31. You are considering a cell phone package that needs no money down but has monthly payments of $18.50 for 36 months. The monthly interest rate for you is 1% per month. Alternatively, you can buy the cell phone outright for one fixed price. At which of the following prices would you be better to buy the cell phone?
A. $500
B. $557
C. $575
D. $666
32. Ines Corporation bought a new machine and agreed to pay for it in equal annual instalments of $10,000 at the end of each of the next four years. The payments include both interest and principal. The rate of interest for this transaction is 8%. The amount that Ines should record the cost of the machine at is closest to?
A. $29,401
B. $33,121
C. $37,037
D. $40,000
33. Ines Corporation bought a new machine and agreed to pay for it in equal annual instalments of $10,000 at the end of each of the next four years. The payments include both interest and principal. The rate of interest for this transaction is 8%. The total amount of interest that Ines will pay is closest to?
A. $2,963
B. $3,200
C. $6,879
D. The interest cost can't be determined.
34. Which of the following related to sales on credit is known with certainty at the balance sheet date?
A. The gross amount of accounts receivable.
B. The amount of bad debts.
C. The returns of goods.
D. The discounts customers take when paying their accounts.
35. If a shareholder has borrowed money from a company and is expected to pay it back within 9 months, how would the amount be reported on the balance sheet?
A. As an accounts receivable.
B. As a loan receivable in current assets.
C. As a loan receivable in shareholders' equity.
D. As a reduction from retained earnings.
36. Which of the following would be classified as an accounts receivable?
A. Dividends owing to the company on an investment.
B. A loan to an employee.
C. Amounts due from customers.
D. Amounts due from the tax department.
37. Which of the following is an advantage of allowing customers to buy on credit?
A. It lengthens the cash cycle.
B. It allows the company to claim bad debt expense.
C. It increases sales.
D. It allows the company to claim more tax refunds.
38. At what amount are accounts receivable shown on the balance sheet?
A. At their gross amount.
B. At their gross amount plus expected interest revenue.
C. At their net realizable amount plus expected interest revenue.
D. At their net realizable amount.
39. Which of the following measurement conventions primarily supports the use of the allowance for uncollectible accounts?
A. Historical cost
B. Full disclosure
C. Revenue recognition
D. Matching principle
40. A company recognizes bad debts by writing off the receivable only when it becomes certain that the customer will not be paying. What is this method called?
A. Direct writeoff method
B. Allowance method
C. Net realizable value method
D. Percentage-of-credit-sales method