4.4 Final Exam

Question

1- Which of the following could appear in an adjusting entry, closing entry, and reversing entry?

a- Withdrawals

b- Salary Expense

c- Cash

d- Depreciation Expense, Buildings

2- Reversing entries occur at the beginning of the accounting period and:

a- help to reduce potential errors.

b- simplify the bookkeeping associated with accruals from the prior period.

c- reverse the adjusting entries.

d- All of the above are correct.

3- Which of the following could be recorded as a reversing entry?

a- Accrual of interest expense

b- Allocation of prepaid rent in the current period

c- Cash

d- Depreciation of building

4- Which of the following adjustments may be reversed?

a- The adjustment to Accrue Salaries Payable

b- The adjustment to Record Depreciation Expense

c- The adjustment to Allocate Prepaid Insurance to the current period

d- The adjustment for Petty Cash replenishmen

5- The reversing entry for Salaries is:

a- debit Salaries Expense; credit Salaries Payable.

b- debit Salaries Expense; credit Accounts Payable.

c- debit Salaries Payable; credit Salaries Expense.

d- debit Salaries Payable; credit Income Summary.

6- Reversing entries are done when assets or liabilities are increasing and have no previous balance.

True

False

7- Reversing entries are the opposite of closing entries.

True

False

8- Not all adjusting entries can be reversed.

True

False

9- Reversing entries are recorded on the third day of the new accounting period.

True

False

10- When making a collection, no entry was recorded to reinstate an account previously written off. The allowance method is being used. This error would cause:

a- net income to be understated.

b- total liabilities to be understated.

c- total assets to be overstated.

d- None of these is correct.

11- The journal entry to write off an account judged to be uncollectible under the allowance would include a credit to:

a- Bad Debts Expense.

b- Sales.

c- Allowance for Doubtful Accounts.

d- Accounts Receivable.

12- Town and Country Saddle learns the account receivable for a customer is uncollectible. The journal entry under the allowance method to write-off an account is to:

a- debit Bad Debts Expense; credit Accounts Receivable.

b- debit Sales; credit Allowance for Doubtful Accounts.

c- debit Allowance for Doubtful Accounts; credit Accounts Receivable.

d- debit Allowance for Doubtful Accounts; credit Bad Debts Expense

13- What would be the basis for the following journal entry if it appears on Travis Company’s records? Travis uses the allowance method.

Allowance for Doubtful Accounts150Accounts Receivable—Tim Morgan150

a- The firm is writing off a specific account.

b- It is a reversing entry.

c- The firm is estimating its uncollectible accounts.

d- The firm is making a collection of a previously written-off account.

14- Myra’s balance of Accounts Receivable is $4,000. The balance of the Allowance account is $600 credit. Myra writes off a $150 uncollectible account. The effect on net realizable value of the receivables is that it:

a- reduces net realizable value.

b- is unchanged.

c- increases net realizable value.

d- is undeterminable.

15- The net realizable value of a company’s Accounts Receivables is:

a- the guaranteed amount the company will collect from its customers.

b- decreased at the time of a specific write-off.

c- unchanged at the time of a specific write-off.

d- increased at the time of a specific write-off.

16- A company writes off a specific account as uncollectible, but later the customer pays. The journal entry to record the reinstatement under the allowance method includes a(n):

a- decrease to Sales.

b- decrease to Bad Debts Expense.

c- increase to Allowance for Doubtful Accounts.

d- decrease to Cash.

17- Aging Accounts Receivable measures:

a- months a bill has been due but not paid.

b- sales for the year.

c- days a bill has been due but not paid.

d- All of these answers are correct

18- Ohio Company uses the Allowance for Doubtful Accounts Method. When Ohio writes off an uncollectible account, there is:

a- an increase in the Allowance Account.

b- an increase in Accounts Receivable.

c- a decrease in Accounts Receivable.

d- None of these answers is correct.

19- After having written off a customer under the direct write-off method, the account will be reopened when the customer:

a- sends any amount to pay on their account.

b- None of the above

c- pays the collection bureau.

d- sends the full amount to pay off the account.

20- The two methods of accounting for uncollectible receivables are the direct write-off method and the:

a- cash method.

b- allowance method.

c- equity method.

d- interest method.

21- The two methods of accounting for uncollectible receivables are the allowance method and the:

a- equity method.

b- interest method.

c- cost method.

d- direct write-off method.

22- In the direct write-off method, writing off an account causes:

a- an increase in expense.

b- an increase in Accounts Receivable.

c- a decrease in the Allowance account.

d- a decrease in expense.

23- Pittsburgh Tours collected $190 on an account that had been directly written off the previous year. The journal entry to record the transaction would include:

a- a credit to Bad Debts Expense.

b- a debit to Bad Debts Recovered.

c- a credit to Bad Debts Recovered.

d- a debit to Allowance for Doubtful Accounts.

24- A company is not able to reasonably estimate its bad debts expense. The method it may use is:

a- net realizable value method.

b- income statement method.

c- direct write-off method.

d- aging method.

25- If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer’s account as uncollectible?

a- Bad Debts Expense

b- Accounts Receivable

c- Interest Expense

d- Bad Debts Recovered

26- What would be the basis for the following entry on a firm’s records?

Bad Debt Expense150Allowance for Doubtful Accounts150

a- The firm is using the direct write-off method.

b- The firm is using the allowance method for estimating bad debt.

c- The firm is writing off an uncollectible account.

d- All of these answers are correct.

27- A written promise to pay a certain sum of money to another person or company is a:

a- Promissory Accounts Receivable.

b- Promissory Note Payable.

c- Promissory Note Receivable.

d- Promissory Accounts Payable.

28- Sonny’s Service Bureau is able to collect an amount previously written off last year under the direct write-off method. The journal entry will:

a- decrease Bad Debts Expense.

b- decrease Accounts Receivable.

c- increase Bad Debts Recovered.

d- decrease Cash.

29- David borrows $4,000 from Matthew and gives him a promissory note. David is the:

a- payor.

b- payee.

c- drawee.

d- maker.

30- Harvey loaned $450 to Chase and received a promissory note. Harvey is the:

a- maker.

b- drawee.

c- payee.

d- debtor.

31- The interest rate stated on a note for 90 days is:

a- stated on a daily basis.

b- stated on a monthly basis.

c- stated on an annual basis.

d- indeterminable.

32- The due date of a promissory note is known as the:

a- maturity date.

b- issue date.

c- discount date.

d- interest note.

33- The basic formula for calculating the interest on a note is:

a- Interest = (Principal × Time) + Rate.

b- Interest = Principal × Rate × Time.

c- Interest = (Principal × Rate) – Time.

d- Interest = Principal × Rate/ Time.

34- Interest calculated for one year on a $8,000, 6% promissory note is:

a- $48.

b- some other amount.

c- $480.

d- $4.80.

35- Interest on a $5,000, 15% promissory note for six months is:

a- $3.75.

b- $375.

c- $3,750.

d- $37.50.

36- In calculating interest on a note, it is NOT necessary to take which of the following into consideration?

a- The interest

b- The principal

c- The payee

d- The length of the note

37- A $10,000, 7% note is dated June 18 and is due in 45 days. The due date would be:

a- Aug 4.

b- Aug 2.

c- Aug 3.

d- Aug 1.

38- A $12,000, 5% note is dated May 18 and is due in 90 days. Using a 360-day year, the maturity value would be:

a- $12,000.

b- $12,150.

c- $12,175.

d- $12,050.

39- Trust Worthy Bank accepts a promissory note for $6,000 from a customer on November 1, to be repaid in eight months plus 6% interest. The maturity value of the note is:

a- $6,240.

b- $6,140.

c- $6,075.

d- $6,000.

40- The formula for calculating interest on a note is: principal × rate × time.

True

False