East West University

Department of Business Administration

Bachelor of Business Administration (BBA) Program
ACT 411 Intermediate Accounting
Semester: Fall 2021
Quiz II
Time: 60 Minutes Full Marks 10
(Answer all the questions)
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1. “Cash equivalents are the same as cash.” Do you agree? Explain.

2. Define restricted cash. How should restricted cash funds be reported on the balance sheet?

3. Mr. X cannot understand why cash realizable value does not decrease when an uncollectible
account is written off under the allowance method. Clarify this point for Mr. X.

4. “The selection of an inventory cost flow method is a decision made by accountants.” Do you
agree? Explain.

5. The controller of PQR Company believes that the yearly allowance for doubtful accounts for PQR
should be 2% of net credit sales. The president of PQR is nervous that the owners might expect
the company to sustain its 10% growth rate, suggests that the controller increase the allowance
for doubtful accounts to 4%. The president thinks that the lower net income, which reflects a 6%
growth rate, will be a more sustainable rate for PQR Company.
Required:
(a) Who are the stakeholders in this case?
(b) Does the president’s request pose an ethical dilemma for the controller?
(c) Should the controller be concerned with PQR Co.’s growth rate? Explain your answer.

6. The following reconciling items are applicable to the bank reconciliation for KLM Company: (1)
outstanding checks, (2) bank debit memorandum for service charge, (3) bank credit
memorandum for collecting a note for the depositor, and (4) deposits in transit. (5) NSF check
Required: How each item should be shown on a bank reconciliation.

Good luck!