Question 1. Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/09:
Currency and coins $ 650
Balance in checking account 2,600
Customer checks waiting to be deposited 1,200
Treasury bills, purchased on 11/1/09,
mature on 4/30/10 3,000
Marketable equity securities 10,200
Commercial paper, purchased on 11/1/09,
mature on 1/30/10 5,000
What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?
A. $ 9,450.
B. $12,450.
C. $ 7,450.
D. $19,650.
Question 2. A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off?
Allowance for Accounts
Uncollectible Accounts Receivable
A. Increase Decrease
B. No effect Decrease
C. Increase No effect
D. No effect No effect
Question 3. San Mateo Company had the following account balances at December 31, 2009 before recording bad debt expense for the year:
Accounts receivable $1,400,000
Allowance for uncollectible 22,000
accounts (credit balance)
Credit sales for 2009 1,950,000
San Mateo is considering the following approaches for estimating bad debts for 2009:
• Based on 3% of credit sales
• Based on 6% of year-end accounts receivable
What amount should San Mateo charge to bad debt expense at the end of 2009 under each method?
Percentage of credit sales Percentage of accounts receivable
A. $36,500 $62,000
B. $58,500 $62,000
C. $58,500 $84,000
D. $117,000 $95,000
Question 4. Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2009. The note, along with interest at 6%, is due on June 30, 2010. On September 30, 2009, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank?
A. $40,600.
B. $36,000.
C. $39,220.
D. $36,820 .
Question 5. The following information pertains to Jacobsen Co.'s accounts receivable at December 31, 2009:
Days Estimated %
Outstanding Amount Uncollectible
0-30 $420,000 2%
31-60 140,000 5%
61-120 100,000 10%
Over 120 120,000 20%
During 2009, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2008, allowance for uncollectible accounts was $40,000. Under the aging method, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2009?
A. $28,000.
B. $31,400.
C. $55,400.
D. $49,400.