Question 1

Which of the following is NOT a component of internal control as defined by the COSO framework?

Accepted Answer

Information Technology

Question 2

A company discovers that an employee has been stealing cash from daily deposits before they are recorded. Which type of fraud does this represent?

Accepted Answer

Asset Misappropriation

Question 3

Which of the following would NOT be included in the calculation of the adjusted bank balance during a bank reconciliation?

Accepted Answer

Bank service charges

Question 4

A company’s unadjusted cash balance per books is $$5,000. The bank statement shows a balance of 5$$,400. There are $$800 in deposits in transit and 600 in $$outstanding checks. What is the adjusted bank balance?

Accepted Answer

$5,600

Question 5

Which of the following is considered a cash equivalent?

Accepted Answer

90-day Treasury bill

Question 6

Which journal entry is required when a company collects a note receivable at maturity, including interest? Assume the principal is $10,000, interest rate is 6%, and the note is for 1 year.

Accepted Answer

Debit Cash $$10,600; Credit Notes Receivable 10$$,000; Credit Interest Revenue $600

Question 7

A company uses the allowance method to account for uncollectible accounts. If it writes off a $2,000 account, what is the effect on total assets and net income?

Accepted Answer

Total assets do not change; net income does not change

Question 8

Which of the following best describes the revenue recognition principle?

Accepted Answer

Revenue is recognized when the performance obligation is satisfied

Question 9

A company sells merchandise FOB Shipping Point. When should the company recognize revenue?

Accepted Answer

When the goods are shipped

Question 10

A company made a credit card sale of $1,000. The credit card company charges a 3% fee. What is the correct journal entry to record this sale?

Accepted Answer

Debit Cash $$970; Debit Credit Card Expense 30$$; Credit Sales $1,000

Question 11

A customer returns $200 of merchandise previously sold on account. Which is the correct journal entry for the sales return?

Accepted Answer

Debit Sales Returns and Allowances $$200; Credit Accounts Receivable 200$$

Question 12

A company estimates that $5,000 of its accounts receivable will be uncollectible. What is the adjusting journal entry to record this estimate?

Accepted Answer

Debit Bad Debt Expense $$5,000; Credit Allowance for Doubtful Accounts 5$$,000

Question 13

A company’s Accounts Receivable balance is $$50,000 and Allowance for Doubtful Accounts is 3$$,000. What is the Net Realizable Value (NRV) of Accounts Receivable?

Accepted Answer

$47,000

Question 14

Which of the following is true about the Allowance for Doubtful Accounts?

Accepted Answer

It is a contra-asset account that reduces accounts receivable

Question 15

A company uses the gross method to record sales discounts. It sells $1,000 of goods on account with terms 2/10, n/30. The customer pays within the discount period. What is the correct journal entry for the collection?

Accepted Answer

Debit Cash $$980; Debit Sales Discounts 20$$; Credit Accounts Receivable $1,000

Question 16

A company’s aging report indicates that the Allowance for Doubtful Accounts should have a balance of $$8,000. The current balance is a 2$$,000 credit. What is the required adjusting entry?

Accepted Answer

Debit Bad Debt Expense $$6,000; Credit Allowance for Doubtful Accounts 6$$,000

Question 17

A company writes off a $1,500 uncollectible account under the allowance method. What is the correct journal entry?

Accepted Answer

Debit Allowance for Doubtful Accounts $$1,500; Credit Accounts Receivable 1$$,500

Question 18

A company accepts a 6-month, 8% note receivable for $12,000 on July 1. What is the maturity value of the note?

Accepted Answer

$12,480

Question 19

At year-end, a company must accrue interest on a $10,000, 9% note receivable issued on November 1. What is the amount of accrued interest at December 31?

Accepted Answer

$150

Question 20

Which of the following would be included on the book side of a bank reconciliation?

Accepted Answer

Bank service charges

Question 21

A company’s bank reconciliation shows a bank service charge of $25. What is the correct journal entry?

Accepted Answer

Debit Bank Service Charge Expense $$25; Credit Cash 25$$

Unit 2 Exam Study Guide: Internal Control, Cash, and Receivables

Study Guide - Practice Questions

Study Guide - Flashcards