Question

1. To support the reported doubtful accounts balance, company officials must obtain sufficient evidence asserting the fair presentation of the amount reported. True or False

2. Companies that have an audit may be able to borrow money at lower interest rates. True or False

3. Wild Cart Inc. made sales of $730,000 during Year Two. Cash of $720,000 was collected and no accounts were written off as uncollectible.   The beginning balance of accounts receivable was $20,000. Calculate the age of receivables of Wild Cart Inc. at the end of Year Two.

a. 15 days

b. 24.3 days

c. 36.5 days

d. 12.5 days

4. The PCAOB holds no authority on the audit performed on financial statements of an organization issuing publicly traded securities. True or false

5. true or false

Most companies maintain two separate T-accounts to report accounts receivable due to the uncertainty involved.

Answer 1

1. It's True. Company has to obtain sufficient, appropriate and corroborative evidence to support the amounts in financial statements

2. It's False. Audit won't give company an advantage of borrowing money at lower interest rates

3. Average age of receivables = Average Receivables / Credit Sales *365

= (20000 + 30000)/2 / 7300000 * 365 = 12.5 days

4. It's False. Pursuant to SOX, 2002, PCAOB oversees the audit of publically traded companies in the United States and has authority over them.

5. False. It's not necessary tom maintain 2 seperate T-accounts for Receivables