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Cash caption on a balance sheet

1) Which of the following items should NOT be included in the Cash caption on the balance sheet?

A. Coins and currency in the cash register
B. Postage stamps on hand
C. Checks from other parties presently in the cash register
D. Amounts on deposit in checking account at the bank

2) Which of the following is NOT considered cash for financial reporting purposes?

A. Petty cash funds and change funds
B. Postdated checks and I.O.U.'s
C. Money orders, certified checks, and personal checks
D. Coin, currency, and available funds

3) Which of the following is considered cash?

A. Certificates of deposit (CDs)
B. Postdated checks
C. Money market checking accounts
D. Money market savings certificates

4) Which of the following methods of determining annual bad debt expense best achieves the matching concept?

A. Percentage of sales
B. Direct write-off
C. Percentage of ending accounts receivable
D. Percentage of average accounts receivable

5) Which of the following methods of determining bad debt expense does NOT properly match expense and revenue?

A. Charging bad debts with a percentage of sales under the allowance method.
B. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method.
C. Charging bad debts with an amount derived from aging accounts receivable under the allowance method.
D. Charging bad debts as accounts are written off as uncollectible.

6) 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.

7) The failure to record a purchase of mer¬chandise on account even though the goods are properly included in the physical inven¬tory results in

A. an overstatement of assets and net income.
B. an understatement of assets and net income.
C. an understatement of cost of goods sold and liabilities and an overstatement of assets.
D. an understatement of liabilities and an overstatement of owners' equity.

8) The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007. Orion uses the periodic inventory system. The January 1, 2007 merchandise inventory balance will appear

A. only as an asset on the balance sheet.
B. only in the cost of goods sold section of the income statement.
C. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
D. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

9) If the beginning inventory for 2006 is overstated, the effects of this error on cost of goods sold for 2006, net income for 2006, and assets at December 31, 2007, respectively, are

A. overstatement, understatement, overstatement.
B. overstatement, understatement, no effect.
C. understatement, overstatement, overstatement.
D. understatement, overstatement, no effect.

10) Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method?

A. Prices decreased.
B. Prices remained unchanged.
C. Prices increased.
D. Price trend cannot be determined from information given.

11) The use of a Discounts Lost account implies that the recorded cost of a purchased inventory item is its

A. invoice price.
B. invoice price plus the purchase discount lost.
C. invoice price less the purchase discount taken.
D. invoice price less the purchase discount allowable whether taken or not.

12) All of the following costs should be charged against revenue in the period in which costs are incurred EXCEPT for

A. manufacturing overhead costs for a product manufactured and sold in the same accounting period.
B. costs from idle manufacturing capacity resulting from an unexpected plant shutdown.
C. costs which will NOT benefit any future period.
D. costs of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory.

Solution Preview

-- To be used in combination with your text and other study materials for your studying purposes.

1) Which of the following items should NOT be included in the Cash caption on the balance sheet?

A. Coins and currency in the cash register
B. Postage stamps on hand <-- this wouldn't be included in cash.
C. Checks from other parties presently in the cash register
D. Amounts on deposit in checking account at the bank

2) Which of the following is NOT considered cash for financial reporting purposes?

A. Petty cash funds and change funds
B. Postdated checks and I.O.U.'s <-- this is not considered cash. All other forms listed are.
C. Money orders, certified checks, and personal checks
D. Coin, currency, and available funds

3) Which of the following is considered cash?

A. Certificates of deposit (CDs)
B. Postdated checks
C. Money market checking accounts <-- this is a checking account that regular checks can be written out of.
D. Money market savings certificates

4) Which of the following methods of determining annual bad debt expense best achieves the matching concept?

A. Percentage of sales <-- this is used and its the most common method used.
B. Direct write-off
C. Percentage of ending accounts receivable
D. Percentage of average accounts receivable

5) Which of the following methods of determining ...

Solution Summary

This solution provides the correct answer with explanation to the multiple choice study questions listed.

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