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Multiple Choice Identify the choice that best completes the statement or answers the question. 

1. Which principle states that positive (debit) balances and negative (credit) balances inaccounts receivable cannot under any circumstances be compensated?a. Prudence principle

 b. Accrual principlec. No offsetting principled. Matching principle

ANSWER: C

EasyPOINTS: 0 / 1REF:  page 329 

2. Which category of accounts receivable corresponds to the following two criteria?o Claim is uncontested by customer;

o The amount that will be collected is doubtful given the financial or 

economic situation of the debtor a. Ordinary accounts receivable

 b. Doubtful accounts receivable

c. Disputed accounts receivabled. Uncollectible accounts receivable

ANSWER: BEasy

POINTS: 0 / 1REF:  page 330 

3. In an aged balance, in which order are the balances of each individual customer accountreviewed and structured?a. By due date

 b. By decreasing amountc. By increasing amountd. By alphabetical order

ANSWER: AEasy

POINTS: 0 / 1REF:  page 330 

4. When the collectibility of an amount already included in revenue is uncertain, theuncollectible amount, or the amount in respect of which recovery has ceased to be

 probable, is preferably:a. Not recognized.

 b. Recognized as an adjustment of the amount of revenue originally recognized.c. Recorded directly in retained earnings.d. Recognized as an expense.

Name: Score: 0 / 10 points (0%)

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ANSWER: DModerate

POINTS: 0 / 1REF:  page 332 

5. With which principle does the allowance method conform?a. Prudence principle

 b. Matching principlec. No offsetting principled. Consistency principle

ANSWER: BModerate

POINTS: 0 / 1REF:  page 332 

6. “Provision for bad debts” is a contra-asset account.a. True

 b. False

ANSWER: AEasy

POINTS: 0 / 1REF:  page 332 

7. Which method is used for reporting accounts receivable in the financial statements?a.   Accounts receivable (gross) 100

Less provision for doubtful accounts -70

Accounts receivable (net) 30

 b.   Accounts rece ivable (net of provision for doubtful accounts: 70) 30c.   Gross value Provisions Net value

Accounts rece ivable 100 70 30

d. All of the above methods are used.

ANSWER: DModerate

POINTS: 0 / 1REF:  page 334, 335 

8. Which of the following statements is false?

a. Cash equivalents are short-term investments. b. Cash equivalents are investments that are subject to a significant risk of changes

in value.c. Cash equivalents are highly liquid investments.d. Cash equivalents are investments that are readily convertible into known

amounts of cash.

ANSWER: BModerate

POINTS: 0 / 1

REF:  page 341 9. Which of the following items is not a specific monetary instrument used to settle sales?

a. A credit sale b. A bill of exchange

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c. A draftd. A promissory note

ANSWER: AModerate

POINTS: 0 / 1REF:  page 343 

10. How is the “receivables turnover” calculated?a. Net sales x Average accounts receivable

 b. Net sales/Average accounts receivablec. Net sales + Average accounts receivabled. Net sales - Average accounts receivable

ANSWER: BModerate

POINTS: 0 / 1REF:  page 347 

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