) The person or company to whom a check is payable is called the payee.

2) Checks that have been processed by the bank and are no longer negotiable are called outstanding checks.

3) Bad debts are written off by crediting allowance for doubtful account.

4) On the bank reconciliation, bank charges are a deduction from the balance per company books.

5) Accounts receivable is a customer's written promise to pay an amount and interest at an agreed date.

6) If the ending balance in the Cash Short/Over account is a credit, it indicates that cash shortages have exceeded cash overages for the period.

7) Deposits that have been added to the balance per bank but not the General Ledger balance are called deposits in transit.

8) When the Allowance for Doubtful Accounts appears on a company's financial statements, its balance will be a debit balance.

9) Allowance for Doubtful Accounts appears in the Balance Sheet.

10)A company's Allowance for Doubtful Accounts has a credit balance of $25,000. It learns that one of its accounts receivable amounting to $1,800 is worthless and needs to be written off. To do the write off, the company must debit Bad Debts Expense.

11) Under the direct write off method, Bad Debts Expense account is debited when a company writes off one of its accounts receivable.

12) Sorting a company's accounts receivable into classifications such ascurrent, 1-30 days past due, and31-60 days past dueis known as theAging of Accounts Receivables.

13) The receivable turnover ratio is computed by dividing the average amount of accounts receivable during the year by the Net Credit Sales.

14) A company's accounts receivable minus its allowance for doubtful accounts equals the netrealizable value of the accounts receivable.

15)Any adjustment to the bank's records to take up a reconciling item requires a journal entry.

16) Quick assets include cash, marketable securities and accounts receivables.

17) When a sale is made with the credit terms 2/10, net 30, the "10" refers to the credit period.

18)After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its balance in Allowance for Doubtful Accounts

19) In some industries, companies often sell their accounts receivable to a firm known as a"factor"

20) Receivable turnover is a measure of profitability.

21) A current ratio is never larger than the quick ratio.

22) All companies should have at least a 1.5 to 1 current ratio.

23)Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

24) Accounts receivable turnover measures the number of days in the company's average collection period.

25)It is not possible for the bank statement to show a larger ending cash balance than the ending cash balance shown on the balance sheet

Multiple Choice

1) One of the objectives of internal control is _______?

A) To comply with applicable laws and regulations.

B) To safeguard and use assets solely for business purposes.

C) To produce reliable and accurate financial reports.

D) All of the above are correct.

2) A $50 petty cash fund has cash left in the cash box of $25 and valid receipts for $30. The entry to replenish the fund would include

A) credit to Cash for $30.

B) credit to Petty Cash for $25.

C) credit to Cash for $25.

D) credit to Petty Cash for $30.

3) Any shortage while replenishing petty cash fund is recorded as a ______ to _____account?

A) credit, Petty cash account

B) credit, Cash short & over

C) debit, Cash short & over

D) credit, Cash short & over

4) Scotch Services received a credit memorandum from the bank. During the bank reconciliation they should

A) increase their cash account on the company's books.

B) decrease their cash account on the company's books.

C) increase the ending cash balance on the bank statement.

D) decrease the ending cash balance on the bank statement.

5) What type of transaction gives rise to accounts receivable?

A) purchases for cash

B) sales for cash

C) sales on account

D) purchases on account

6) Estimates for uncollectible receivables are recoded as a _____ in _____ account?

A) debit, Allowance for doubtful accounts

B) debit, Accounts Receivable

C) credit, Bad debt expense

D) credit, Allowance for doubtful accounts

7) An estimate of the length of time the accounts receivable has been outstanding?

A) aging of receivables

B) days' sales in receivables

C) accounts receivable turnover

D) maturity date

8) Accounts Receivable less Allowance for doubtful accounts equal?

A) Net realizable value

B) Bad debts already written off

C) Estimate for doubtful accounts

D) Total Accounts receivable

9) Net sales when divided by Average accounts receivable yields?

A) Accounts Receivable turnover

B) Days' sales in receivables

C) Inventory turnover

D) Gross Sales

10) The quick ratio EXCLUDES which of the following accounts?

A) Cash

B) Inventory

C) Accounts Receivable

D) Accounts Payable

11) A company recorded its check #2754 in its accounting records as $98. However, check #2754 was actually written for $89 and it cleared the bank as $89. What adjustment is needed to the Cashbalanceper books?

A) Decrease By $9

B)Increase By $9

C) None Needed

D) Decrease by $89

12) Wilkinson Company had net credit sales of $2,250,000. At the beginning of the year, its Allowance for Doubtful Accounts had a credit balance of $54,000. During year, $90,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at the end of the year was $600,000, what is the required adjustment to the Allowance for Doubtful Accounts at year end?

A) $ 60,000

B) $ 24,000

C) $ 96,000

D) $ 90,000

13) On June 1, $800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned $100 of the goods. How much should the seller expect to receive if the buyer pays on June 8?

A) $692

B) $693

C) $700

D) $792

14)A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for Doubtful Accounts presently has a debit balance of $3,000. The adjusting entry will include a __________ to Allowance for Doubtful Accounts.

A) Debit of $17,000

B) Credit of $17,000

C) Debit of $23,000

D) Credit of $23,000

15) The proper treatment on the bank reconciliation of an NSF check of a customer that is returned with the bank statement is to show it as a(an)

A) addition per book balance of cash

B) deduction per book balance of cash

C) addition per bank statement balance

D) deduction per bank statement balance

16) Which of the following would require the Petty Cash account to be credited?

A) the petty cash fund is short by $3.50

B) the petty cash fund is over by $4.50

C) the petty cash account is being increased

D) the petty cash account is being decreased

17) If the petty cash fund is not replenished at the end of the accounting period,

A) the income statement and the balance sheet will not be correct

B) liabilities will be overstated on the balance sheet

C) the cash account will be understated

D) it indicates that the petty cash fund is probably short

18) The bookkeeper recorded a bank deposit at $450, but the bank recorded the deposit at its correct amount of $540. The bank reconciliation will require a(an)

A) addition per book balance of cash

B) deduction per book balance of cash

C) addition per bank statement balance

D) deduction per bank statement balance

19) The bookkeeper recorded a check at $340.56 for store supplies. The check was recorded by the bank at its correct amount of $430.65. The bank reconciliation will require a(an)

A) addition per book balance of cash

B) deduction per book balance of cash

C) addition per bank statement balance

D) deduction per bank statement balance

20) A $300 petty cash fund has cash of $39 and receipts of $255. The journal entry to replenish the account would include

A) debit to Cash for $255.

B) credit to Petty Cash for $255.

C) debit to Petty Cash for $261.

D) credit to Cash for $261.

21) When a firm writes off a bad debt under the allowance method of accounting for bad debts

A) the realizable value of accounts receivable decreases

B) total net current assets will decrease

C) the cash account will decrease

D) the net realizable value of accounts receivable will not change

22) When a firm collects (recovers) an account receivable that was previously written off under the allowance method of accounting for bad debts,

A) the realizable of accounts receivable will decrease

B) the cash account will decrease by the full amount of recovery

C) the allowance amount will decrease by the amount collected

D) the realizable value of accounts receivable will increase

23) The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustment, of $450. The bad debts are estimated at 3% of $650,000, the net credit sales. After the appropriate adjusting entry for bad debts, the Allowance for Doubtful Accounts should have a credit balance of

A) $19,500

B) $19,950

C) $19,050

D) $20,400

24) Net sales were $360,000. The cost of goods sold was $180,000. Operating expenses were $120,000. The ending balance of the Accounts Receivable account was $20,000. The gross profit margin was:

A) 16.67%

B) 20.0%

C) 50.0%

D) 33.3%

25) Net sales were $450,000, and the accounts receivable turnover was 5.5 times. What is the average accounts receivable?

A) not determinable from the information provided

B) $24,750

C) $81,818

D) $90,000