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Questions and Answers
Bank reconciliation is necessary to agree cash balance according to the bank with per depositor.
Bank reconciliation is necessary to agree cash balance according to the bank with per depositor.
True
Time deposit accounts have no restrictions on withdrawal.
Time deposit accounts have no restrictions on withdrawal.
False
Cash receipts in a business using a bank account are initially deposited in a cash register.
Cash receipts in a business using a bank account are initially deposited in a cash register.
False
Errors by both parties do not contribute to disagreements between balance per bank and balance per books.
Errors by both parties do not contribute to disagreements between balance per bank and balance per books.
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Bank reconciliation lists the items that cause the cash balance in the bank statement to match exactly with the balance in the depositor's ledger.
Bank reconciliation lists the items that cause the cash balance in the bank statement to match exactly with the balance in the depositor's ledger.
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The business usually uses cash for all payments except for very large amounts.
The business usually uses cash for all payments except for very large amounts.
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Companies use trade discounts to reveal the true invoice price to competitors.
Companies use trade discounts to reveal the true invoice price to competitors.
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ABC company sold its product at birr 45 per unit with a trade discount of 10% applied.
ABC company sold its product at birr 45 per unit with a trade discount of 10% applied.
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Cash discounts are offered by companies to delay payment from customers.
Cash discounts are offered by companies to delay payment from customers.
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Sales discounts are recorded as an addition to sales revenue on the income statement.
Sales discounts are recorded as an addition to sales revenue on the income statement.
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Under the net method, companies record sales at the gross amount without deducting cash discounts.
Under the net method, companies record sales at the gross amount without deducting cash discounts.
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Ideally, companies should measure receivables in terms of their future value rather than their present value.
Ideally, companies should measure receivables in terms of their future value rather than their present value.
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Derecognition of receivables occurs when a company transfers a receivable to another company, thereby transferring the risks and rewards of ownership to the other company.
Derecognition of receivables occurs when a company transfers a receivable to another company, thereby transferring the risks and rewards of ownership to the other company.
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Assessing whether all the risks and rewards of ownership are transferred when a company sells a receivable is always a straightforward process.
Assessing whether all the risks and rewards of ownership are transferred when a company sells a receivable is always a straightforward process.
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Reporting of trade and non-trade receivables should be combined in financial statements.
Reporting of trade and non-trade receivables should be combined in financial statements.
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Disclosure requirements related to receivables include providing information about collectible receivables only.
Disclosure requirements related to receivables include providing information about collectible receivables only.
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Transfers of receivables do not raise any significant issues as they are straightforward transactions.
Transfers of receivables do not raise any significant issues as they are straightforward transactions.
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According to Solution A, the Cash amount recorded for the receipt of the note is $9,520.
According to Solution A, the Cash amount recorded for the receipt of the note is $9,520.
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In Solution B, the Interest Revenue recognized at the end of Year 1 is $1,142.
In Solution B, the Interest Revenue recognized at the end of Year 1 is $1,142.
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The Discount Amortization Schedule in Solution B shows that at the end of Year 1, the Carrying Amount of the Note Receivable is $9,662.
The Discount Amortization Schedule in Solution B shows that at the end of Year 1, the Carrying Amount of the Note Receivable is $9,662.
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According to the solution provided, the derecognition of receivables occurs when the contractual rights to the cash flows of the receivable no longer exist.
According to the solution provided, the derecognition of receivables occurs when the contractual rights to the cash flows of the receivable no longer exist.
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The market rate of interest for a note of similar risk in this scenario is 10 percent.
The market rate of interest for a note of similar risk in this scenario is 10 percent.
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If a company collects its receivable when due, it must recognize those receivables in its books.
If a company collects its receivable when due, it must recognize those receivables in its books.
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When the stated rate matches the market rate, the present value of a note will always differ from the face value.
When the stated rate matches the market rate, the present value of a note will always differ from the face value.
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If a company receives a zero-interest-bearing note, its present value will be equal to the cash paid to the issuer.
If a company receives a zero-interest-bearing note, its present value will be equal to the cash paid to the issuer.
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Kurat Co. issued a three-year note to Mayet Imports at a 5% annual interest rate.
Kurat Co. issued a three-year note to Mayet Imports at a 5% annual interest rate.
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Discount or premium over the life of a note is never amortized by companies when recording notes at present value.
Discount or premium over the life of a note is never amortized by companies when recording notes at present value.
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The implicit interest rate can be calculated when a company receives a zero-interest-bearing note.
The implicit interest rate can be calculated when a company receives a zero-interest-bearing note.
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If the market rate for a note is higher than its stated rate, companies will record a premium over the life of the note.
If the market rate for a note is higher than its stated rate, companies will record a premium over the life of the note.
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