Q: Which of the following best describes the accounting equation?

$$\text{Assets} = \text{Liabilities} + \text{Equity}$$

Q: How do you calculate the net realizable value (NRV) of accounts receivable?

$$\text{NRV} = \text{Accounts Receivable} - \text{Allowance for Uncollectible Accounts}$$

Question 1

Which of the following best describes the accounting equation?

Accepted Answer

$$	ext{Assets} = 	ext{Liabilities} + 	ext{Equity}$$

Question 2

A company receives a $5,000 customer payment on account. Which journal entry is correct under accrual-basis accounting?

Accepted Answer

Debit Cash $$5,000; Credit Accounts Receivable 5$$,000

Question 3

Which of the following is NOT considered a cash equivalent on the balance sheet?

Accepted Answer

A certificate of deposit with an original maturity of 9 months

Question 4

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To resolve differences between the bank and book ending balances

Question 5

A company’s bank statement shows an ending balance of $$12,000. There are 1$$,500 in deposits in transit and $2,200 in outstanding checks. What is the adjusted bank balance?

Accepted Answer

$$12,000 + 1,500 - 2,200 = 11$$,300$

Question 6

Which side of the bank reconciliation requires journal entries and why?

Accepted Answer

Book side, because adjustments must be recorded in the company’s accounting records

Question 7

Which of the following is an example of misappropriation of assets?

Accepted Answer

An employee steals cash and covers it up by falsifying records

Question 8

When is revenue recognized under FOB Shipping Point terms?

Accepted Answer

When goods leave the seller’s shipping dock

Question 9

How do you calculate the net realizable value (NRV) of accounts receivable?

Accepted Answer

$$	ext{NRV} = 	ext{Accounts Receivable} - 	ext{Allowance for Uncollectible Accounts}$$

Question 10

A company sells $10,000 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 using the gross method?

Accepted Answer

Debit Cash $$9,800; Debit Sales Discounts 200$$; Credit Accounts Receivable $10,000

Question 11

Which of the following is a real (permanent) account?

Accepted Answer

Inventory

Question 12

A company estimates that $$4,000 of its 100$$,000 accounts receivable will be uncollectible. What is the adjusting journal entry using the allowance method?

Accepted Answer

Debit Bad Debt Expense $$4,000; Credit Allowance for Doubtful Accounts 4$$,000

Question 13

A $5,000 note receivable is issued at 8% annual interest for 6 months. What is the maturity value?

Accepted Answer

$$5,000 + (5,000 	imes 0.08 	imes \frac{6}{12}) = 5$$,200$

Question 14

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

Accepted Answer

Debit Allowance for Doubtful Accounts; Credit Accounts Receivable

Question 15

A company’s aging schedule estimates $$7,500 of uncollectible accounts. The Allowance for Doubtful Accounts has a 1$$,000 credit balance before adjustment. What is the required adjusting entry?

Accepted Answer

Debit Bad Debt Expense $$6,500; Credit Allowance for Doubtful Accounts 6$$,500

Question 16

Which of the following best describes the DEALOR mnemonic for debits and credits?

Accepted Answer

Debits: Dividends, Expenses, Assets; Credits: Liabilities, Owner’s Equity, Revenue

Question 17

A company sells $20,000 of goods FOB Destination on December 29, delivered January 3. When is revenue recognized?

Accepted Answer

January 3

Question 18

Which of the following is a nominal (temporary) account?

Accepted Answer

Sales Revenue

Question 19

A company receives a $10,000 note receivable at 6% annual interest for 9 months. How much interest revenue should be accrued at year-end if the note was issued on October 1?

Accepted Answer

$$10,000 	imes 0.06 	imes \frac{3}{12} = 150$

Question 20

Which of the following best describes the purpose of internal control?

Accepted Answer

To safeguard assets and ensure reliable accounting records

Financial Accounting Study Guide: Internal Control, Cash, and Receivables

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