Question

Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, five-year, noninterest-bearing note when an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to:

Multiple Choice

• $50,000.

• The present value of $50,000 using a 10% interest rate.

• Zero.

• The future value of $50,000 using a 10% interest rate.

Long-term interest-bearing notes receivable issued at an unrealistically low interest rate will be:

Multiple Choice

• Accounted for on the installment basis.

• Recorded at an amount equal to the future cash flows.

• Discounted at an imputed interest rate.

• Recorded at the contract amount.

The allowance for uncollectible accounts is a:

Multiple Choice

• Quasi-liability account.

• Contra asset account.

• Deferred charge to expense.

• Deferred revenue account.

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for sales discounts.

What entry would Cherokee make on November 17, assuming the correct payment was received on that date?

Multiple Choice

• Cash	7,840
  Sales	160
  Accounts receivable		8,000

• Cash	7,840
  Accounts receivable		7,840

• Cash	8,000
  Sales discounts	160
  Accounts receivable		8,000
  Sales		160

• Cash	7,840
  Sales discounts	160
  Accounts receivable		8,000

Which of the following is not true regarding accounting for transfers of receivables under IFRS?

Multiple Choice

• Transfer of substantially all the risk and rewards of ownership is an important consideration.

• Transfers of receivables sometimes are treated as a sale of receivables.

• Transfers of receivables can be treated as a sale if the transferee is a QSPE.

• Transfers of receivables sometimes are treated as a secured borrowing.

Answer 1

1. Sales would be recorded at present VAlue and interest income on instruments will be recorded separately.

2.discounted imputed interest rate to arrive ay fair value of interest.

3. Quasi liability account

4.cash 7840

sales discount 160

to Accountes receivable 8000

5.transfer receivables are sometimes considered as secured borrowing