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CH 7 M/C QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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CH 7 M/C QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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CH 7 M/C QUESTIONS AND ANSWERSWITH SOLUTIONS 2024
Which of the following is not considered cash for financial reporting purposes? - ANSWER Postdated
checks and I.O.U.'s
Which of the following is considered cash? - ANSWER Money market checking accounts
Travel advances should be reported as - ANSWER supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.
Which of the following items should not be included in the Cash caption on the balance sheet? -
ANSWER d. Postage stamps on hand
All of the following may be included under the heading of "cash" except - ANSWER money market funds.
In which account are post-dated checks received classified? - ANSWER Receivables.
In which account are postage stamps classified? - ANSWER Office supplies.
What is a compensating balance? - ANSWER 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? - ANSWER
Non-current assets.
A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts
of cash and - ANSWER is so near its maturity that it presents insignificant risk of changes in interest rates.
Bank overdrafts, if material, should be - ANSWER reported as a current liability.
Deposits held as compensating balances - ANSWER 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.
The category "trade receivables" includes - ANSWER advances to officers and employees.
, b. income tax refunds receivable.
c. claims against insurance companies for casualties sustained.
d. none of these.
Which of the following should be recorded in Accounts Receivable? - ANSWER Receivables from officers
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these
What is the preferable presentation of accounts receivable from officers, employees, or affiliated
companies on a balance sheet? - ANSWER As assets but separately from other receivables.
When a customer purchases merchandise inventory from a business organization, she may be given a
discount which is designed to induce prompt payment. Such a discount is called a(n) - ANSWER cash
discount.
Trade discounts are - ANSWER not recorded in the accounts; rather they are a means of computing a
price.
b. used to avoid frequent changes in catalogues.
c. used to quote different prices for different quantities purchased.
d. all of the above.
If a company employs the gross method of recording accounts receivable from customers, then sales
discounts taken should be reported as - ANSWER a deduction from sales in the income statement.
Why do companies provide trade discounts? - ANSWER To avoid frequent changes in catalogs.
b. To induce prompt payment.
c. To easily alter prices for different customers.
d. Both a. and c.
The accounting for cash discounts and trade discounts are - ANSWER not the same.
Of the approaches to record cash discounts related to accounts receivable, which is more theoretically
correct? - ANSWER Net approach.
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