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ACCT 3001 LSU EXAM TEST BANK COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)

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ACCT 3001 LSU

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ACCT 3001 LSU

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ACCT 3001 LSU EXAM TEST BANK
COMPLETE QUESTIONS AND
CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS)

What is the expected result of a zero-interest-bearing note that is sold today for less
than face value?

A.) It has an implicit premium paid equal to the difference between the face value and
the present value.
B.) It has implicit interest equal to the difference between the face value and the present
value.
C.) It has a negative interest rate and will not generate revenue.
D.) It has an implicit discount equal to the amortization of the sum of the face value and
present value. - Answer-B.) It has implicit interest equal to the difference between the
face value and the present value.

Ceres Company has cash in bank of $25,000, restricted cash in a separate account of
$5,000, and a bank overdraft in an account at another bank of $2,000. How much cash
should be reported?

$23,000.
$25,000.
$27,000.
$30,000. - Answer-$25,000.

The cash in this case is limited to the cash in the bank,the overdraft amount is not offset
with cash in bank because it is at a separate bank and restricted cash is reported
separately as an asset.

Ceres Corporation made travel advances to the marketing team. Why are they
considered nontrade receivables?

A.) The amounts owed to the company did not result from selling goods or services.
B.) The amounts owed to the company are not from external parties.
C.) The amounts owed will not cause a decrease in the Cash account.
D.) The amounts are owed to the employees, not to the company. - Answer-A.) The
amounts owed to the company did not result from selling goods or services.

,Companies classify receivables as either current (short-term) or noncurrent (long-term).
Receivables are further classified in the balance sheet as either trade or nontrade
receivables.Nontrade receivables may arise from a variety of transactions; like,
advances to officers and employees, deposits paid to cover potential damages or
losses, or defendants under suit.

Which of the following situations would cause an interest-bearing note to have a present
value less than the face value?

The effective rate of interest is equal to the stated rate of interest.
The effective rate of interest is greater than the stated rate of interest.
The effective rate of interest is less than the stated rate of interest.
The current market rate of interest is equal to the stated rate of interest. - Answer-The
effective rate of interest is greater than the stated rate of interest.

When companies exchange a note at a discount, it is because the effective rate of
interest exceeds the stated rate, meaning, the present value of the note is less than the
face value.

On December 31, 2021, Flint Corporation sold for $100,000 an old machine having an
original cost of $180,000 and a book value of $80,000. The terms of the sale were as
follows:$20,000 down payment$40,000 payable on December 31 for each of the next
two yearsThe agreement of sale made no mention of interest; however, 9% would be a
fair rate for this type of transaction.

What should be the amount of the notes receivable net of the unamortized discount on
December 31, 2021 rounded to the nearest dollar? (The present value of an ordinary
annuity of 1 at 9% for 2 years is 1.75911.)

$80,000.
$70,364.
$90,364.
$140,728. - Answer-$70,364.

$40,000 x 1.75911 = $70,364

How should a company determine how to classify money market funds?

A.) Determine if the fund will be used to meet current operating expenses, because that
would allow them to be considered cash. Otherwise, the appropriate classification would
be as future operating income.
B.) Determine if the fund has check writing privileges, because that would allow enough
liquidity to be considered cash. Otherwise, the appropriate classification would be as a
cash equivalent or temporary investment depending on whether any restriction on
conversion to cash exists.

,C.) Determine if the fund is a negotiable instrument, because then it would be short-
term paper. Otherwise, it can be considered cash.
D.) Determine if the fund balances are greater than the normal amounts of petty cash. If
they are less, then report them as cash; if they are greater, report them an investment -
Answer-B.) Determine if the fund has check writing privileges, because that would allow
enough liquidity to be considered cash. Otherwise, the appropriate classification would
be as a cash equivalent or temporary investment depending on whether any restriction
on conversion to cash exists.

On January 1, 2020, Hat Trick Manufacturing exchanged some equipment for a
$750,000 zero-interest-bearing note due on January 1, 2023. The prevailing rate of
interest for a note of this type at January 1, 2020 was 10%. The present value of $1 at
10% for three periods is 0.75. Hat Trick Manufacturing included ___________ as
interest revenue on the 2021 income statement.

$0
$60,469
$61,875
$56,250 - Answer-$61,875

$750,000 * 0.75 * 0.1 = $56,250($562,500 + $56,250) * .1 =$61,875

Granny's Quilt Shoppe has $2,550 in currency and coins in the cash register along with
$1,200 of personal checks. Two of those personal checks, each for $100, are
postdated. They also have $300 worth of postage stamps and $250 in the petty cash
fund. Additionally, the shop has a balance of $3,000 in their checking account, $4,500 in
their savings account, and $2,500 in a certificate of deposit. How much should be
reported as cash in the balance sheet?

$11,500
$11,300
$14,200
$8,800 - Answer-$11,300

Add the items considered cash together. The postdated checks need to be subtracted
from the total amount of checks since they are not considered cash. Postage stamps
would not be considered cash as they cannot not be used as currency or returned for
cash.$2,550 + ($1,200 - $200) + $250 + $3,000 + $4,500 = $11,300

Which phrases fill in the following blanks? The normal journal entry when writing-off an
account as uncollectible under the allowance method would debit _____________ and
credit______________.

Accounts Receivable; Allowance for Doubtful Accounts.
Bad Debt Expense; Allowance for Doubtful Accounts.
Allowance for Doubtful Accounts; Bad Debt Expense.

, Allowance for Doubtful Accounts; Accounts Receivable. - Answer-Allowance for
Doubtful Accounts; Accounts Receivable.

The most appropriate method for determining annual bad debt expense from an income
statement viewpoint is ____ because it best relates expenses to revenue.

percentage of sales
percentage of ending accounts receivable
percentage of average accounts receivable
direct write-off - Answer-percentage of sales

The percentage of sales method is the most appropriate method because it records
expenses in the same period as associated revenues.

A generally accepted method of determining the amount of the adjustment to bad debt
expense is by determining

A.) a percentage of accounts receivable not adjusted for the balance in the allowance.
B.) an amount derived from aging accounts receivable and not adjusted for the balance
in the allowance.
C.) a percentage of sales not adjusted for the balance in the allowance.
D.) a percentage of sales adjusted for the balance in the allowance. - Answer-C.) a
percentage of sales not adjusted for the balance in the allowance.

What would be the result of writing off an uncollectible account under the allowance
method of recognizing uncollectible accounts?

The allowance for uncollectible accounts would increase.
The allowance for uncollectible accounts would remain the same.
The net income would remain the same.
The net income would decrease. - Answer-The net income would remain the same.

An uncollectible account that has been written off would not affect the net income
because the gross receivable is still there

Charming Cherry's had accounts receivable of $1,240,000 after deducting the related
allowance for doubtful accounts at the close of its first year of operations. During the
year, the company had charges to bad debt expense of $205,000 and wrote off, as
uncollectible, accounts receivable of $175,000. What should the company report on its
balance sheet at year end, as accounts receivable before the allowance for doubtful
accounts?

$1,124,000
$1,445,000
$1,270,000
$1,620,000 - Answer-$1,270,000

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Exam (elaborations)

ACCT 3001 LSU EXAM TEST BANK COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)

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