91. The purpose of establishing a petty cash fund is to:
A. Achieve internal control over small cash disbursements not made by check.
B. Keep track of expenditures paid out of cash receipts from customers prior to deposit.
C. Ensure that the amount of cash in the bank does not become excessive.
D. Keep enough cash on hand in the office to cover all normal operating expenses of the business for a period of time.
92. When preparing a bank reconciliation, an NSF check will:
A. Increase the balance per depositor's records.
B. Decrease the balance per depositor's records.
C. Increase the balance per the bank statement.
D. Decrease the balance per the bank statement.
93. The valuation principle of "mark-to-market" applied to investments classified as available for sale securities:
A. Affects the current period income statement, but not the balance sheet.
B. Enhances usefulness of the balance sheet in evaluating solvency of a business.
C. Applies to marketable securities and inventories.
D. Requires a corporation to adjust its capital stock account to reflect current market value of its outstanding capital stock.
94. The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments. This item:
A. Is included in the income statement.
B. Is shown as a reduction in total stockholders' equity.
C. Indicates that Baxter's marketable securities have a current market value higher than cost.
D. Indicate that Baxter Corporation sold marketable securities during the period at a gain.
95. Restricted cash is:
A. Not reported as an asset on the balance sheet.
B. Not available for the normal operating needs of a company.
C. Not legally owned by the company.
D. All three of the above.
96. Accounts receivable are classified as current assets:
A. Only if convertible into cash within 60 days or sooner.
B. Only if the allowance method is used to estimate the uncollectible accounts.
C. Only if convertible into cash within one year.
D. Whenever the accounts receivable arise from "normal" sales of merchandise to customers, regardless of the credit terms.
97. Accounts receivable appear in the balance sheet:
A. As current assets, combined with cash and cash equivalents.
B. As current assets, immediately after cash and cash equivalents.
C. As either current assets or noncurrent assets, depending on whether the allowance method or the direct write-off method is used to account for uncollectible accounts.
D. Only if the balance sheet method of estimating uncollectible accounts is used.
98. Uncollectible accounts expense:
A. Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit.
B. Is the amount of cash a business must pay each time a credit customer fails to pay his or her account.
C. Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable.
D. Represents the loss in value of accounts receivable that are estimated to be uncollectible.
99. When reading a bank statement which of the following will indicate an increase in the cash balance?
A. Debit Memorandum
B. Credit Memorandum
C. NSF Check
D. Service Charge
100. The Allowance for Doubtful Accounts represents:
A. Cash set aside to make up for bad debt losses.
B. The amount of uncollectible accounts written off to date.
C. The difference between total credit sales and collections on credit sales.
D. The difference between the face value of accounts receivable and the net realizable value of accounts receivable.