Financial Accounting Global Edition 8th Edition Libby Test Bank
Financial Accounting Global Edition 8th Edition Libby Test Bank
Financial Accounting Global Edition 8th Edition Libby Test Bank
1. When goods are shipped FOB shipping point, title passes to the buyer on the shipment date.
True False
2. When goods are shipped FOB destination, the revenue from the sale is recognized on the
shipment date.
True False
True False
4. Sales discounts are deducted from sales in the calculation of net sales.
True False
True False
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6. Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount will
be given; if not paid within two days, the full invoice price will be due in thirty days.
True False
7. A company is thinking of borrowing money at an 18% annual interest rate in order to pay a
$30,000 invoice within the discount period. The invoice terms are 2/10, n/30. They should
borrow the money because they will have a net savings of 19.2%.
True False
True False
True False
10. The journal entry to record bad debt expense is made during the year that it is determined
that a particular receivable is uncollectible, regardless of the year of sale.
True False
11. When a particular account receivable is determined to be uncollectible, the journal entry to
write-off the account reduces net income.
True False
12. When a particular account receivable is determined to be uncollectible, the journal entry to
write-off the account reduces cash.
True False
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13. The allowance for doubtful accounts is reported as a contra-asset on the balance sheet.
True False
14. The journal entry to write-off an uncollectible account does not change the net realizable
value (book value) of accounts receivable.
True False
15. The year-end journal entry to record bad debt expense reduces current assets and net
income.
True False
16. The year-end journal entry to record bad debt expense reduces the accounts receivable
account and increases net income.
True False
17. When using the percentage of credit sales method, net sales multiplied by a historical
percentage for credit losses equal bad debt expense.
True False
18. The accounts receivable aging schedule determines the dollar amount of uncollectible
accounts receivable at year-end; this dollar amount of uncollectible accounts receivable is
the bad debt expense that is recorded for the year regardless of the allowance for doubtful
accounts balance.
True False
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McGraw-Hill Education.
19. Prior year financial statements are adjusted when it is determined that prior year bad debt
expense was too low.
True False
20. If the accounts receivable turnover ratio increases, the number of days it takes to collect the
receivables also increases.
True False
21. When preparing the statement of cash flows, the reason that net sales revenue is adjusted
for the change in accounts receivables is to convert net sales to cash collected from
customers, since accounts receivable represents sales revenue not collected from customers
at the beginning and end of the accounting year.
True False
22. Cash equivalents such as treasury bills are reported as investments on the balance sheet.
True False
23. Cash equivalents on the balance sheet include certificates of deposit with maturities of 90
days or more.
True False
24. Effective internal control of cash should include the separation of the duties for receiving and
disbursing cash.
True False
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25. If a check received from a customer has been deposited by the seller and is marked on the
bank statement as a nonsufficient funds (NSF) amount, then it would appear on the seller's
bank reconciliation as a deduction from the ending bank statement balance.
True False
26. Deposits in transit are deducted from the bank balance when preparing the bank
reconciliation.
True False
27. An objective of preparing the bank reconciliation is to reconcile the bank balance at the end
of the period with the company's book balance at the end of the period.
True False
28. When completing the bank reconciliation, bank service charges should be deducted from the
company's cash balance.
True False
A. Revenue is recognized at the time of shipment when goods are shipped FOB destination.
B. Sales returns and allowances are reported as operating expenses on an income statement.
C. Revenue is recorded when title and risks of ownership transfer to the buyer.
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30. Which of the following would be included in Latimer Company's sales in 2014?
A. Goods shipped from a supplier in 2014 with terms of FOB shipping point. Latimer received
the goods in 2014.
B. Goods shipped to customers in 2014 with terms of FOB destination. The customer
received the goods in 2015.
C. Goods shipped to customers in 2013 with terms of FOB destination. The customer
received the goods in 2014.
D. Goods shipped to customers in 2013 with terms of FOB shipping point. The customer
received the goods in 2014.
31. A company sells a product FOB destination. The product is shipped on December 29, 2013
and the customer receives the shipment on January 3, 2014. Which of the following is true?
A. The sale will be recorded when the customer's credit card information is received.
B. The sale will be recorded when the shipment is received by the customer.
D. The sale will be recorded when it is known there will be no returns or allowances.
32. Which of the following is not a reason for the Jones Hardware Store to accept credit cards
from customers?
A. Jones can receive its money faster than if it directly extended credit to the customer by an
account receivable.
B. The credit card company offers a discount to Jones so that Jones will have more money
available for operations.
C. Jones will not have to be concerned with nonsufficient funds checks from customers.
D. Jones will not have to have extra office workers to make phone calls to customers
requesting collections on accounts.
6-6
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was in a great measure successful. Thousands of these deluded
victims of fanaticism were seduced into the enjoyment of freedom in
our northern cities. And what has been the consequence? Go to these
cities now and ask the question. Visit the dark and narrow lanes, and
obscure recesses, which have been assigned by common consent as
the abodes of those outcasts of the world, the free people of color.
Sir, there does not exist, on the face of the whole earth, a population
so poor, so wretched, so vile, so loathsome, so utterly destitute of all
the comforts, conveniences, and decencies of life, as the unfortunate
blacks of Philadelphia, and New York, and Boston. Liberty has been
to them the greatest of calamities, the heaviest of curses. Sir, I have
had some opportunities of making comparison between the
condition of the free negroes of the north and the slaves of the south,
and the comparison has left not only an indelible impression of the
superior advantages of the latter, but has gone far to reconcile me to
slavery itself. Never have I felt so forcibly that touching description,
“the foxes have holes, and the birds of the air have nests, but the Son
of man hath not where to lay his head,” as when I have seen this
unhappy race, naked and houseless, almost starving in the streets,
and abandoned by all the world. Sir, I have seen in the neighborhood
of one of the most moral, religious, and refined cities of the north, a
family of free blacks, driven to the caves of the rocks, and there
obtaining a precarious subsistence from charity and plunder.
When the gentleman from Massachusetts adopts and reiterates the
old charge of weakness as resulting from slavery, I must be permitted
to call for the proof of those blighting effects which he ascribes to its
influence. I suspect that when the subject is closely examined, it will
be found that there is not much force even in the plausible objection
of the want of physical power in slaveholding states. The power of a
country is compounded of its population and its wealth, and in
modern times, where, from the very form and structure of society, by
far the greater portion of the people must, even during the
continuance of the most desolating wars, be employed in the
cultivation of the soil and other peaceful pursuits, it may be well
doubted whether slaveholding states, by reason of the superior value
of their productions, are not able to maintain a number of troops in
the field fully equal to what could be supported by states with a
larger white population, but not possessed of equal resources.
It is a popular error to suppose that, in any possible state of things,
the people of a country could ever be called out en masse, or that a
half, or a third, or even a fifth part of the physical force of any
country could ever be brought into the field. The difficulty is, not to
procure men, but to provide the means of maintaining them; and in
this view of the subject, it may be asked whether the Southern States
are not a source of strength and power, and not of weakness, to the
country—whether they have not contributed, and are not now
contributing, largely to the wealth and prosperity of every state in
this Union. From a statement which I hold in my hand, it appears
that in ten years—from 1818 to 1827, inclusive—the whole amount of
the domestic exports of the United States was $521,811,045; of which
three articles, (the product of slave labor,) viz., cotton, rice, and
tobacco, amounted to $339,203,232—equal to about two-thirds of
the whole. It is not true, as has been supposed, that the advantage of
this labor is confined almost exclusively to the Southern States. Sir, I
am thoroughly convinced that, at this time, the states north of the
Potomac actually derive greater profits from the labor of our slaves
than we do ourselves. It appears from our public documents, that in
seven years—from 1821 to 1827, inclusive—the six Southern States
exported $190,337,281, and imported only $55,646,301. Now, the
difference between these two sums (near $140,000,000) passed
through the hands of the northern merchants, and enabled them to
carry on their commercial operations with all the world. Such part of
these goods as found its way back to our hands came charged with
the duties, as well as the profits, of the merchant, the ship owner,
and a host of others, who found employment in carrying on these
immense exchanges; and for such part as was consumed at the north,
we received in exchange northern manufactures, charged with an
increased price, to cover all the taxes which the northern consumer
had been compelled to pay on the imported article. It will be seen,
therefore, at a glance, how much slave labor has contributed to the
wealth and prosperity of the United States, and how largely our
northern brethren have participated in the profits of that labor. Sir,
on this subject I will quote an authority, which will, I doubt not, be
considered by the Senator from Massachusetts as entitled to high
respect. It is from the great father of the “American System,” honest
Matthew Carey—no great friend, it is true, at this time, to southern
rights and southern interests, but not the worst authority on that
account, on the point in question.
Speaking of the relative importance to the Union of the Southern
and the Eastern States, Matthew Carey, in the sixth edition of his
Olive Branch, (p. 278,) after exhibiting a number of statistical tables
to show the decided superiority of the former, thus proceeds:—
“But I am tired of this investigation—I sicken for the honor of the
human species. What idea must the world form of the arrogance of
the pretensions of the one side, [the east,] and of the folly and
weakness of the rest of the Union, to have so long suffered them to
pass without exposure and detection. The naked fact is, that the
demagogues in the Eastern States, not satisfied with deriving all the
benefit from the southern section of the Union that they would from
so many wealthy colonies—with making princely fortunes by the
carriage and exportation of its bulky and valuable productions, and
supplying it with their own manufactures, and the productions of
Europe and the East and West Indies, to an enormous amount, and
at an immense profit, have uniformly treated it with outrage, insult,
and injury. And, regardless of their vital interests, the Eastern States
were lately courting their own destruction, by allowing a few
restless, turbulent men to lead them blindfolded to a separation
which was pregnant with their certain ruin. Whenever that event
takes place, they sink into insignificance. If a separation were
desirable to any part of the Union, it would be to the Middle and
Southern States, particularly the latter, who have been so long
harassed with the complaints, the restlessness, the turbulence, and
the ingratitude of the Eastern States, that their patience has been
tried almost beyond endurance. ‘Jeshurun waxed fat and kicked’—
and he will be severely punished for his kicking, in the event of a
dissolution of the Union.” Sir, I wish it to be distinctly understood
that I do not adopt these sentiments as my own. I quote them to
show that very different sentiments have prevailed in former times
as to the weakness of the slaveholding states from those which now
seem to have become fashionable in certain quarters. I know it has
been supposed by certain ill-informed persons, that the south exists
only by the countenance and protection of the north. Sir, this is the
idlest of all idle and ridiculous fancies that ever entered into the
mind of man. In every state of this Union, except one, the free white
population actually preponderates; while in the British West India
Islands, (where the average white population is less than ten per
cent. of the whole,) the slaves are kept in entire subjection: it is
preposterous to suppose that the Southern States could ever find the
smallest difficulty in this respect. On this subject, as in all others, we
ask nothing of our northern brethren but to “let us alone.” Leave us
to the undisturbed management of our domestic concerns, and the
direction of our own industry, and we will ask no more. Sir, all our
difficulties on this subject have arisen from interference from
abroad, which has disturbed, and may again disturb, our domestic
tranquillity just so far as to bring down punishment upon the heads
of the unfortunate victims of a fanatical and mistaken humanity.
There is a spirit, which, like the father of evil, is constantly
“walking to and fro about the earth, seeking whom it may devour:” it
is the spirit of FALSE PHILANTHROPY. The persons whom it possesses do
not indeed throw themselves into the flames, but they are employed
in lighting up the torches of discord throughout the community.
Their first principle of action is to leave their own affairs, and neglect
their own duties, to regulate the affairs and duties of others. Theirs is
the task to feed the hungry, and clothe the naked, of other lands,
while they thrust the naked, famished, and shivering beggar from
their own doors; to instruct the heathen, while their own children
want the bread of life. When this spirit infuses itself into the bosom
of a statesman, (if one so possessed can be called a statesman,) it
converts him at once into a visionary enthusiast. Then it is that he
indulges in golden dreams of national greatness and prosperity. He
discovers that “liberty is power,” and not content with vast schemes
of improvement at home, which it would bankrupt the treasury of the
world to execute, he flies to foreign lands, to fulfil obligations to “the
human race” by inculcating the principles of “political and religious
liberty,” and promoting the “general welfare” of the whole human
race. It is a spirit which has long been busy with the slaves of the
south; and is even now displaying itself in vain efforts to drive the
government from its wise policy in relation to the Indians. It is this
spirit which has filled the land with thousands of wild and visionary
projects, which can have no effect but to waste the energies and
dissipate the resources of the country. It is the spirit of which the
aspiring politician dexterously avails himself, when, by inscribing on
his banner the magical words LIBERTY AND PHILANTHROPY, he draws to
his support that class of persons who are ready to bow down at the
very name of their idols.
But, sir, whatever difference of opinion may exist as to the effect of
slavery on national wealth and prosperity, if we may trust to
experience, there can be no doubt that it has never yet produced any
injurious effect on individual or national character. Look through
the whole history of the country, from the commencement of the
revolution down to the present hour; where are there to be found
brighter examples of intellectual and moral greatness than have been
exhibited by the sons of the south? From the Father of his Country
down to the DISTINGUISHED CHIEFTAIN who has been elevated by a
grateful people to the highest office in their gift, the interval is filled
up by a long line of orators, of statesmen, and of heroes, justly
entitled to rank among the ornaments of their country, and the
benefactors of mankind. Look at the “Old Dominion,” great and
magnanimous Virginia, “whose jewels are her sons.” Is there any
state in this Union which has contributed so much to the honor and
welfare of the country? Sir, I will yield the whole question—I will
acknowledge the fatal effects of slavery upon character, if any one
can say, that for noble disinterestedness, ardent love of country,
exalted virtue, and a pure and holy devotion to liberty, the people of
the Southern States have ever been surpassed by any in the world. I
know, sir, that this devotion to liberty has sometimes been supposed
to be at war with our institutions; but it is in some degree the result
of those very institutions. Burke, the most philosophical of
statesmen, as he was the most accomplished of orators, well
understood the operation of this principle, in elevating the
sentiments and exalting the principles of the people in slaveholding
states. I will conclude my remarks on this branch of the subject, by
reading a few passages from his speech “on moving his resolutions
for conciliation with the colonies,” the 22d of March, 1775.
“There is a circumstance attending the southern colonies which
makes the spirit of liberty still more high and haughty than in those
to the northward. It is, that in Virginia and the Carolinas they have a
vast multitude of slaves. Where this is the case, in any part of the
world, those who are free are by far the most proud and jealous of
their freedom. Freedom is to them not only an enjoyment, but a kind
of rank and privilege. Not seeing there, as in countries where it is a
common blessing, and as broad and general as the air, that it may be
united with much abject toil, with great misery, with all the exterior
of servitude, liberty looks among them like something more noble
and liberal. I do not mean, sir, to commend the superior morality of
this sentiment, which has, at least, as much pride as virtue in it—but
I cannot alter the nature of man. The fact is so; and these people of
the southern colonies are much more strongly, and with a higher and
more stubborn spirit, attached to liberty than those to the
northward. Such were all the ancient commonwealths—such were
our Gothic ancestors—such, in our days, were the Poles—and such
will be all masters of slaves who are not slaves themselves. In such a
people, the haughtiness of domination combines with the spirit of
freedom, fortifies it, and renders it invincible.”
In the course of my former remarks, Mr. President, I took occasion
to deprecate, as one of the greatest evils, the consolidation of this
government. The gentleman takes alarm at the sound.
“Consolidation,” “like the tariff,” grates upon his ear. He tells us, “we
have heard much of late about consolidation; that it is the rallying
word of all who are endeavoring to weaken the Union, by adding to
the power of the states.” But consolidation (says the gentleman) was
the very object for which the Union was formed; and, in support of
that opinion, he read a passage from the address of the president of
the convention to Congress, which he assumes to be authority on his
side of the question. But, sir, the gentleman is mistaken. The object
of the framers of the constitution, as disclosed in that address, was
not the consolidation of the government, but “the consolidation of
the Union.” It was not to draw power from the states, in order to
transfer it to a great national government, but, in the language of the
constitution itself, “to form a more perfect Union;”—and by what
means? By “establishing justice, promoting domestic tranquillity,
and securing the blessings of liberty to ourselves and our posterity.”
This is the true reading of the constitution. But, according to the
gentleman’s reading, the object of the constitution was, to
consolidate the government, and the means would seem to be, the
promotion of injustice, causing domestic discord, and depriving the
states and the people “of the blessings of liberty” forever.
The gentleman boasts of belonging to the party of National
Republicans. National Republicans! A new name, sir, for a very old
thing. The National Republicans of the present day were the
Federalists of ’98, who became Federal Republicans during the war
of 1812, and were manufactured into National Republicans
somewhere about the year 1825.
As a party, (by whatever name distinguished,) they have always
been animated by the same principles, and have kept steadily in view
a common object, the consolidation of the government. Sir, the party
to which I am proud of having belonged, from the very
commencement of my political life to the present day, were the
Democrats of ’98, (Anarchists, Anti-Federalists, Revolutionists, I
think they were sometimes called.) They assumed the name of
Democratic-Republicans in 1822, and have retained their name and
principles up to the present hour. True to their political faith, they
have always, as a party, been in favor of limitations of power; they
have insisted that all powers not delegated to the federal government
are reserved, and have been constantly struggling, as they now are, to
preserve the rights of the states, and to prevent them from being
drawn into the vortex, and swallowed up by one great consolidated
government.
Sir, any one acquainted with the history of parties in this country
will recognize in the points now in dispute between the senator from
Massachusetts and myself the very grounds which have, from the
beginning, divided the two great parties in this country, and which
(call these parties by what names you will, and amalgamate them as
you may) will divide them forever. The true distinction between
those parties is laid down in a celebrated manifesto, issued by the
convention of the Federalists of Massachusetts, assembled in Boston,
in February, 1824, on the occasion of organizing a party opposition
to the reëlection of Governor Eustis. The gentleman will recognize
this as “the canonical book of political scripture;” and it instructs us
that, when the American colonies redeemed themselves from British
bondage, and became so many independent nations, they proposed
to form a National Union, (not a Federal Union, sir, but a national
Union.) Those who were in favor of a union of the states in this form
became known by the name of Federalists; those who wanted no
union of the states, or disliked the proposed form of union, became
known by the name of Anti-Federalists. By means which need not be
enumerated, the Anti-Federalists became (after the expiration of
twelve years) our national rulers, and for a period of sixteen years,
until the close of Mr. Madison’s administration, in 1817, continued to
exercise the exclusive direction of our public affairs. Here, sir, is the
true history of the origin, rise, and progress of the party of National
Republicans, who date back to the very origin of the government,
and who, then, as now, chose to consider the constitution as having
created, not a Federal, but a National Union; who regarded
“consolidation” as no evil, and who doubtless considered it “a
consummation devoutly to be wished” to build up a great “central
government,” “one and indivisible.” Sir, there have existed, in every
age and every country, two distinct orders of men—the lovers of
freedom, and the devoted advocates of power.
The same great leading principles, modified only by the
peculiarities of manners, habits, and institutions, divided parties in
the ancient republics, animated the whigs and tories of Great
Britain, distinguished in our own times the liberals and ultras of
France, and may be traced even in the bloody struggles of unhappy
Spain. Sir, when the gallant Riego, who devoted himself, and all that
he possessed, to the liberties of his country, was dragged to the
scaffold followed by the tears and lamentations of every lover of
freedom throughout the world, he perished amid the deafening cries
of “Long live the absolute king!” The people whom I represent, Mr.
President, are the descendants of those who brought with them to
this country, as the most precious of their possessions, “an ardent
love of liberty;” and while that shall be preserved, they will always be
found manfully struggling against the consolidation of the
government—AS THE WORST OF EVILS.
The senator from Massachusetts, in alluding to the tariff, becomes
quite facetious. He tells us that “he hears of nothing but tariff, tariff,
tariff; and, if a word could be found to rhyme with it, he presumes it
would be celebrated in verse, and set to music.” Sir, perhaps the
gentleman, in mockery of our complaints, may be himself disposed
to sing the praises of the tariff, in doggerel verse, to the tune of “Old
Hundred.” I am not at all surprised, however, at the aversion of the
gentleman to the very name of tariff. I doubt not that it must always
bring up some very unpleasant recollections to his mind. If I am not
greatly mistaken, the senator from Massachusetts was a leading actor
at a great meeting got up in Boston, in 1820, against the tariff. It has
generally been supposed that he drew up the resolutions adopted by
that meeting, denouncing the tariff system as unequal, oppressive,
and unjust, and if I am not much mistaken, denying its
constitutionality. Certain it is, that the gentleman made a speech on
that occasion in support of those resolutions, denouncing the system
in no very measured terms; and, if my memory serves me, calling its
constitutionality in question. I regret that I have not been able to lay
my hands on those proceedings; but I have seen them, and cannot be
mistaken in their character. At that time, sir, the senator from
Massachusetts entertained the very sentiments in relation to the
tariff which the south now entertains. We next find the senator from
Massachusetts expressing his opinion on the tariff, as a member of
the House of Representatives from the city of Boston, in 1824. On
that occasion, sir, the gentleman assumed a position which
commanded the respect and admiration of his country. He stood
forth the powerful and fearless champion of free trade. He met, in
that conflict, the advocates of restriction and monopoly, and they
“fled from before his face.” With a profound sagacity, a fulness of
knowledge, and a richness of illustration that have never been
surpassed, he maintained and established the principles of
commercial freedom, on a foundation never to be shaken. Great
indeed was the victory achieved by the gentleman on that occasion;
most striking the contrast between the clear, forcible, and convincing
arguments by which he carried away the understandings of his
hearers, and the narrow views and wretched sophistry of another
distinguished orator, who may be truly said to have “held up his
farthing candle to the sun.”
Sir, the Senator from Massachusetts, on that, the proudest day of
his life, like a mighty giant, bore away upon his shoulders the pillars
of the temple of error and delusion, escaping himself unhurt, and
leaving his adversaries overwhelmed in its ruins. Then it was that he
erected to free trade a beautiful and enduring monument, and
“inscribed the marble with his name.” Mr. President, it is with pain
and regret that I now go forward to the next great era in the political
life of that gentleman when he was found on this floor, supporting,
advocating, and finally voting for the tariff of 1828—that “bill of
abominations.” By that act, sir, the senator from Massachusetts has
destroyed the labors of his whole life, and given a wound to the cause
of free trade never to be healed. Sir, when I recollect the position
which that gentleman once occupied, and that which he now holds in
public estimation, in relation to this subject, it is not at all surprising
that the tariff should be hateful to his ears. Sir, if I had erected to my
own fame so proud a monument as that which the gentleman built
up in 1824, and I could have been tempted to destroy it with my own
hands, I should hate the voice that should ring “the accursed tariff”
in my ears. I doubt not the gentleman feels very much, in relation to
the tariff, as a certain knight did to “instinct,” and with him would be
disposed to exclaim,—
“Ah! no more of that, Hal, an thou lovest me.”