Current Assets and Current Liabilities

Question 1

Includes both cash and cash equivalents

Answer 1

Cash

Question 2

Assets that are readily convertible into cash and so near maturity that they carry little risk of changing in value due to interest rate changes—generally only those with initial maturities of 3 months or less from the date of purchase
Ex. treasury bills, commercial paper, money market funds

Answer 2

Cash equivalents

Question 3

Prepared by bank depositors when they receive their monthly bank statements and used to determine any required adjustments to the cash balance

Answer 3

Bank reconciliations–usually made as of a specific date

Question 4

A four-column cash reconciliation that reconciles bank and book cash balances over a specified period of time–purpose is to disclose any misstatements in cash (i.e. unrecorded disbursements/receipts) which would not be detected by a bank rec

Answer 4

Proof of cash

Question 5

Method of accounting for bad debts in which bad debts are considered expenses in the period in which they are written off–not GAAP, unless amounts are immaterial–but required for tax purposes
Only used if company cannot estimate bad debts

Answer 5

Direct write-off method

Question 6

BAd debts expense method that seeks to estimate hte amount of uncollectible receivables, and establishes a contra valuation account (allowance for bad debts) for the amount estimated to be uncollectible

Answer 6

Allowance method

Question 7

The balance in A/r less the allowance for bad debts

Answer 7

Net A/R

Question 8

Purchasing and selling securities that are collateralized by a pool of assets, such as a group of recievables

Answer 8

Securitizations

Question 9

Selling receivables at a discount to obtain immediate cash–usually to an outside financing institution, with the financing institution assuming hte risk of loss from noncollection

Answer 9

Factoring

Question 10

Selling receivables at a discount to btain immediate cash but retaining the risk of loss if the customer does not pay the amount owed

Answer 10

Transfers of recieves with recourse

Question 11

An agreement to sell an asset to a leder and later repurchase the asset–effectively using the asset as collateral for a loan

Answer 11

Repurchase agreement

Question 12

A situation where a group of financial institutions purchase a share of financial instruments

Answer 12

Loan participations

Question 13

An order from a customer of a bank for hte repayment of a specified sum of money that maybe bought and sold

Answer 13

Bankers’ acceptances

Question 14

A distinct asset or liability only when separate contracually from the underlying asset–usually results from a separate purchase or assumptionf othe servicing rights, with obligations specified in the contract

Answer 14

Servicing of financial assets

Question 15

A method of accounting for servicing assets and liaibilties that requires them to be intiially recorded at fair value and then amortized in proportion to, and over the period of, receipt of estimated net servicing income/loss

Answer 15

Amortization method

Question 16

A method of accounting for servicin A/L in which theyare initially recorded at fair value and then fair value is measured at each reporting date, with any changes being reported in earingsin the period in which the change occurs

Answer 16

Fair value method

Question 17

A liability in which the amount of cash and time of payment are known and reasonably precise

Answer 17

Determinable liabilty

Question 18

A liability in whcih obligations may exist but are dependent on certain future events–an existing condition, situation, or set of circumstances involving uncertainty as to possible gain/loss that will ultimately be resolved wehn one or more future events occur or fail to occur

Answer 18

contingent liability