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Unformatted text preview: ch07 Student: ___________________________________________________________________________ 1. Cash equivalents would include investments in marketable equity securities as long as management intends to sell the securities in the next three months. True False 2. From a financial accounting perspective, the main purposes of a system of internal control are to improve the accuracy and reliability of accounting information and to safeguard assets. True False 3. In a good system of internal control, the person who initiates a transaction should be allowed to effectively control the processing of the transaction through its final inclusion in the accounting records. True False 4. Depending on the circumstances, the classification of a compensating balance may be either current or noncurrent, and the arrangement should be disclosed in the notes. True False 5. Under IFRS, an overdraft in a cash account at one bank can be offset against a positive balance in the account at another bank for purposes of reporting cash on the company's balance sheet. True False 6. The net method of accounting for cash discounts requires adjusting entries for discounts taken. True False 7. Recognizing sales returns when they occur could result in an overstatement of income in the period of the related sale. True False 8. The income statement approach to estimating bad debts requires an adjusting entry at the end of the period to reduce receivables to net realizable value. True False 9. Under IFRS, accounts receivable can be accounted for at fair value whenever company management wants to do so. True False 10. Under IFRS, accounts receivable can be accounted for as "available for sale" if that approach is elected upon initial recognition of the receivable. True False 11. Using the balance sheet approach, bad debt expense is an indirect result of estimating the net realizable value of accounts receivable. True False 12. Discounts on notes receivable are recognized as interest earned over the term of the related note. True False 13. Unless specific sales criteria are met, the factoring of accounts receivable with recourse is accounted for as a loan. True False 14. Securitization of receivables is a type of secured borrowing. True False 15. Under IFRS, transfer of risks and rewards of ownership, rather than transfer of control, is the primary factor determining whether a factored receivable can be treated as sold rather than as part of a secured borrowing. True False 16. The receivables turnover ratio provides a way for an analyst to assess the effectiveness of a company in managing its investment in receivables. True False 17. In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges....
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This note was uploaded on 04/12/2011 for the course ACCT 201 taught by Professor Hyduke,n during the Spring '10 term at Community College of Baltimore County.
- Spring '10
- Financial Accounting