Required: circle or indicate the correct response

1. Which of the following are reasons why companies should monitor accounts receivable levels

carefully?

a) to maximize costs of collection

b) to encourage prompt payment from their customers

c) to minimize the stress on working capital and related bank debt

d) b) and c) only

e) All of the above are reasons why companies should monitor accounts receivable.

2. If a company uses the gross method of recording accounts receivable, then cash discounts

taken should be reported as

a) a deduction from sales in the income statement.

b) an item of "other expense" in the income statement.

c) a deduction from accounts receivable in determining the net realizable value of accounts

receivable.

d) sales discounts forfeited in the cost of goods sold section of the income statement.

3. What is the single most important indicator used to identify impaired accounts receivable?

a) the customer's payment history

b) the age of the accounts

c) credit reports and references

d) industry in which the company operates

4. An estimated loss on purchase commitments is reported

a) under other expenses and losses.

b) as a deduction from purchases.

c) as a current liability.

d) as an extraordinary item.

5. If a unit of inventory has declined in value below original cost, but the market value exceeds

net realizable value, the amount to be used for purposes of inventory valuation is

a) net realizable value.

b) original cost.

c) market value.

d) net realizable value less a normal profit margin.

6. Generally, transaction costs are

a) capitalized when investments are accounted for using a cost-based model.

b) capitalized when investments are accounted for using a fair value model.

c) always expensed.

d) never expensed.

7. To calculate the amount of interest to recognize each period for a bond investment (unless it

held for trading purposes),

a) ASPE requires the use of the effective-interest method.

b) IFRS requires the use of the effective-interest method.

c) IFRS allows the use of either the effective-interest or the straight-line method.

d) ASPE requires the use of the straight-line method.