Q: A company has a beginning cash balance of $$5,000, expects cash receipts of 12$$,000, and budgeted payments of $10,000. What is the cash available before new financing?

$$7,000$$ \text{ (i.e., } 5,000 + 12,000 - 10,000 \text{)}$

Q: A company’s accounts receivable at year-end is $$13,886. The allowance for uncollectible accounts before adjustment is 293. If $$the aging schedule estimates uncollectibles at $444, what is the required adjustment?

$$151$$ \text{ (i.e., } 444 - 293 \text{)}$

Q: What is the formula for the current ratio?

$$\text{Current Ratio} = \frac{\text{Total Current Assets}}{\text{Total Current Liabilities}}$$

Q: If a company’s beginning accounts receivable is $$200, sales on credit are 1$$,800, and ending accounts receivable is $500, what are the cash collections from customers?

$$1,500$$ \text{ (i.e., } 200 + 1,800 - 500 \text{)}$

Q: A promissory note has a principal of $1,000, an annual interest rate of 9%, and a term of 4 months. What is the interest revenue recognized at year-end if the note was signed on August 31?

$$30$$ \text{ (i.e., } 1,000 \times 0.09 \times \frac{4}{12} \text{)}$

Question 1

Which of the following is NOT one of the five objectives of internal control as described in financial accounting?

Accepted Answer

Maximize shareholder dividends

Question 2

According to the fraud triangle, which element is most directly addressed by implementing strong internal controls?

Accepted Answer

Opportunity

Question 3

A company has a beginning cash balance of $$5,000, expects cash receipts of 12$$,000, and budgeted payments of $10,000. What is the cash available before new financing?

Accepted Answer

$$7,000$$ 	ext{ (i.e., } 5,000 + 12,000 - 10,000 	ext{)}$

Question 4

Which of the following is a limitation of the direct write-off method for uncollectible accounts?

Accepted Answer

It overstates assets on the balance sheet

Question 5

A company’s accounts receivable at year-end is $$13,886. The allowance for uncollectible accounts before adjustment is 293. If $$the aging schedule estimates uncollectibles at $444, what is the required adjustment?

Accepted Answer

$$151$$ 	ext{ (i.e., } 444 - 293 	ext{)}$

Question 6

Which of the following is a key control procedure for cash receipts?

Accepted Answer

Depositing cash receipts quickly

Question 7

What is the formula for the current ratio?

Accepted Answer

$$	ext{Current Ratio} = \frac{	ext{Total Current Assets}}{	ext{Total Current Liabilities}}$$

Question 8

If a company’s beginning accounts receivable is $$200, sales on credit are 1$$,800, and ending accounts receivable is $500, what are the cash collections from customers?

Accepted Answer

$$1,500$$ 	ext{ (i.e., } 200 + 1,800 - 500 	ext{)}$

Question 9

Which of the following is NOT a way that good internal control can be circumvented?

Accepted Answer

Segregation of duties

Question 10

What is the primary purpose of a bank reconciliation?

Accepted Answer

To detect errors and fraud in the cash account

Question 11

Which of the following is a correct journal entry for writing off an uncollectible account under the allowance method?

Accepted Answer

Debit Allowance for Uncollectible Accounts; Credit Accounts Receivable

Question 12

A promissory note has a principal of $1,000, an annual interest rate of 9%, and a term of 4 months. What is the interest revenue recognized at year-end if the note was signed on August 31?

Accepted Answer

$$30$$ 	ext{ (i.e., } 1,000 	imes 0.09 	imes \frac{4}{12} 	ext{)}$

Question 13

Which of the following best describes the aging-of-receivables method?

Accepted Answer

It estimates uncollectibles based on the time outstanding of each receivable

Question 14

Which of the following is a real-world example of a cost/benefit relationship in internal control?

Accepted Answer

Hiring a part-time security guard who prevents more theft than their salary costs

Question 15

What is the net realizable value of accounts receivable if the gross receivables are $$10,000 and the allowance for uncollectible accounts is 900$$?

Accepted Answer

$$9,100$$ 	ext{ (i.e., } 10,000 - 900 	ext{)}$

Question 16

Which of the following is NOT a recommended internal control for purchasing?

Accepted Answer

Receiving goods before issuing a purchase order

Question 17

Which of the following items is added to the bank balance during bank reconciliation?

Accepted Answer

Deposits in transit

Question 18

What is the impact on the income statement when an account is written off under the allowance method?

Accepted Answer

No impact

Question 19

Which of the following is a benefit of selling on credit?

Accepted Answer

Sales and profits increase

Question 20

Which of the following is a correct formula for calculating interest on a note receivable?

Accepted Answer

$$	ext{Interest} = 	ext{Principal} 	imes 	ext{Rate} 	imes \frac{	ext{Time}}{12}$$

Internal Control, Cash, and Receivables – Financial Accounting Study Notes

Study Guide - Practice Questions

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