1. The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:

A. Consistency.

B. Matching revenue and expense.

C. Objectivity.

2. If an organization purchases $700 of supplies on account, with terms of 2/15, n50:

A. $650 must be paid within 15 days of the invoice date.

B. $698 must be paid within 50 days of the invoice date.

C. $686 can be paid within 15 days of the invoice date, or $700 must be paid within 50 days of the invoice date.

3. For which of the following reconciling items would an adjusting entry be necessary?

A. A deposit in transit.

B. An error by the bank.

C. A bank service charge.

4. When a manufacturer invests in short-term marketable securities:

A. The return on investment is more important than the risk involved.

B. The securities are likely to have a maturity date more than a year in the future.

C. Risk avoidance is of great importance.

5. A cash equivalent is a current asset that:

A. Will be converted to cash within one month.

B. Is readily convertible into cash with a minimal risk.

C. Is readily convertible into cash with a substantial risk.

D. None of these

6. When an uncollectible account receivable is written off against the allowance for bad debts:

A. Total current assets are not affected.

B. Total current assets decrease and expenses decrease.

C. Current assets decrease and expenses are not affected.

7. The balance sheet valuation of inventories is:

A. Lower of cost or market.

B. Lower of selling price or cost.

C. Cost, regardless of the cost of replacing the inventory.

8. The valuation of short-term marketable securities in the balance sheet is likely to be their cost because:

A. The market value of short-term marketable securities does not fluctuate from cost.

B. The high quality and close maturity date of the securities causes their market value to be relatively stable.

C. Generally accepted accounting principles require that short-term marketable securities be reported at cost.