Current Assets

Question 1

1.What best describes the proper presentation of accounts receivable in the financial statements

Answer 1

Accounts receivable less allowance for doubful accounts in the asset section of the balance sheet

Question 2

2. Which of the following would not cause a bank to debit a depositors account?
   a. Bank service charge
   b. Collection of a note receivable
   c.EFT of funds to other locations
   d.Bank account fee

Answer 2

b. Collection of a note receivable

Question 3

3. Which of the following would be added to the balance of the cash at bank account in the books on a bank reconciliation?
   a. outstanding EFTs
   b. outstanding deposits
   c. notes collected by the bank
   d. services charges

Answer 3

c. Notes collected by the bank

Question 4

4. Outstanding deposits (or deposits in transit):
   a. Have been recorded on the company’s boo but not yet by the bank.
   b. have been recorded by the bank but not yet by the compnay.
   c. have not been recorded by the bank or the company
   d. are customers’ payments that have not yet been received by the company

Answer 4

a. Have been recoreded on the company’s books but not yet by the bank

Question 5

5. a cheque was written by a business for $502, but waas recorded in the cash pay,ents journal as $205. How would this error be included in the on the bank reconciliation.
   a. A deduction on the cash book side
   b. An addition on the bank side
   c. a deduction on the bank side
   d. An addition on the cash book side

Answer 5

a. A deduction on the cash book side.

Question 6

6. The bank recorded a $200 deposit as $2000. How would this information be included on the bank reconciliation
   a. An addition on the bank side
   b. a deduction on the cash book side
   c. A deduction on the bank side
   d. An addition of the cash book side

Answer 6

c. A deduction on the bank side

Question 7

7. Cheque number 6135 (written by the firm) for $675 was incorrectly enterers as $657. Which adjustment needs to be made?
   a. Decrease the book balance
   b. Increase the bank statement
   c. Decrease the bank statement
   d. Increase the book balance

Answer 7

a. decrease the book balance

Question 8

8. The bank charged a service charge of $25. How would this information be included in the bank reconciliation?
   a. An addtion on the cash book side
   b. a deduction on the cash book side
   c. A decution on the bank side
   d. An addition on the bank side

Answer 8

b. A deduction on the cash book side

Question 9

9. Which of the following items found on a bank reconciliation does NOT require an adjusting entry?
   a. Interest earned
   b. a bill receivable collected by the bank
   c. a bank service charge
   d. Depostis in transit

Answer 9

d. Deposits in transit

Question 10

10. Which of the following items would require an adjusting entry after preperation of the bank reconciliation?
    a. Outstanding cheques
    b. errors made on the books revealed by the bank reconcilition
    c. All items on the bank’s side
    d. Errors made by the bank revealed by the bank reconciliation

Answer 10

b. Errors made on the book revealed by the bank reconciliation

Question 11

When bad debt expense is recorded under the allowance method:
a. Total assets remain the ssame and stockholders’ equity remains the same
b. Total assets decrease and stockholders’ equity decreases
c. Total assets increase and stockholders’ equity decreases
d. Total liabilities

Answer 11

b. total assets decrease and stockholders’ equity decreases

Question 12

Dunedin Art is just finishing up its first year of operations. During the year, there were
credit sales of $70,000 and collections of credit sales of $60,000. One account for $765 was
written off. Dunedin Art uses the accounts receivable method to account for bad debts
expense. It has estimated $725 as uncollectable at year-end. At the end of the year, what is
the ending balance in the Bad debts expense account?
a. $764
b. $725
c. $40
d.$1490

Answer 12

d. $1490

Question 13

Net credit sales for the month are $800 000. The accounts receivable balance is $160000.
The allowance is calculated as 7.5% of the receivables balance using the ageing of
receivables method. If the allowance for doubtful debts has a credit balance of $5000 before
adjustment, what is the balance after adjustment?
a. $12,000
b. $7,000
c. $17,000
d. $31,000

Answer 13

a. $12,000

Question 14

If a EFT correctly written and paid by the bank for $354 is incorrectly recorded on the
company’s books for $345, the appropriate treatment on the bank reconciliation would be to:

A. add $9 to the bank’s balance.
B. add $9 to the cash at bank book balance.
C. deduct $9 from the bank’s balance.
D. deduct $9 from the cash at bank book balance.

Answer 14

d. Deduct $9 from the cash at bank book balance

Question 15

5. A EFT for $157 is incorrectly recorded by a company as $175. On the bank reconciliation,
   the $18 error should be:
   A. added to the balance per books.
   B. deducted from the balance per books.
   C. added to the balance per bank.
   D. deducted from the balance per bank.

Answer 15

A. added to the balance per books.

Question 16

For which of the following errors should the appropriate amount be added to the balance
per bank on a bank reconciliation?
A. EFT for $93 recorded as $39.
B. A returned $400 EFT recorded by bank as $40.
D. EFT for $68 recorded as $86.
D. Deposit of $350 recorded by bank as $35.

Answer 16

D. Deposit of $350 recorded by bank as $35.

Question 17

Which of the following items on a bank reconciliation would require an adjusting entry on
the company’s books?
A. An error by the bank
B. A bank service charge
C. Outstanding EFTs
D. An outstanding deposit

Answer 17

B. A bank service charge

Question 18

A cheque of $57 deposited by a company was returned from the bank as a dishonoured
cheque. How would this information be included on the bank reconciliation?
A. An addition on the bank side.
B. An addition on the cash book side.
C. A deduction on the cash book side.
D. A deduction on the bank side.

Answer 18

C. A deduction on the cash book side.

Question 19

Which of the following would be included in a journal to record a dishonoured cheque?
A. A debit to Accounts payable and a credit to Cash.
B. A debit to Accounts receivable and a credit to Cash.
C. A debit to Miscellaneous expense and a credit to Cash.
D. A debit to Cash and a credit to Accounts receivable.

Answer 19

B. A debit to Accounts receivable and a credit to Cash.

Question 20

Kim plc has a credit balance of $15,000 in its Allowance for Doubtful Accounts before any
adjustments are made at the end of the year. Kim estimates that $60,000 of its receivables are
uncollectible. The amount of bad debt expense which should be reported for the year is:
A. $15,000. B. $60,000. C. $45,000. D. $75,000.

Answer 20

C. $45,000.