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1. What is a compensating balance? A) Savings account balances. B) Margin accounts held with brokers. C) Temporary investments serving as collateral for outstanding loans. D) Minimum deposits required to be maintained in connection with a borrowing arrangement. 2. Bank overdrafts, if material, should be A) reported as a deduction from the current asset section. B) reported as a deduction from cash. C) netted against cash and a net cash amount reported. D) reported as a current liability. 3. If a company employs the gross method of recording accounts receivable from customers, then sales 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 accounts receivable amount expected to be collected. D) sales discounts forfeited in the cost of goods sold section of the income statement. 4. What is the normal journal entry when writing-off an account as uncollectible under the allowance method? A) Debit Allowance for Doubtful Accounts, credit Accounts Receivable. B) Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. C) Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. D) Debit Accounts Receivable, credit Allowance for Doubtful Accounts. 5. Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method? A) Debit Allowance for Doubtful Accounts, credit Accounts Receivable. B) Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. C) Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. D) Debit Accounts Receivable, credit Allowance for Doubtful Accounts. Page 1