107. The accounts receivable turnover rate:
A. Indicates how many times the receivables were converted into cash during the year.
B. Is computed by dividing average receivables by sales.
C. Indicates the average number of days a business waits to make collection on a credit sale.
D. Indicates the proportion of a company’s accounts receivable that the independent auditors were unable to confirm.
108. The accounts receivable turnover rate for Baldwin Corporation is 8, and for Basinger Company is 10. These statistics indicate that:
A. Basinger collects its accounts receivable within 10 days on average; Baldwin collects its accounts receivable in 8 days on average.
B. Basinger writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company.
C. Basinger collects its accounts receivable faster than does Baldwin Company.
D. Basinger makes on average 10 credit sales annually to each of its customers, while Baldwin makes 8 credit sales to each customer.
109. Available-for-sale securities are usually held for:
A. Less than three months.
B. Between six and eighteen months.
C. Greater than one year.
D. Less than one month.
110. Under the allowance method, when a receivable that had been previously written off is collected:
A. Income is recognized.
B. An expense is reduced.
C. Net income is not affected.
D. Net assets are increased.
111. Which of the following activities affects net income, but has no immediate impact upon cash flows?
A. Collection of an account receivable.
B. Making the end-of-period adjustment to record estimated uncollectible accounts.
C. Investing excess cash in marketable securities.
D. Write-off of an uncollectible account receivable against the allowance.
112. Each of the following transactions would be reflected in both the income statement and the statement of cash flows for the current period, except:
A. Purchase of marketable securities for cash.
B. Receipt of dividends earned on investments.
C. Payment of interest on bonds.
D. Sale of merchandise for cash.
113. Investments in available-for-sale marketable securities:
A. Only include investments in the capital stock of publicly traded corporations.
B. May be reported in the balance sheet at market values lower than cost, but never at values in excess of original cost.
C. Are adjusted to current market value at the end of each accounting period.
D. Are carried in the accounting records at current market values, and therefore do not generate gains or losses when sold at market values.
114. The purpose of the mark-to-market adjustment for securities classified as “available-for-sale” is:
A. To adjust the valuation of a company’s investment to current market value.
B. To recognize the proper amount of gain or loss on fluctuations in the market value of these securities in the current period income statement.
C. To adjust a corporation’s capital stock account to reflect the current market value of the outstanding capital stock.
D. Both a and b are correct.
115. The mark-to-market adjustment:
A. Affects both the balance sheet and the current period income statement.
B. Is not made when the current market value of investments in marketable securities is higher than original cost.
C. May result in either a gain or a loss to be reported in the current period income statement.
D. Represents a departure from the cost principle.
116. An Unrealized Holding Gain (or Loss) on Investments classified as “available-for-sale” securities:
A. Is reported in the asset section of the balance sheet, as an adjustment to the carrying value of the marketable securities.
B. Is reported in the stockholders’ equity section of the balance sheet, as either an increase or decrease in total stockholders’ equity.
C. Appears in the current period income statement, combined with realized gains and losses from sales of securities.
D. Indicates the amount of cash a company would receive if the marketable securities were sold as of the balance sheet date.
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