Reference no: EM132743147
Questions -
Q1. What is a compensating balance?
a. Savings account balances
b. Temporary investments serving as collateral for outstanding loans
c. Minimum deposits required to be maintained in connection with a borrowing arrangement.
d. Margin accounts held with brokers
Q2. When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will
a. Offset the overdraft against cash account
b. Report the same in the notes to financial statements
c. Classify the bank overdraft as compensating balance
d. Report the bank overdraft amount as accounts payable
Q3. [S1] A deposit in transit is a reconciling item to the unadjusted book balance. [S2] A debit memo is already accounted in the unadjusted bank balance.
a. Only S2 is true.
b. Both S1 and S2 are true.
c. Both S1 and S2 are false.
d. Only S1 is true.
Q4. The following requires an adjustment to the balance per cash in bank account EXCEPT
a. A loan was directly paid by a debtor through fund transfer into the entity's bank account.
b. A customer check was drawn against insufficient funds.
c. A customer check was a certified check.
d. Earning of interest income on the depositor's bank account balance
Q5. A proof of cash is prepared to correctly identify the following amounts relating to cash in bank EXCEPT
a. Outstanding checks as of each date
b. Receipts for the period
c. Average balance of the bank account
d. Disbursements for the period
Q6. [S1] The unadjusted receipts per bank for a certain period generally includes deposits by the entity which have not yet been cleared in the previous period but has recently cleared. [S2] Outstanding checks from the previous period may or may not have been disbursed by the bank in the current period.
a. Both S1 and S2 are true.
b. Only S1 is true.
c. Both S1 and S2 are false.
d. Only S2 is true.
Q7. Which of the following transactions will increase the balance of the accounts receivable account? *
a. Collection of an account written off
b. A customer NSF check
c. A customer return merchandise
d. Write-off of a customer account
Q8. When sales are made on account, what shipping term will result to the highest amount debited to accounts receivable?
a. FOB destination, freight prepaid
b. FOB destination, freight collect
c. FOB shipping point, freight collect
d. FOB shipping point, freight prepaid
Q9. The collection of an account previously written off will:
a. Increase accounts receivable
b. Increase allowance for doubtful accounts
c. Decrease allowance for doubtful accounts
d. Decrease accounts receivable
Q10. When an aging approach is used for estimating uncollectible accounts
a. Bad debt expense is measured directly and the allowance for uncollectible account is measured directly.
b. Bad debt expense is measured indirectly and the allowance for uncollectible account is measured indirectly.
c. Bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured directly.
d. Bad debt expense is measured directly and the allowance for uncollectible account is measured indirectly.
Q11. The book balance of a cash in bank account of Stands Corp. is P1,090,000. As of this date, outstanding checks totaled P60,000 while deposits in transit amount to P120,000. The accountant of Stands determined that debit memos and credit memos for the month amounting to P30,000 and P200,000 has not yet been recorded. What is the adjusted cash in bank balance?
a. P1,030,000
b. P920,000
c. P1,090,000
d. P1,260,000
Q12. The checking account balance per bank statement is P3,874,000. Included in the bank statement are a bank service charge of P10,000, a note collection by the bank of P400,000 and the return of P100,000 from a matured time deposit. Outstanding checks totaled P490,000 while deposits in transit total P210,000. The depositor incorrectly recorded a cash collection of P82,000 as P28,000. What is the adjusted cash in bank?
a. P3,594,000
b. P4,154,000
c. P3,648,000
d. P3,540,000
Q13. HIRO Company provided you its June bank statement for its PNB demand account. The beginning balance, total debits and total credits are P350,000, P2,800,000 and P2,850,000 respectively. Checks disbursed by the company last month that cleared this month totaled P250,000 while checks issued this month but still outstanding amount to P350,000. Deposit in transit at the beginning and end of the month total P200,000 and P350,000, respectively. The bank also returned P30,000 which it incorrectly charged against the HIRO bank account during May. What is the correct cash receipts amount for the month?
a. P2,920,000
b. P2,970,000
c. P3,000,000
d. P2,950,000
Q14. Naseen Company has P3,100,000 of accounts receivable at the end of the year. P1,200,000 are not yet due but it is estimated that 1% of which is uncollectible. P900,000 are one to two months past due, 98% of which may be collectible. 6% of the remaining balance is estimated to be uncollectible. During the year, the entity wrote off P70,000 in accounts receivable and recovered P20,000 that had been written of in prior years. At the beginning of the current year, the allowance for doubtful accounts was P60,000. What amount should the company debit to doubtful accounts expense?
a. 80,000
b. 60,000
c. 90,000
d. 70,000