Fall_08_Exam_II - Fall 08 Exam II AEM 3360 Multiple Choice...

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Fall 08 Exam II AEM 3360 Multiple Choice 1. In preparing its August 31, 2007 bank reconciliation, Adel Corp. has available the follow-ing information: Balance per bank statement, 8/31/07 $21,650 Deposit in transit, 8/31/07 3,900 Return of customer's check for insufficient funds, 8/30/07 600 Outstanding checks, 8/31/07 2,750 Bank service charges for August 100 At August 31, 2007, Adel's correct cash balance is A) $22,800.; B) $22,200.; C) $22,100; D) $20,500. Ans: A Feedback: $21,650 + $3,900 – $2,750 = $22,800. 2. Which of the following methods of determining bad debt expense does not properly match expense and revenue? A) Charging bad debts with a percentage of sales under the allowance method. B) Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. C) Charging bad debts with an amount derived from aging accounts receivable under the allowance method. D) Charging bad debts as accounts are written off as uncollectible. Ans: D 3. Horvath Company has the following items at year-end: Cash in bank $20,000 Petty cash 300 Short-term paper with maturity of 2 months 5,500 Postdated checks 1,400 Horvath should report cash and cash equivalents of A) $20,000.; B) $20,300.; C) $25,800.; D) $27,200. Ans: C LO: 2 Feedback: $20,000 + $300 + $5,500 = $25,800. 4. Before year-end adjusting entries, Bass Company's account balances at December 31, 2007, 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 net realizable value of accounts receivable after adjustment is
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5. When preparing a bank reconciliation, bank credits are 6. The cash account shows a balance of $45,000 before reconciliation. The bank statement does not include a deposit of $2,300 made on the last day of the month. The bank statement shows a collection by the bank of $940 and a customer's check for $320 was returned because it was NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $79 was recorded as $97. The correct balance in the cash account was A) $45,512.; B) $45,548.; C) $45,728.; D) $47,848. Ans: B Feedback: $45,000 + $940 – $320 – $90 + $18 = $45,548. 7. Tanner, Inc.'s checkbook balance on December 31, 2007 was $21,200. In addition, Tanner held the following items in its safe on December 31. (1) A check for $450 from Peters, Inc. received December 30, 2007, which was not included in the checkbook balance. (2) An NSF check from Garner Company in the amount of $900 that had been deposited at the bank, but was returned for lack of sufficient funds on December 29. The check was to be re-deposited on January 3, 2008. The original deposit has been included in the December 31 checkbook balance.
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