Immediate Accounting Exam 2: Ch.7 Study Guide

Please select and explain the best answer.

1. Travel advances should be reported as

a. supplies.

b. cash because they represent the equivalent of money.

c. investments.

d. receivables

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2. All of the following may be included under the heading of "cash" except

a. currency.

b. money market funds.

c. checking account balance.

d. savings account balance.

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3. Deposits held as compensating balances

a. usually do not earn interest.

b. if legally restricted and held against short-term credit may be included as cash.

c. if legally restricted and held against long-term credit may be included among current assets.

d. if separately restricted and held against long-term credit may be included as noncurrent assets

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4. How can accounting for bad debts be used for earnings management?

a. Determining which accounts to write-off.

b. Changing the percentage of receivables recorded as bad debt expense.

c. Using an aging of the accounts receivable balance to determine bad debt expense.

d. Reversing previous write-offs.

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5. 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.

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6. Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense?

a. Actual losses from uncollectible accounts

b. A percentage of accounts receivable adjusted for the balance in the allowance

c. A percentage of accounts receivable not adjusted for the balance in the allowance

d. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance

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7. When preparing a bank reconciliation, bank credits are

a. added to the bank statement balance.

b. deducted from the bank statement balance.

c. added to the balance per books.

d. deducted from the balance per books.

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***As the instuctions state, please explain your answers if possible.***