Question

Instructions: Please circle the letter of the best response for each multiple choice question. Read each question carefully. Each multiple choice question is worth two points, unless otherwise noted. 1. Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense? a. Actual losses from uncollectibles b. A percentage of accounts receivable adjusted for the balance in the allowance C. A percentage of accounts receivable not adjusted for the balance in the allowance d. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance 2. Which of the following items should not be included in the Cash caption on the balance sheet? a. Coins and currency in the cash register b. Checks from other parties presently in the cash register c. Amounts on deposit in checking account at the bank d. Postage stamps on hand 3. Lawrence Company has cash in bank of $25,000, 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. $23,000. b. $25,000. c. $28,000. d. $29,000 4. Kaniper Company has the following items at year-end: Cash in bank Petty cash Short-term paper with maturity of 2 months Postdated checks Kaniper should report cash and cash equivalents of a. $35,000 b. $35,300. C. $40,800. d. $42,200. $35,000 300 5,500 1,400

Answer 1

1.

A percentage of accounts receivable adjusted for the balance in allowance is a generally accepted method of determining the amount of the adjustment to the bad debt expense.

  Correct option is (b)

2.

Postage stamps on hand are not included in cash caption on the balance sheet.

Correct option is (d)

3.

Cash to be reported is the cash at bank since bank overdraft and restricted cash are not considered as cash and cash equivalents.

Cash to be reported = $25,000

Correct option is (b)

4.

Cash and cash equivalent = Cash in bank + Petty cash + Short term paper with maturity of 2 months

= 35,000 + 300 + 5,500

= $40,800

Correct option is (c)

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