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Exam 7: Financial Assets

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Question 41

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Which of the following activities affects net income,but has no immediate impact upon cash flows?

A) Collection of an account receivable
B) Making the end-of-period adjustment to record estimated uncollectible accounts
C) Investing excess cash in marketable securities
D) Write-off of an uncollectible account receivable against the allowance

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Question 42

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An Unrealized Holding Gain (or Loss) on Investments classified as "available-for-sale" securities:

A) Is reported in the asset section of the balance sheet,as an adjustment to the carrying value of the marketable securities.
B) Is reported in the stockholders' equity section of the balance sheet,as either an increase or decrease in total stockholders' equity.
C) Appears in the current period income statement,combined with realized gains and losses from sales of securities.
D) Indicates the amount of cash a company would receive if the marketable securities were sold as of the balance sheet date.

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Question 43

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Match the following terms with the explanations below.If no term fits the explanation write none ________ (1)A means of accounting for uncollectibles,which does not recognize any expense until specific receivables are determined to be worthless. ________ (2)An account showing the amount of estimated uncollectible receivables. ________ (3)The process of estimating uncollectible accounts by classifying accounts receivables by age groups. ________ (4)Dividing net sales by average receivables to create a ratio to measure the liquidity of accounts receivable. ________ (5)Very short-term liquid investments that must mature within 90 days of acquisition. ________ (6)Cash and assets convertible directly into known amounts of cash. ________ (7)An account showing the difference between the cost of an investment in marketable securities and its market value. ________ (8)The value of a note at its maturity date. ________ (9)Highly liquid investments that can be sold in organized securities exchanges.

Internal control will aid in achieving accurate accounting for cash transactions.

Each of these categories of assets is normally shown in the balance sheet at current value,except:

[The following information applies to the questions displayed below.] At the end of March,the unadjusted trial balance of Tutor,Inc.included the following accounts: -Tutor uses the income statement approach in estimating uncollectible accounts expense,and uncollectible accounts expense is estimated to be 3% of credit sales.The net realizable value of Tutor's accounts receivable in the March 31 balance sheet is:

The lower the accounts receivable turnover rate,the longer a company must wait to collect from its credit customers.

Write-off of uncollectible account receivable On January 10,Winston,Inc.'s trial balance included the following accounts: On January 11,Len Palmer,a major customer,declares bankruptcy and thus,Winston determines that a receivable from Palmer in the amount of $3,400 is worthless. (a)In the space provided,prepare the journal entry that Winston should record to write-off the account receivable from Len Palmer on January 11. (b)Compute the net realizable value of Winston's accounts receivable at each of the following dates: January 10 (before write-off of Palmer's account)$________ January 11 (immediately after write-off of Palmers' account)$________

In the bank reconciliation,every adjustment to the balance per depositor's records requires a journal entry.

Salem's balance sheet at December 31,2017,includes which of the following as a result of the sale of land on November 1?

The direct write-off method of recognizing uncollectible accounts expense:

Financial assets (a. )Briefly explain what is meant by the term "financial assets." (b. )List the three major categories of assets comprising a company's financial assets.For each category,indicate the basis for valuation in the balance sheet.

Accounting terminology Listed below are nine technical accounting terms emphasized in this chapter. Fair value accounting Factoring Direct write-off Financial asset Cash equivalent Bank reconciliation Allowance for doubtful accounts Accounts receivable turnover Uncollectible accounts expense Each of the following statements may (or may not)describe one of these technical terms.In the space provided below each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ________ a.A transaction in which a business sells its accounts receivables to a financial institution. ________ b.An estimate of the portion of year-end accounts receivable that ultimately will turn out to be uncollectible. ________ c.Schedule explaining any differences between cash balances appearing in the accounting records and in the monthly bank statement. ________ d.Balance sheet valuation standard applicable to investments in marketable securities. ________ e.Cash and assets convertible directly into known amounts of cash,such as marketable securities and receivables. ________ f.A ratio,computed by dividing 365 days by average receivables,that indicates the liquidity of the receivables. ________ g.Method of accounting for uncollectible receivables that fails to match revenues and expenses.

Assuming a 365-day year,Bush Industries calculated an average of 47 days to collect its accounts receivable in 2019.During 2018,Bush's accounts receivable turnover rate:

Sales to customers using bank credit cards,such as Visa or MasterCard,are recorded as:

[The following information applies to the questions displayed below.] The Cash account in the ledger of Hensley,Inc.showed a balance of $3,100 at June 30.The bank statement,however,showed a balance of $3,900 at the same date.The only reconciling items consisted of a $700 deposit in transit,a bank service charge of $7,and a large number of outstanding checks. -What is the "adjusted cash balance" at June 30?

A bank reconciliation explains the differences between:

At December 31,before adjusting and closing the accounts had occurred,the Allowance for Doubtful Accounts of Seaboard Corporation showed a debit balance of $3,200.An aging of the accounts receivable indicated the amount probably uncollectible to be $2,100.Under these circumstances,a year-end adjusting entry for uncollectible accounts expense would include a:

The valuation principle of "fair value accounting" applied to investments classified as available-for-sale securities:

Which of the following practices best illustrates efficient management of cash?