Chapter 6
1. All receivables that are expected to be realized in cash within a year are presented in the current assets section of the
balance sheet.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-EPKD
2. Receivables not expected to be collected within one year are reported in the fixed assets section of the balance sheet.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-EPJU
3. Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.
Chapter 6
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-EPJ1
4. The due date of a 60-day note dated July 10 is September 9.
a.
True
b.
False
False
Moderate
False
JFND-GO3A-EW4R-EPJT
GO4W-NQNBEE
5. The sum of the face amount and the interest that must be paid at the due date of the note is called maturity value.
a.
True
b.
False
True
Chapter 6
6. The person who is to be paid when a note matures is called the payee.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-EPJZ
7. The maturity value of a 12%, 60-day note for $1,000 is $1,020. (Assume 360 days in a year)
a.
True
b.
False
True
Moderate
Easy
False
JFND-GO3A-EW4R-EPJO
Chapter 6
8. The interest at 6%, on a 60-day note for $5,000 is $300. (Assume 360 days in a year)
a.
True
b.
False
False
Moderate
False
JFND-GO3A-EW4R-EPJI
4OTI-GO4W-NQNBEE
9. The due date of a 90-day note dated July 15 is October 13. (Assume 360 days in a year)
a.
True
b.
False
True
Moderate
False
False
JFND-GO3A-EW4R-EPJS
4OTI-GO4W-NQNBEE
Chapter 6
10. The party promising to pay a note at maturity is the payee.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-KOKN
11. When companies sell their receivables to other companies, the transaction is called factoring.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-EPJW
Chapter 6
12. Under the direct write-off method, an attempt is made to match Bad Debt Expense to sales revenues in the same
accounting period.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-KOJ3
GO4W-NQNBEE
13. Generally accepted accounting principles do not normally allow the use of the allowance method of accounting for
uncollectible accounts.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-KOKB
Chapter 6
JFND-GO3A-EW4R-KOJA
14. The direct write-off method records uncollectible accounts expense in the year the specific account receivable is
determined to be uncollectible.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KOKG
GO4W-NQNBEE
15. Allowance for Doubtful Accounts is a contra liability account.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-KOKF
Chapter 6
16. Net income is reduced when a specific receivable is written off under the analysis of receivables method.
a.
True
b.
False
False
Moderate
False
JFND-GO3A-EW4R-KOKR
17. The difference between the total receivables and the balance in Allowance for Doubtful Accounts at the end of a
period is referred to as the net realizable value of the receivables.
a.
True
b.
False
True
Easy
False
NC3S-8YSU-YQMR-GOSU-YQDF-GWSU-K3DD-GO4U-RA3W-E7JI-YT4D-JFNN-4OTI-
Chapter 6
GO4W-NQNBEE
18. At the end of a period before the accounts are adjusted, Allowance for Doubtful Accounts has a balance of $250, and
net sales on account for the period total $500,000. If uncollectible accounts expense is estimated at 1% of net sales on
account, the current provision to be made for uncollectible accounts expense is $4,997.50.
a.
True
b.
False
False
Moderate
False
JFND-GO3A-EW4R-KOJU
19. The estimate of uncollectible accounts receivable based on the sales method violates the matching principle.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-KOJ1
Chapter 6
20. Inventories of merchandising and manufacturing businesses are reported as current assets on the balance sheet.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KOJT
21. The FIFO method of costing inventory is based on the assumption that costs should be charged against revenues in the
order in which they were incurred.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KOJO
22. Of the three widely used inventory costing methods (FIFO, LIFO, and average), the FIFO method of costing inventory
is based on the assumption that costs are charged against revenues in the order in which they were incurred.
Chapter 6
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KOJZ
23. During inflationary periods, the use of the FIFO method of costing inventory will result in a greater amount of net
income than would result from the use of the LIFO method of costing inventory.
a.
True
b.
False
True
Moderate
False
JFND-GO3A-EW4R-KOJS
24. During inflationary periods, the value of inventory that appears on the balance sheet using FIFO method will be more
than its current replacement cost.
a.
True
Chapter 6
b.
False
False
Moderate
False
JFND-GO3A-EW4R-KOJI
GO4W-NQNBEE
25. During inflationary periods, the use of the LIFO method of costing inventory will result in a lesser amount of net
income than would result from the use of the average method of inventory costing.
a.
True
b.
False
True
Moderate
False
JFND-GO3A-EW4R-KOJW
GO4W-NQNBEE
26. During deflationary periods, the use of the LIFO method of costing inventory will result in a greater amount of net
income than would result from the use of the FIFO method of inventory costing.
a.
True
b.
False
Chapter 6
True
Challenging
False
JFND-GO3A-EW4R-KO1N
27. The balance of the allowance for doubtful accounts is added to accounts receivable on the balance sheet.
a.
True
b.
False
False
Easy
False
JFND-GO3A-EW4R-KO1B
4OTI-GO4W-NQNBEE
28. The net realizable value is used for purposes of valuing out of date merchandise in inventory.
a.
True
b.
False
True
Chapter 6
29. Lower-of-cost-or-market is a method of inventory valuation.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KOTA
30. In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any
direct cost of disposal.
a.
True
b.
False
True
Easy
Easy
False
JFND-GO3A-EW4R-KOT3
Chapter 6
31. Average cost is a method of inventory valuation.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KO1F
4OTI-GO4W-NQNBEE
32. “Market,” as used in the phrase “lower of cost or market” for valuing inventory, refers to the price at which the
inventory is being offered for sale by its owner.
a.
True
b.
False
False
Easy
False
False
JFND-GO3A-EW4R-KO1G
Chapter 6
33. The use of the lower-of-cost-or-market method of inventory valuation increases the gross profit for the period in
which the inventory replacement price declined.
a.
True
b.
False
False
Moderate
False
JFND-GO3A-EW4R-KO1D
4OTI-GO4W-NQNBEE
34. Merchandise Inventory is presented on the balance sheet in the current assets section.
a.
True
b.
False
True
Easy
False
JFND-GO3A-EW4R-KO1R
Chapter 6
Bloom’s: Understanding
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KOTU
35. Credit purchase is taken into account while calculating accounts receivable turnover ratio.
a.
True
b.
False
False
Easy
True / False
False
SACC.WARR.18.6-9 – LO: 06.09
United States – BUSPROG: Analytic
Bloom’s: Remembering
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KOTS
36. A note receivable due in five years is listed on the balance sheet under the caption:
a.
investments.
b.
current assets.
c.
fixed assets.
d.
stockholders’ equity.
a
Easy
Multiple Choice
False
SACC.WARR.18.6-1 – LO: 06.01
United States – BUSPROG: Analytic
United States – DISC: – ACBSP: APC–09 – Financial Statements
Chapter 6
United States – AK – DISC: AICPA: FN-Reporting
Bloom’s: Understanding
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KOTO
37. A written promise to pay a sum of money on demand or at a definite time is called a(n):
a.
letter of credit.
b.
deferred note.
c.
credit memorandum.
d.
promissory note.
Easy
Multiple Choice
False
SACC.WARR.18.6-1 – LO: 06.01
United States – BUSPROG: Analytic
Bloom’s: Remembering
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KOTZ
38. In reference to a promissory note, the person who makes the promise to pay is called the:
a.
maker.
b.
payee.
c.
seller.
d.
receiver.
a
Easy
Multiple Choice
SACC.WARR.18.6-1 – LO: 06.01
United States – BUSPROG: Analytic
Chapter 6
39. In reference to a promissory note, the person who is to receive payment is called the:
a.
maker.
b.
payee.
c.
seller.
d.
payer.
Easy
Multiple Choice
False
SACC.WARR.18.6-1 – LO: 06.01
United States – BUSPROG: Analytic
Bloom’s: Remembering
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KOTW
40. The amount of the promissory note plus the interest earned on the due date is called the:
a.
market value.
b.
maturity value.
c.
face value.
d.
discounted value.
Easy
Multiple Choice
False
SACC.WARR.18.6-1 – LO: 06.01
Bloom’s: Remembering
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KOTI
Chapter 6
41. The due date of a 60-day note dated July 12 is:
a.
September 11.
b.
September 8.
c.
September 9.
d.
September 10.
Moderate
Multiple Choice
False
SACC.WARR.18.6-1 – LO: 06.01
United States – BUSPROG: Analytic
Bloom’s: Applying
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KQB3
GO4W-NQNBEE
42. A 90-day, 10% note for $10,000 dated March 15 is received from a customer on account. The face value of the note is:
a.
$10,250.
b.
$9,000.
c.
$9,750.
d.
$10,000.
Moderate
Multiple Choice
False
United States – BUSPROG: Analytic
Bloom’s: Remembering
7/19/2016 9:50 AM
7/19/2016 9:50 AM
JFND-GO3A-EW4R-KQNN