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Illinois Company prepared the following bank reconciliation at May 31: Illinois Company prepared the following bank reconciliation at May 31: Required: Prepare the necessary journal entries for Illinois Company required by the May 31 bank reconciliation. Required: Prepare the necessary journal entries for Illinois Company required by the May 31 bank reconciliation.

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Which of the following statements is correct?


A) Revenue is recognized at the time of shipment when goods are shipped FOB destination.
B) Sales returns and allowances are reported as operating expenses on an income statement.
C) A seller records revenue when title and risks of ownership transfer to the buyer.
D) Sales discounts are reported as cost of sales on an income statement.

E) C) and D)
F) All of the above

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CHS Company has just finished preparing its bank reconciliation. If CHS did everything correctly, which items would have been included as an addition to the company's cash account?


A) Deposits in transit.
B) Interest received and collections of notes receivables.
C) Outstanding checks.
D) ATM and check printing fees.

E) All of the above
F) B) and D)

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Cash equivalents on the balance sheet include certificates of deposit with maturities of 90 days or more.

A) True
B) False

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Redwing Company sold inventory costing $500 to a customer on account for $700. Which of the following correctly describes the collection of $686 cash when the customer takes advantage of a sales discount?


A) Operating expenses increase $14.
B) Accounts receivable decreases $686.
C) Current assets decrease $14.
D) Gross profit is not affecteD.Cash increases $686 and accounts receivable decreases $700.

E) B) and D)
F) All of the above

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A comparison of the balance in Cottonwood Company's cash account per its books as of April 30, 2016 and the bank statement dated April 30, 2016 revealed the following information: A comparison of the balance in Cottonwood Company's cash account per its books as of April 30, 2016 and the bank statement dated April 30, 2016 revealed the following information: Required: Prepare a complete bank reconciliation using the format below. In each section of the bank reconciliation indicate the proper handling of each of the items shown above by listing the appropriate item code letter and the respective amount. Required: Prepare a complete bank reconciliation using the format below. In each section of the bank reconciliation indicate the proper handling of each of the items shown above by listing the appropriate item code letter and the respective amount. A comparison of the balance in Cottonwood Company's cash account per its books as of April 30, 2016 and the bank statement dated April 30, 2016 revealed the following information: Required: Prepare a complete bank reconciliation using the format below. In each section of the bank reconciliation indicate the proper handling of each of the items shown above by listing the appropriate item code letter and the respective amount.

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The Tanner Company's April 30, 2016 pre-reconciliation cash balance on its books was $35,000. While preparing the April 30 bank reconciliation, Tanner determined that outstanding checks total $11,000, deposits in transit total $7,000, and bank service charges are $50. What was Tanner's April 30, 2016 cash balance per the bank statement?


A) $31,000.
B) $30,950.
C) $38,950.
D) $39,000.

E) None of the above
F) A) and C)

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Which of the following correctly describes the following journal entry? Which of the following correctly describes the following journal entry? A) The gross profit does not change. B) Net income decreases. C) Current assets increase. D) Net sales increases.


A) The gross profit does not change.
B) Net income decreases.
C) Current assets increase.
D) Net sales increases.

E) B) and D)
F) A) and B)

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Which of the following statements correctly describes the effect of recording the collection of a $10,000 account receivable for which a 2% sales discount was recorded at the time of collection?


A) Current assets will remain the same.
B) Gross profit will decrease $200.
C) Accounts receivable will decrease $9,800.
D) Net sales will increase $9,800.

E) None of the above
F) A) and C)

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When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What percent (rounded) would this savings amount to on an annual basis?


A) 18.2%.
B) 20.0%.
C) 29.2%.
D) 36.5%.

E) C) and D)
F) A) and B)

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When preparing the monthly bank reconciliation, the accountant for Farris Corporation discovered that a check correctly written to one of Farris' suppliers for $159 had been incorrectly recorded in the books as $195. Which of the following statements is correct with respect to the bank reconciliation process?


A) The cash balance per the books will be decreased.
B) The cash balance per the bank statement will be increased.
C) The cash balance per the bank statement will be decreased.
D) The cash balance per the books will be increaseD.The error incorrectly decreases the cash balance per the books.To correct the books, the difference [$195 - $159] is added back to the book balance.

E) A) and B)
F) A) and C)

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The cash records and the bank statement of Frankel Company showed the following at the end of February 2016: Outstanding checks as of the beginning of February 2016, $8,000; checks written by Frankel Company according to its books during February 2016, $50,000; and checks cleared by the bank during February 2016, $54,000. What was the amount of the outstanding checks at the end of February 2016?


A) $2,000.
B) $4,000.
C) $6,000.
D) $8,000.

E) A) and B)
F) A) and C)

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A customer purchased and received $5,000 of goods on credit from Discount Paper Supply on September 1. The customer received the bill on September 13 and mailed a $5,000 check on September 30. Discount Paper Supply received the check on October 4. On which of the following dates should Discount Paper Supply record sales revenue?


A) September 1
B) September 13
C) September 30
D) October 4

E) A) and B)
F) A) and C)

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Which of the following correctly describes the effect of a sales discount?


A) Gross profit increases.
B) Net sales increases.
C) Current assets remain the same.
D) Net income decreases.

E) All of the above
F) A) and C)

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Which of the following transactions does not affect gross profit?


A) A customer returning merchandise that was sold for a profit.
B) The collection of cash on an account receivable, which was paid for by the customer within the discount period.
C) The journal entry to record bad debt expense.
D) Accepting a credit card for a sale and paying a service fee to the credit card company.

E) None of the above
F) B) and D)

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When goods are shipped FOB destination, the revenue from the sale is recognized on the shipment date.

A) True
B) False

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When using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet at the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will:


A) Decrease the net realizable value of the accounts receivable.
B) Have an effect that is not determinable from the information given.
C) Increase the net realizable value of the accounts receivable.
D) Have no effect on the net realizable value of the accounts receivable.

E) B) and C)
F) A) and C)

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Which of the following accounts is not a contra-revenue account?


A) Sales discounts
B) Credit card discounts
C) Sales returns and allowances
D) Allowance for doubtful accounts

E) C) and D)
F) None of the above

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Which of the following demonstrates a poor internal control procedure?


A) The bookkeeper makes cash deposits and records journal entries related to cash, while the treasurer prepares the bank reconciliation.
B) The president, who does no bookkeeping, prepares the bank reconciliation each month.
C) The treasurer signs all checks after the bookkeeper prepares the supporting documents.
D) One bookkeeper prepares cash deposits and the other bookkeeper enters the collections in the journal and ledger.

E) A) and B)
F) None of the above

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Which of the following statements is correct?


A) A decrease in the accounts receivable balance means that credit sales exceeded cash collections from customers.
B) The accounts receivable balance increases when cash collected from customers exceeds credit sales.
C) A decrease in accounts receivable is deducted from net income when determining cash flow from operating activities.
D) An increase in accounts receivable is deducted from net income when determining cash flow from operating activities.

E) A) and B)
F) A) and C)

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