72.

Consider the following: Cash in bank – checking amount of 13,500, Cash on hand of 500, Post-dated
checks received totaling 3,500, and certificate of deposit totaling 124,000. How much should be
reported as cash in the balance sheet.
a. 13,500 b. 14,000 c. 17,500 d. 131,500

73. On January 1, 2010, Lynn Company borrows 2,000,000 from National Bank at 11% annual interest. In
addition, Lynn is required to keep a compensatory balance of 200,000 on deposit at National Bank which
will earn interest at 5%. The effective interest that Lynn pays on its 2,000,000
A. 10.0% b. 11.0% c. 11.5% d. 11.6%

74. Kennison Company has cash in bank of 10,000, restricted cash is separate account of 3,000, and a
bank overdrafts in the account at another bank of 1,000. Kennison should report cash of
a. 9,000 b. 10,000 c. 12,000 d. 13,000

75. Kaniper 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
Post-dated checks 1,400
Keniper should report cash and cash equivalents of
a. 20,000 b. 20,300 c.25,500 d. 27,200

76. Lawrence company has cash in bank of 15,000, restricted cash in a separate account of 4,000, and a
bank overdraft in an account at another bank of 2,000. Lawrence should report cash of
a. 13,000 b. 15,000 c. 18,000 d. 19,000

77. Steinert Company has the following items at year – end:

Cash in bank 30,000
Petty Cash 500
Short-term paper with maturity of 2 months 8,200
Post-dated checks 2,100
Steinert should report cash and cash equivalents of
a. 30,000 b. 30,500 c. 38,700 d. 40,800

78. If a company purchase merchandise on terms of 1/10, n/30, the cash discount available is equivalent
to what effective annual rate of interest (assuming a 360-day year)?
a. 1% b.12% c. 18% d. 30%

79. AG Inc. made a 10,000 sale on account with the following terms: 1/15, n/30. If the company uses net
method to resort sales made on credit, how much should be recorded as revenue?
a. 9,800 b.9,900 c. 10,000 d. 10,100
80. AG Inc. made a 10,000 sale on account with the following terms: 1/15, n/30. If the company uses the
gross method to record sale made on credit, what is/are the debit(s) in the journal entry to record the
sales?
a. Debit Accounts Receivable for 9,900
b. Debit Accounts Receivable for 9,900 and Sales Discounts for 100
c. Debit Accounts Receivable for 10,000
d. Debit Accounts Receivable for 10,000 and Sales Discounts for 100

81. AG Inc. made a 10,000 sale on account with the following terms: 2/10, n/30. If the company uses the
net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the
sale?
a. Debit Accounts Receivable for 9,800
b. Debit Accounts Receivable for 9,800 and Sales Discounts for 200
c. Debit Accounts Receivable for 10,000
d. Debit Accounts Receivable for 10,000 and Sales Discounts for 200

82. Wellington Corp. has outstanding accounts receiving totaling 2.54 million as of December 31 and
sales on credit during the year of 12.8 million. There is also a debit balance of 6,000 in the allowance for
doubtful accounts. If the company estimates that 1% of its net credit sales will be uncollectible, what will
be the balance in the allowance for doubtful accounts after the year-end adjustments to record bad
debts expense?
A. 25,400 b. 31,400 c. 122,000 d. 134,000

83. Wellington Corp. has outstanding accounts receiving totaling 6.5 million as of December 31 and sales
on credit during the year of 24 million. There is also a credit balance of 12,000 in the allowance for
doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible,
what will be the amount of bad debts expense recognized for the year?
A. 532,000 b. 520,000 c. 1,920,000 d. 508,000

84. Wellington Corp. has outstanding accounts receiving totaling 3 million as of December 31 and sales
on credit during the year of 15 million. There is also a debit balance of 12,000 in the allowance for
doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible,
what will be the balance in the allowance for doubtful accounts after the year-end adjustments to
record bad debts expense?
A. 1,200,000 b. 228,000 c. 240,000 d. 252,000

85. At the close of its first year of operations, December 31, 2010, Ming Company had accounts
receivable of 540,000, after deducting the related allowance for doubtful accounts. During 2010, the
company had charges to bad debt expense of 90,000 and wrote off, as uncollectible, accounts receivable
of 40,000. What should the company report on its balance sheet at December 31,2010, as accounts
receivable before the allowance for doubtful accounts?
A. 670,000 b. 590,000 c. 490,000 d. 440,000
86. Before year-end adjusting entries, Dunn Company’s account balances at December 31, 2010, for
accounts receivable and the related allowances 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
A. 582, 500 b. 537,500 c. 492,500 d. 555,000

87. During the year, Kiner Company made an entry to write off 4,000 uncollectible account. Before this
entry was made, the balance in accounts receivable was 50,000 and the balance in the allowance
account was 4,500. The net realizable value of accounts receivable after the write-off entry was
A. 50,000 b. 49,500 c. 41,500 d. 45,500

88. The following information is available for Murphy Company:

Allowance for doubtful accounts at December 31,2009 8,000
Credit Sales during 2010 400,000
Accounts receivable deemed worthless and written off during 2010 9,000
As a result of a review and aging of accounts receivable In early January 2011, however, it has been
determined that an allowance for doubtful accounts of 5,500 is needed at December 31, 2010. What
amount should Murphy record as “bad debt expense” for the year ended December 31, 2010?
A. 4,500 b. 5,500 c. 6,500 d. 13,500

Use the following information for questions 89 and 90.

A trial balance before adjustments included the following:
Debit Credit
Sales 425,000
Sales Return and allowances 14,000
Accounts Receivable 43,000
Allowance for doubtful accounts 760

89. If the estimate of uncollectible is made by taking 2% of net sales, the amount of the adjustment is
a. 6,700 b. 8,220 c. 8,500 d. 9,740

90. If the estimate of uncollectible is made by taking 10% of gross account receivables, the amount of
the adjustment is
a. 3,540 b. 4,300 c. 4,224 d. 5,060

91. Lankton Company has the following account balances at year-end:

Accounts Receivable 60,000
Allowance for doubtful accounts 3,600
Sales discounts 2,400
Lankton should report accounts receivable at a net amount of
a. 54,000 b. 56,400 c. 57,600 d. 60,000
92. Smithson Corporation had a 1/1/10 balance in the allowance for doubtful accounts for 10,000.
During 2010, it wrote off 7,200 of accounts and collected 2,100 on accounts previously written off. The
balance in accounts receivable was 200,000 at 11/1 and 240,000 at 12/31. At 12/31/10, Smithson
estimates that 5% of accounts receivable will prove to be uncollectible. What is bad debt expense for
2010?
A. 2,000 b. 7,100 c. 9,200 d. 12,000

93. Black Corporation had a 1/1/10 balance in the allowance for doubtful accounts for 12,000. During
2010, it wrote off 8,640 of accounts and collected 2,520 on accounts previously written off. The balance
in accounts receivable was 240,000 at 11/1 and 288,000 at 12/31. At 12/31/10, Smithson estimates that
5% of accounts receivable will prove to be uncollectible. What should Black report as its allowance for
doubtful accounts at 12/31/10?
A. 5,760 b. 5,880 c. 8,280 d. 14,400

94. Shelton Company has the following account balances at year-end:

Accounts Receivable 80,000
Allowance for Doubtful Accounts 4,800
Sales Discounts 3.200
Shelton should report accounts receivable at net amount of
a. 72,000 b. 75,200 c. 76,800 d. 80,000

95. Vasguez Corporation had a 1/1/10 balance in the allowance for doubtful accounts of 20,000. During
2010, it wrote off 14,400 of accounts and collected 4,200 on accounts previously written off. The
balance in accounts receivable was 400,000 at 11/1 and 480,000 at 12/31. At 12/31/10, Vasguez
estimates that 5% of accounts receivable will prove to be uncollectible. What is bad debt expense for
2010?
A. 4,000 b. 14,200 c. 18,400 d. 24,000

96. McGlone Corporation had a 1/1/10 balance in the allowance for doubtful accounts for 15,000.
During 2010, it wrote off 10,800 of accounts and collected 3,150 on accounts previously written off. The
balance in accounts receivable was 300,000 at 11/1 and 360,000 at 12/31. At 12/31/10, McGlone
estimates that 5% of accounts receivable will prove to be uncollectible. What should McGlone report as
its allowance for doubtful accounts at 12/31/10?
A. 7,200 b. 7,350 c. 10,350 d. 18,000

97. Lester Company received a seven-year zero-interest-bearing note on February 22, 2010, in exchange
of property it sold to Porter Company. There was no established exchange price for this property and
the note has no ready market. The prevailing rate of interest for a note of this type was 7% on February
22, 2010, 7.5% on December 31, 2010, 2.2% on February 22,2011, and 8% on December 31, 2011. What
interest rate should be used to calculate the interest revenue from this transaction for the years ended
December 31,2010 and 2011, respectively?
A. 0% and 0% b. 7% and 7% c. 7% and 7.7% d. 7.5% and 8%
98. On December 31, 2010, Flint Corporation sold for 75,000 an old machine having an original cost of
135,000 and a book value of 60,000. The terms of the sale were as follows:
15,000 down payment
30,000 payable on December 31 each of the next two years
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of
transaction. What should be the amount of the notes receivable net of the unamortized discount on
December 31, 2010 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9%
for 2 years is 1.75911.)
A. 52,773 b. 67,773 c. 60,000 d. 105,546