1. Mr. Golf Champ maintains the accounts receivable records, authorizes the write-off of uncollectible accounts, issues credit memoranda to customers, and handles cash receipts from customers. When customers are late in paying their accounts, Mr. Golf Champ often writes off the account as uncollectible and abstracts the cash received from the customer. This fraud should come to light if an employee other than Mr. Golf Champ.

Select one:

a. reconciles the accounts receivable subsidiary ledger to the controlling account

b. reconciles credit memoranda for sales returns to the returned merchandise accepted by the receiving department

c. none of the above

d. reconciles the bank statement to the accounting records

(LETTER B WAS WRONG)

2. If a 12%, 3-month note receivable is acquired from a customer in settlement of an existing account receivable of 10,000, the entry on initial recognition of the note receivable includes a

Select one:

a. debit to note receivable for 11,200

b. debit to note receivable for 10,300

c. debit to note receivable for 10,000 and no entry for interest

d. credit to interest income for 300

(LETTER C WAS WRONG)