Ch 072

Ch 072 - 10/26/2009 Chapter 07: Cash and Receivables 0% (0...

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0% (0 out of 21 correct) Responses to questions are indicated by the symbol. 1. Postdated checks are not considered as cash. A. True B. False Postdated checks are treated as receivables. 2. Cash equivalents are short-term investments with original maturities of six months or less. A. True B. False Cash equivalents include only highly liquid investments that have original maturities of three months or less. 3. The easiest and most commonly used method of recording sales and related sales discount transactions is the net method. A. True B. False The gross method is more commonly used and easier to implement. 4. Under the direct write-off method, bad debts are only recognized when an account is determined to be uncollectible. A. True B. False Bad debt expense is recognized when an account is written off under the direct write-off method. 5. Aging accounts receivable is a variation of the percentage-of-sales approach to recognizing bad debt expense. 10/26/2009 Chapter 07: Cash and Receivables higheredbcs.wiley.com/…/ch07.html 1/6
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A. True B. False Aging is an estimation method used with the percentage-of-accounts receivable approach. 6. Bank overdrafts are generally offset against the cash balance. A. True B. False Bank overdrafts are generally reported in the current liabilities section as accounts payable. 7. Deposits held as compensating balances if legally restricted and held against long-term credit should be included among current assets. A.
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Ch 072 - 10/26/2009 Chapter 07: Cash and Receivables 0% (0...

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