1.

Consider the following: Cash in Bank – checking account of $13,500, Cash on hand of
$500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling
$124,000. How much should be reported as cash in the statement of financial position?
a. $ 13,500.
b. $ 14,000.
c. $ 17,500.
d. $131,500.

2. On January 1, 2010, Lynn Company borrows $2,000,000 from National Bank at 11% annual
interest. In addition, Lynn is required to keep a compensatory balance of $200,000 on deposit at
National Bank which will earn interest at 5%. The effective interest that Lynn pays on its
$2,000,000 loan is
a. 10.0%.
b. 11.0%.
c. 11.5%.
d. 11.6%.

3. Kennison Company has cash in bank of $10,000, restricted cash in a separate account of
$3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash
of
a. $9,000.
b. $10,000.
c. $12,000.
d. $13,000.

4. Kaniper Company has the following items at year-end:

Cash in bank $20,000
Petty cash 300
Commercial paper with maturity of 2 months 5,500
Postdated checks 1,400
Kaniper should report cash and cash equivalents of
a. $20,000.
b. $20,300.
c. $25,800.
d. $27,200.

5. Lawrence Company has cash in bank of $15,000, 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. $13,000.
b. $15,000.
c. $18,000.
d. $19,000.

6. Steinert Company has the following items at year-end:

Cash in bank $30,000
Petty cash 500
Commercial paper with maturity of 2 months 8,200
Postdated checks 2,100
Steinert should report cash and cash equivalents of
a. $30,000.
b. $30,500.
c. $38,700.
d. $40,800.
 7. If a company purchases merchandise on terms of 1/10, n/30, the cash discount available is
equivalent to what effective annual rate of interest (assuming a 360-day year)?
a. 1%
b. 12%
c. 18%
d. 30%

8. AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company
uses the net method to record sales made on credit, how much should be recorded as sales
revenue?
a. $ 9,800.
b. $ 9,900.
c. $10,000.
d. $10,100.

9. AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company
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 $9,900.
b. Debit Accounts Receivable for $9,900 and Sales Discounts for $100.
c. Debit Accounts Receivable for $10,000.
d. Debit Accounts Receivable for $10,000 and Sales Discounts for $100.

10. AG Inc. made a $10,000 sale on account with the following terms: 2/10, n/30. If the company
uses the net 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 $9,800.
b. Debit Accounts Receivable for $9,800 and Sales Discounts for $200.
c. Debit Accounts Receivable for $10,000.
d. Debit Accounts Receivable for $10,000 and Sales Discounts for $200.

11. Rosalie Co. uses the gross method to record sales made on credit. On June 10, 2011, it made sales
of $100,000 with terms 2/10, n/30 to Finley Farms, Inc. On June 19, 2011, Rosalie received
payment for 1/2 the amount due from Finley Farms. Rosalie's fiscal year end is on June 30, 2011.
What amount will be reported in the statement of financial position for the accounts receivable
due from Finley Farms, Inc.?
a. $49,000
b. $50,000
c. $48,000
d. $51,000
12. Vivian, Inc had net sales in 2011 of €700,000. At December 31, 2010, before adjusting entries,
the balances in selected accounts were: accounts receivable €125,000 debit, and allowance for
doubtful accounts €1,200 credit. Vivian estimates that 2% of its net sales will prove to be
uncollectable. What is the cash realizable value of the receivables reported on the statement of
financial position at December 31, 2011?
a. €112,200
b. €122,500
c. €111,000
d. €109,800

13. Vivian, Inc had net sales in 2011 of €700,000. At December 31, 2010, before adjusting entries,
the balances in selected accounts were: accounts receivable €125,000 debit, and allowance for
doubtful accounts €1,200 debit. Vivian estimates that 2% of its net accounts receivable will prove
to be uncollectable. What is the cash realizable value of the receivables reported on the statement
of financial position at December 31, 2011?
a. €112,200
b. €122,500
c. €111,000
d. €109,800
14. Rosalie Corporation is located in Los Angeles but does business throughout Europe. The
company builds and sells equipment used in manufacturing pharmaceuticals. On December 31,
2011, Rosalie's accounts receivable are as follows:

Individually significant receivables

Finley Company $ 80,000
Rios, Inc. 200,000
Rafael Co. 120,000
Hunter, Inc. 100,000
All other receivables 500,000
Total $1,000,000

Rosalie Corporation determines that Finley Company's receivable is impaired by $40,000 and
Hunter, Inc.'s receivable is totally impaired. The other receivables from Rafael and Rios are not
considered impaired. Rosalie determines that a composite rate of 2% is appropriate to measure
impairment on all other receivables. What is the total impairment of receivables for Rosalie
Corporation for 2011?
a. $156,400
b. $140,000
c. $150,000
d. $123,600

15. Wave Crest Hotels is located in Canada, but manages an extensive network of boutique hotels in
the United States. Wave Crest has significant receivables from 3 customers,
$480,000 due from Stephanie Inn, $900,000 due from Warren House, and $760,000 due from
Hallmark Hotels. Wave Crest has other receivables totaling $440,000.

Wave Crest determines that the Warren House receivable is impaired by $160,000 and the
Hallmark Hotels receivable is impaired by $200,000. The receivable from the Stephanie Inn is not
considered impaired. Wave Crest determines that a composite rate of 5% is appropriate to
measure impairment on all other receivables. What is the total impairment of receivables for
Wave Crest for 2011?
a. $382,000
b. $314,000
c. $406,000
d. $360,000

16. Wellington Corp. has outstanding accounts receivable totaling $2.54 million as of December 31
and sales on credit during the year of $12.8 million. There is also a debit balance of $6,000 in the
allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be
uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end
adjustment to record bad debt expense?
a. $ 25,400.
b. $ 31,400.
c. $122,000.
d. $134,000.
17. Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31
and sales on credit during the year of $24 million. There is also a credit balance of
$12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its
outstanding receivables will be uncollectible, what will be the amount of bad debt expense
recognized for the year?
a. $ 532,000.
b. $ 520,000.
c. $1,920,000.
d. $ 508,000.

18. Wellington Corp. has outstanding accounts receivable totaling $3 million as of December 31 and
sales on credit during the year of $15 million. There is also a debit balance of $12,000 in the
allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables
will be uncollectible, what will be the balance in the allowance for doubtful accounts after the
year-end adjustment to record bad debt expense?
a. $1,200,000.
b. $ 228,000.
c. $ 240,000.
d. $ 252,000.
19. At the close of its first year of operations, December 31, 2010, Ming Company had accounts
receivable of $540,000, after deducting the related allowance for doubtful accounts. During
2010, the company had charges to bad debt expense of $90,000 and wrote off, as uncollectible,
accounts receivable of $40,000. What should the company report on its statement of financial
position at December 31, 2010, as accounts receivable before the allowance for doubtful
accounts?
a. $670,000
b. $590,000
c. $490,000
d. $440,000

20. Before year-end adjusting entries, Dunn Company's account balances at December 31,
2010, for accounts receivable and the related allowance for uncollectible accounts were
$600,000 and $45,000, respectively. An aging of accounts receivable indicated that
$62,500 of the December 31 receivables are expected to be uncollectible. The cash
realizable value of accounts receivable after adjustment is

a. $582,500.
b. $537,500.
c. $492,500.
d. $555,000.