loan, and the note bears interest at 9% per year. During the first month, Marsh collected $230,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note. Instructions Make all the entries for Marsh Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company. Ex. 4-Factoring Accounts Receivable. On May 1, Dexter, Inc. factored $900,000 of accounts receivable with Quick Finance on a without recourse basis. Under the arrangement, Dexter was to handle disputes concerning service, and Quick Finance was to make the collections, handle the sales discounts, and absorb the credit losses. Quick Finance assessed a finance charge of 6% of the total accounts receivable factored and retained an amount equal to 2% of the total receivables to cover sales discounts. Instructions (a) Prepare the journal entry required on Dexter's books on May 1 (b) Prepare the journal entry required on Quick Finance's books on May1 (c) Assume Dexter factors the $900,000 of accounts receivable with Quick Finance on a with recours basis instead. The recourse provision has a fair value of $14,000. Prepare the journal entry required on Dexters books on May 1 Ex. 5 -Discount of Note Receivable Sutherland Corporation sold goods to Rice Decorators for $50,000 on September 1, 2018, accepting Rice's S50.000, 6-month, 6% note. Instructions (a) Prepare Sutherland's September 1 entry, December 31, annual adjusting entry, and March 1 entry for the collection of the note and interest (b) Assume Sutherland's discount the note to Bank of America on December 1, at 10% (discount interest), prepare the entry to record discount of the