intermediate accounting exam 3 ACTUAL
QUESTIONS AND CORRECT ANSWERS
Which of the following is not considered cash for financial reporting purposes?
a. petty cash funds and change funds
b. money orders, certified checks, and personal checks
c. coin, currency, and available funds
d. postdated checks and I.O.U.s - CORRECT ANSWERS postdated checks and I.O.U.s
which of the following is considered cash?
a. certificates of deposit (CDs)
b. money market checking accounts
c. money market savings certificates
d. postdated checks - CORRECT ANSWERS money market checking accounts
what is a compensating balance?
a. savings account balances
b. margin accounts held with brokers
c. temporary investments serving as collateral for outstanding loans
d. minimum deposits required to be maintained in connection with a borrowing arrangement -
CORRECT ANSWERS minimum deposits required to be maintained in connection with a
borrowing arrangement
under which section of the balance sheet is "cash restricted for plant expansion" reported?
a. current assets
b. non-current assets
,c. current liabilities
d. stockholders' equity - CORRECT ANSWERS non-current assets
a cash equivalent is a short-term, highly liquid investment that is readily convertible into known
amounts of cash and
a. is acceptable as a means to pay current liabilities
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation
d. is so near its maturity that it presents insignificant risk of changes in interest rates -
CORRECT ANSWERS is so near its maturity that it presents insignificant risk of changes
in interest rates
bank overdrafts, if material, should be
a. reported as a deduction from the current asset section
b. reported as a deduction from cash
c. netted against cash and a net cash amount reported
d. reported as a current liability - CORRECT ANSWERS reported as a current liability
deposits held as compensating balances
a. usually do not earn interest
b. if legally restricted and held against short-term credit may be included as cash
c. if legally restricted and held against long-term credit may be included among current assets
d. none of these - CORRECT ANSWERS none of these
the category "trade receivables" includes
a. advances to officers and employees
, b. income tax refunds receivable
c. claims against insurance companies for casualties sustained
d. none of these - CORRECT ANSWERS none of these
which of the following should be recorded in Accounts Receivable?
a. receivables from officers
b. receivables from subsidiaries
c. dividends receivable
d. none of these - CORRECT ANSWERS none of these
trade discounts are
a. not recorded in the accounts; rather they are a means of computing a price
b. used to avoid frequent changes in catalogs
c. used to quote different prices for different quantities purchased
d. all of the above - CORRECT ANSWERS all of the above
if a company employes 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 -
CORRECT ANSWERS a deduction from sales in the income statement
why do companies provide trade discounts?
QUESTIONS AND CORRECT ANSWERS
Which of the following is not considered cash for financial reporting purposes?
a. petty cash funds and change funds
b. money orders, certified checks, and personal checks
c. coin, currency, and available funds
d. postdated checks and I.O.U.s - CORRECT ANSWERS postdated checks and I.O.U.s
which of the following is considered cash?
a. certificates of deposit (CDs)
b. money market checking accounts
c. money market savings certificates
d. postdated checks - CORRECT ANSWERS money market checking accounts
what is a compensating balance?
a. savings account balances
b. margin accounts held with brokers
c. temporary investments serving as collateral for outstanding loans
d. minimum deposits required to be maintained in connection with a borrowing arrangement -
CORRECT ANSWERS minimum deposits required to be maintained in connection with a
borrowing arrangement
under which section of the balance sheet is "cash restricted for plant expansion" reported?
a. current assets
b. non-current assets
,c. current liabilities
d. stockholders' equity - CORRECT ANSWERS non-current assets
a cash equivalent is a short-term, highly liquid investment that is readily convertible into known
amounts of cash and
a. is acceptable as a means to pay current liabilities
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation
d. is so near its maturity that it presents insignificant risk of changes in interest rates -
CORRECT ANSWERS is so near its maturity that it presents insignificant risk of changes
in interest rates
bank overdrafts, if material, should be
a. reported as a deduction from the current asset section
b. reported as a deduction from cash
c. netted against cash and a net cash amount reported
d. reported as a current liability - CORRECT ANSWERS reported as a current liability
deposits held as compensating balances
a. usually do not earn interest
b. if legally restricted and held against short-term credit may be included as cash
c. if legally restricted and held against long-term credit may be included among current assets
d. none of these - CORRECT ANSWERS none of these
the category "trade receivables" includes
a. advances to officers and employees
, b. income tax refunds receivable
c. claims against insurance companies for casualties sustained
d. none of these - CORRECT ANSWERS none of these
which of the following should be recorded in Accounts Receivable?
a. receivables from officers
b. receivables from subsidiaries
c. dividends receivable
d. none of these - CORRECT ANSWERS none of these
trade discounts are
a. not recorded in the accounts; rather they are a means of computing a price
b. used to avoid frequent changes in catalogs
c. used to quote different prices for different quantities purchased
d. all of the above - CORRECT ANSWERS all of the above
if a company employes 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 -
CORRECT ANSWERS a deduction from sales in the income statement
why do companies provide trade discounts?
