Question : 31.If a company’s collection period for accounts receivable considered to : 1253648

31.If a company’s collection period for accounts receivable is considered to be excessively long, then

a. the company may want to invest excess cash from receivable collections in the stock market.

b. the company might examine its billing procedures in order to expedite collection from customers.

c. customer returns should be disallowed in order to increase the collection of cash.

d. cash flows from operations will probably be more than sufficient.

32.During the year, Caltech Inc.’s accounts receivable turnover rate increased from 10 to 12 times. The company makes credit sales only with credit terms of 3/10, n/40. The best explanation for the increase is that

a.the company’s credit department did a better follow up with customers whose account balances became past due.

b.the company has recently dropped its credit check policy.

c.the company makes all customers pay cash instead of allowing purchases to be charged.

d.the company has more customers at the end of the year than it had at the beginning of the year.

33.Summers, Inc. uses the allowance method to account for bad debts. The entry to record the write-off of a customer’s account balance decreases

a.assets and owners’ equity.

b.assets and decreases liabilities.

c.owners’ equity and revenues.

d.none of these answers is correct.

34.If a company uses the allowance method to account for bad debts, the company’s owners’ equity will decrease

a.at the end of the accounting period when an adjusting entry to estimate bad debts is recorded.

b.on the date a customer’s account is determined to be uncollectible.

c.when the accounts receivable amount becomes past due.

d.on the date a customer’s account is written off.

35.Managers must understand how transactions affect working capital

a.because GAAP does not allow companies with weak working capital to obtain loans.

b.because lenders often use this to assess a company’s ability to meet current obligations.

                    so that management can avoid transactions that increase working capital.

                   in anticipation of meeting creditors guidelines before issuing new stock.

36.Which of the following would be separately reported as restricted cash in the balance sheet or footnotes to the financial statement?

a.$8,000 in the savings account at First Bank

b.$200 in a petty cash drawer

c.$10,000 cash in an escrow account at Guarantee Bank

d.$4,000 in a checking account at Second Rate Bank

37.On March 1, 2010, Silver Corp. sold goods to a Chinese company for 10,000 Chinese yuan (10,000 RMB) to be paid on April 1, 2010. The exchange rates on March 1 and April 1, 2010 are US$8.0 = 1 RMB and US$8.5 = 1 RMB, respectively. What is Silver’s revenue in US dollars and its 2009 exchange gain or loss?

a.Sales revenue =US $80,000; Exchange gain US $5,000

b. Sales revenue = US $85,000; Exchange loss US $5,000

c.Sales revenue = US $80,000; Exchange loss US $5,000

d.Sales revenue = US $85,000; Exchange gain US $5,000

38.The current ratio fails to accurately reflect

a.the ability of a company to pay its current debts as they come due.

b.amounts that will come due within the next accounting period.

c.amounts due within the next operating cycle as of the end of the accounting period.

d.cash flows anticipated in future accounting periods.

39.Most companies

a.use working capital and current and quick ratios as low-cost surrogates for cash flow measures.

b.place little importance on managing current assets.

c.have large amounts of current assets comprised of cash only.

d.are moving away from cash flow accounting.

40.The procedures designed to ensure that the cash account on the balance sheet reflects the actual amount of cash in the company’s possession are referred to as

a.compensating balances.

b.record controls.

c.physical controls.

d.cash budgeting.