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     33.     If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as
a.     a deduction from sales in the income statement.
b.     an item of "other expense" in the income statement.
c.     a deduction from accounts receivable in determining the net realizable value of accounts receivable.
d.     sales discounts forfeited in the cost of goods sold section of the income statement.
     34.     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.

     35.     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.

     36.     Which of the following methods of determining annual bad debt expense best achieves the matching concept?
a.     Percentage of sales
b.     Percentage of ending accounts receivable
c.     Percentage of average accounts receivable
d.     Direct write-off

     37.     Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense?
a.     A percentage of sales adjusted for the balance in the allowance
b.     A percentage of sales not adjusted for the balance in the allowance
c.     A percentage of accounts receivable not adjusted for the balance in the allowance
d.     An amount derived from aging accounts receivable and not adjusted for the balance in the allowance

     38.     The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach
a.     gives a reasonably correct statement of receivables in the balance sheet.
b.     best relates bad debt expense to the period of sale.
c.     is the only generally accepted method for valuing accounts receivable.
d.     makes estimates of uncollectible accounts unnecessary.

     39.     At the beginning of 2006, Finney Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Finney reported this note as a $1,000 trade note receivable on its 2006 year-end statement of financial position and $1,000 as sales revenue for 2006. What effect did this accounting for the note have on Finney's net earnings for 2006, 2007, 2008, and its retained earnings at the end of 2008, respectively?
a.     Overstate, overstate, understate, zero
b.     Overstate, understate, understate, understate
c.     Overstate, overstate, overstate, overstate
d.     None of these


     40.     Which of the following is true when accounts receivable are factored without recourse?
a.     The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction.
b.     The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables.
c.     The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
d.     The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.

     S41.     Which of the following statements is incorrect regarding the classification of accounts and notes receivable?
a.     Segregation of the different types of receivables is required if they are material.
b.     Disclose any loss contingencies that exist on the receivables.
c.     Any discount or premium resulting from the determination of present value in notes receivable transactions is an asset or liability respectively.
d.     Valuation accounts should be ap¬propriately offset against the proper receivable accounts.

     S42.     Of the following conditions, which is the only one that is not required if the transfer of receivables with recourse is to be accounted for as a sale?
a.     The transferor is obligated to make a genuine effort to identify those receiv¬ables that are uncollectible.
b.     The transferor surrenders control of the future economic benefits of the receivables.
c.     The transferee cannot require the transferor to repurchase the receivables.
d.     The transferor's obligation under the recourse provisions can be reasonably estimated.

     P43.     The accounts receivable turnover ratio measures the
a.     number of times the average balance of accounts receivable is collected during the period.
b.     percentage of accounts receivable turned over to a collection agency during the period.
c.     percentage of accounts receivable arising during certain seasons.
d.     number of times the average balance of inventory is sold during the period.

     44.     The accounts receivable turnover ratio is computed by dividing
a.     gross sales by ending net receivables.
b.     gross sales by average net receivables.
c.     net sales by ending net receivables.
d.     net sales by average net receivables.

     *45.     Which of the following is not true?
a.     The imprest petty cash system in effect adheres to the rule of disbursement by check.
b.     Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end.
c.     The Petty Cash account is debited when the fund is replenished.
d.     All of these are not true.


     *46.     A Cash Over and Short account
a.     is not generally accepted.
b.     is debited when the petty cash fund proves out over.
c.     is debited when the petty cash fund proves out short.
d.     is a contra account to Cash.

     *47.     The journal entries for a bank reconciliation
a.     are taken from the "balance per bank" section only.
b.     may include a debit to Office Expense for bank service charges.
c.     may include a credit to Accounts Receivable for an NSF check.
d.     may include a debit to Accounts Payable for an NSF check.

     *48.     When preparing a bank reconciliation, bank credits are
a.     added to the bank statement balance.
b.     deducted from the bank statement balance.
c.     added to the balance per books.
d.     deducted from the balance per books.

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