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5-1
Chapter 05 Accounting for and Presentation of Current Assets
Answer Key
Multiple Choice Questions
1.
The current assets of most companies are usually made up of:
2.
Which of the following is the correct balance sheet presentation for current assets?
5-2
3.
The principal reason for reconciling the cash balance per books with the balance shown
on the bank statement is to:
4.
For which of the following reconciling items would an adjusting entry be necessary on the
company's book?
5-3
5.
When a manufacturer invests in short-term marketable securities:
6.
A cash equivalent is a current asset that:
5-4
7.
The accounting concept or principle applied when the cost of short-term marketable
securities is adjusted to market value is:
8.
The accrual of interest on short-term marketable securities results in:
5-5
9.
The accounting concept or principle applied when an allowance is provided for estimated
uncollectible accounts receivable is:
10.
The allowance for uncollectible accounts is a(n):
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11.
Bad debt expense is recognized in the same accounting period as the revenue that is
related to the receivable because:
12.
When an uncollectible account receivable is written off against the allowance for bad
debts:
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13.
With respect to the write-off of an uncollectible account receivable against the allowance
for bad debts, a sound system of internal control would require:
14.
An organization's system of internal control is designed primarily to:
5-8
15.
If an organization purchases $2,100 of supplies on account, with terms of 2/15, n50:
16.
Trading and Available-for-Sale securities are reported on the balance sheet at:
5-9
17.
Which of the following is(are) a category for securities?
18.
When a firm uses the LIFO inventory cost flow assumption:
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19.
Accounts receivable are reported at:
20.
An accounts receivable results from the sale of:
5-11
21.
The principal reason for converting a customer's account receivable to a note receivable
is:
22.
The inventory cost flow assumption describes the flow of product cost:
5-12
23.
One inventory cost flow assumption will result in different cost of goods sold from another
inventory cost flow assumption only if:
24.
When costs are rising over time:
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25.
In an inflationary economic environment, the selling price set for a firm's products will:
26.
One of the principal reasons for selecting the LIFO cost flow assumption instead of the
FIFO cost flow assumption in an inflationary economic environment is that:
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27.
The balance sheet valuation of inventories is:
28.
Which of the following inventory accounting systems has been made much more feasible
as a result of computer systems developments?
5-15
29.
The effect of an error resulting in an understatement of ending inventory is to:
30.
Which of the following is true regarding notes receivables?
5-16
31.
Regardless of the inventory cost flow assumption used, inventories on the balance sheet
are stated at:
32.
Prepaid expenses classified as current assets represent:
5-17
33.
The balance sheet presentation of accounts receivable net of the allowance for doubtful
accounts has the effect of stating accounts receivable at:
34.
A firm has used LIFO for several years during which costs have trended higher. The effect
on 2017 net income using LIFO, relative to FIFO, will be:
5-18
35.
One of the most important reasons for having a system of internal control is to:
36.
A firm has used LIFO for several years during which costs have trended higher. If this firm
achieves a substantial reduction in inventory quantities in 2017 by selling more
merchandise than it purchases, the effect on 2017 net income of the inventory reduction,
compared to having no change in inventory quantity from the beginning to the end of 2017,
is:
5-19
37.
The amount of cash related to a particular bank checking account that is shown on the
balance sheet at December 31 is:
38.
The valuation of short-term marketable securities on the balance sheet is likely to be for
an amount that is approximately equal to the cost of these investments because:
