Intermediate Accounting
Comprehensive Exam 3 || With
Questions & All Correct Solutions
(Graded A+)
[School]
[Course title]
, Intermediate Accounting
Comprehensive Exam 3 || With
Questions & All Correct Solutions
(Graded A+)
What is the normal journal entry when writing-off an account as uncollectible under
the allowance method?
a. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
b. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts - ANSWER -
Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
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. - ANSWER - the amount of the
discount is not material.
Which of the following methods of determining annual bad debt expense best
achieves the matching concept?
a. Balance sheet approach
b. Percentage of average accounts receivable
c. Income statement approach
d. Direct write-off - ANSWER - Income statement approach
At the beginning of 2013, Gannon Company received a three-year zero-interest-
bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time.
Gannon reported this note as a $1,000 trade note receivable on its 2013 year-end
statement of financial position and $1,000 as sales revenue for 2013. What effect did
this accounting for the note have on Gannon's net earnings for 2013, 2014, 2015,
respectively?
a. Overstate, overstate, understate.
b. Overstate, understate, understate.
c. Overstate, overstate, overstate.
d. None of these answer choices are correct. - ANSWER - Overstate, understate,
understate.
Antique Company has notes receivable that have a fair value of $920,000 and a
carrying amount of $710,000. Antique decides on December 31, 2014, to use the fair
value option for these recently-acquired receivables. The adjusting entry to record
this change will include a:
a. debit to Unrealized Holding Gain or LossIncome for $210,000.
, b. credit to Notes Receivable for $210,000.
c. credit to Unrealized Holding Gain or LossIncome for $210,000.
d. debit to Notes Receivable for $920,000. - ANSWER - credit to Unrealized Holding
Gain or LossIncome for $210,000.
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. - ANSWER - The factor assumes the risk of
collectibility and absorbs any credit losses in collecting the receivables.
Which of the following items should be included in accounts receivable reported on
the balance sheet?
a. Notes receivable.
b. Interest receivable.
c. Allowance for doubtful accounts.
d. Advances to related parties and officers - ANSWER - Allowance for doubtful
accounts.
Lawrence Company has cash in bank of $22,000, restricted cash in a separate
account of $4,000, and a bank overdraft in an account at another bank of $2,000.
Lawrence should report cash of
a. $20,000.
b. $22,000.
c. $25,000.
d. $26,000. - ANSWER - 22,000
Kaniper Company has the following items at year-end:
Cash in bank $35,000
Petty cash 500
Short-term paper with maturity of 2 months 8,200
Postdated checks 2,100
Kaniper should report cash and cash equivalents of
a. $35,000.
b. $35,500.
c. $43,700.
d. $45,800. - ANSWER - $43,700.
$35,000 + $500 + $8,200 = $43,700.
ABC made a $15,000 sale on account with the following terms: 1/10, n/30. If ABC
uses the gross method to record sales made on credit, what is/are the debit(s) in the
journal entry to record the sale?
a. Debit Accounts Receivable for $14,850.
b. Debit Accounts Receivable for $14,850 and Sales Discounts for $150.
