1. At December 31, 2011, Kale Co. had the following balances in the accounts it maintains at First State Bank:
Checking account No. 001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $175,000
Checking account No. 201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,000)
Money market account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
90-day certificate of deposit, due February 28, 2012 . . . . . . . . . . . . . . 50,000
180-day certificate of deposit, due March 15, 2012 . . . . . . . . . . . . . . . 80,000
Kale classifies investments with original maturities of three months or less as cash equivalents. In its December 31, 2011, balance sheet, what amount should Kale report as cash and cash equivalents?
(a) $190,000
(b) $200,000
(c) $240,000
(d) $320,000
2. When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account would:
(a) Decrease both accounts receivable and the allowance for uncollectible accounts.
(b) Decrease accounts receivable and increase the allowance for uncollectible accounts.
(c) Increase the allowance for uncollectible accounts and decrease net income.
(d) Decrease both accounts receivable and net income.
3. Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a:
(a) Loan from Ross collateralized by Gar's accounts receivable.
(b) Loan from Ross to be repaid by the proceeds from Gar's accounts receivable.
(c) Sale of Gar's accounts receivable to Ross, with the risk of uncollectible accounts retained by Gar.
(d) Sale of Gar's accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross.