PARTI - MULTIPLE CHOICE (40 points) _1. Internal controls are concerned with a. only manual systems of accounting. b. the extent of government regulations. C. safeguarding assets. d. preparing income tax returns. 2. Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of a. inadequate internal control. b. duplication of effort. c. external verification. d. segregation of duties. __3. If employees are bonded a. it means that they are not allowed to handle cash. b. they have worked for the company for at least 10 years. c. they have been insured against misappropriation of assets. d. it is impossible for them to steal from the company. _4. Mrs. Smith has worked for Arcco Inc., for 20 years without taking a vacation. An internal control feature that would address this situation would be a. human resource controls. b. establishment of responsibility. c. physical controls. d. documentation procedures. _5. Which one of the following items would not be considered cash? a. Coins b. Money orders c. Currency d. Postdated checks _6. A credit balance in Cash Over and Short is reported as an) a. asset. b. liability c. miscellaneous expense. d. miscellaneous revenue. 7. Which one of the following would not cause a bank to debit a depositor's account? a. Bank service charge b. Collection of a note receivable C. Wiring of funds to other locations d. Checks marked NSF _8. An adjusting entry is not required for a. outstanding checks. b. collection of a note by the bank. C. NSF checks. d. bank service charges. 9. Under the allowance method, writing off an uncollectible account a. affects only balance sheet accounts. b. affects both balance sheet and income statement accounts. c. affects only income statement accounts. d. is not acceptable practice. 10. The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the a. direct write-off method. b. percentage of receivables basis. c. percentage of sales basis. d. percentage of receivables and percentage of sales basis. 11. The percentage of sales basis of estimating expected uncollectibles a. emphasizes the matching of expenses with revenues. b. emphasizes balance sheet relationships. C. emphasizes cash realizable value. d. is not generally accepted as a basis for estimating bad debts. 12. Allowance for Doubtful Accounts on the balance sheet a. is offset against total current assets. b. increases the cash realizable value of accounts receivable. C. appears under the heading "Other Assets." d. is offset against accounts receivable. 13 Ilsing the percentage of receivables method for 13. Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 credit before adjustment, what is the amount of bad debts expense for that period? a $10,000 b. $8,000 C. $12,000 d. $2,000 14. A company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts % of sales. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of a. $18,000. b. $19,000. C. $17,980. d. $17,000. 15. Major advantages of credit cards to the retailer include all of the following except the a. credit card issuer does the credit investigation of customers. b. credit card issuer undertakes the collection process. C. retailer receives more cash from the credit card issuer. d. All of these are advantages. 16. Retailers generally consider sales from the use of national credit card sales as a a. credit sale. b. collection of an accounts receivable. c. cash sale. d. collection of a note receivable. 17. The maturity value of a $90,000, 10%, 60-day note receivable dated July 3 is a. $90,000. b. $99,000 C. $105,000. d. $91,500. 18. A note receivable is a negotiable instrument which a. eliminates the need for a bad debts allowance. b. can be transferred to another party by endorsement. c. takes the place of checks in a business firm. d. can only be collected by a bank. Use the following information for questions 1920: The financial statements of Colter Manufacturing Company report net sales of $400,000 and accounts receivable of $80,000 and $40,000 at the beginning and end of the year, respectively. 19. What is the receivables turnover ratio for Colter? a. 6.7 times b. 10 times 5 times d. 8 times 20. What is the average collection period for accounts receivable in days? a. 40 times b. 80 times 54.7 times d. 50 times
