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Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is included in the category other receivables?
A) Investments
B) Bills receivable
C) Loans to employees
D) Accounts receivable
Answer: C
Diff: 1 Type: MC
AACSB: Analytical Thinking, Reflective Thinking
2) A record that contains the details by customer or vendor of the individual account balances would be called a:
A) journal.
B) subsidiary ledger.
C) control account.
D) liability account.
Answer: B
Diff: 1 Type: MC
3) A creditor is a person or business who:

A) purchases goods on credit.
B) has a payable to another party.
C) invests money in the shares of a company.
D) has a receivable from another party.
Answer: D
Diff: 1 Type: MC
4) Which of the following is NOT a key issue in controlling and managing receivables?
A) Extend credit only to customers who are most likely to pay.
B) Separate the responsibility for custody and protection of inventory assets from the accounting for inventory assets.
C) Separate cash-handling, credit and accounting duties to keep employees from stealing cash collected from customers.
D) Pursue collection from customers to maximise cash flow.
Answer: B
Diff: 2 Type: MC
5) Which of the following duties should NOT be performed by a credit department?

A) Monitoring customer payment records.
B) Reviewing applicant's income and credit history.
C) Evaluating customers who apply for credit.
D) Handling cash receipts.
Answer: D
Diff: 2 Type: MC
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
6) The two major types of receivables are accounts receivable and bills receivable.
Copyright © 2016 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781486021109/ Horngren, Accounting 8e
Answer: True False
Diff: 1 Type: TF
7) The creditor is the entity that signs a bill.

Answer: True False
Diff: 1 Type: TF
8) Bills receivable are usually longer in term than accounts receivable.

Answer: True False
Diff: 1 Type: TF
9) A debtor is a party to the transaction who will receive the cash for the transaction at a later date.
Answer: True False
Diff: 1 Type: TF
10) Accounts receivable are also known as trade receivables.

Answer: True False
Diff: 1 Type: TF
11) Which of the following is a benefit of selling on credit?
A) Some customers do not pay, creating an expense.
B) Expenses are reduced by making sales to a wide range of customers.
C) Revenues are increased by making sales to a wider range of customers.
D) Cash is received sooner.
Answer: C
Diff: 1 Type: MC
12) Which of the following is NOT a cost of selling on credit?

A) Opportunity cost of not having the cash immediately
B) Bad debt expense
C) Increased advertising
D) Collection costs
Answer: C
Diff: 1 Type: MC
13) Which of the following are the two methods of accounting for uncollectable receivables?
A) The allowance method and the liability method
B) The allowance method and the direct write-off method
C) The direct write-off method and the liability method
D) The asset method and the sales method
Answer: B
Diff: 1 Type: MC
14) Which of the following is a disadvantage of selling on credit?
A) Some customers do not pay, creating an expense.
B) Profits are decreased by making sales to a more specific range of customers.
C) Sales can be made to fewer customers.
D) Prices must be reduced when selling on credit.
Answer: A
Diff: 1 Type: MC
15) AASB requires companies to use the:

A) direct write-off method to evaluate bad debts.
B) allowance method to evaluate bad debts.
C) 360-day method to evaluate bad debts.
D) amortisation method to evaluate bad debts.
Answer: B
Diff: 1 Type: MC
16) A company may collect its own receivables or alternatively hire a third-party collection agency to do this for a fee.
Answer: True False
Diff: 1 Type: TF
17) Which of the following are the two methods of estimating bad debts?
A) The direct write-off method and the percentage of completion method
B) The gross method and the direct write-off method
C) The ageing of accounts receivable method and the percentage of sales method
D) The allowance method and the amortisation method
Answer: C
Diff: 1 Type: MC
18) Which of the following entries would be used to account for bad debts using the allowance method?
A) Accounts receivable is debited and Bad debts expense is credited.
B) Bad debts expense is debited and Accounts receivable is credited.
C) Bad debts expense is debited and Allowance for doubtful debts is credited.
D) Allowance for doubtful debts is debited and Bad debts expense is credited.
Answer: C
Diff: 1 Type: MC
19) The following information is from the records of Armadillo Camera Shop:
Accounts receivable, 31 December 2016 $22,000 (debit)

Allowance for doubtful debts, 31 December 2016
prior to adjustment 900 (debit)
Net credit sales for 2016 94,000
Accounts written off as uncollectable during 2016 400
Bad debts expense is estimated by the ageing of accounts receivable method. Management estimates that $3150 of accounts
receivable will be uncollectable. Calculate the amount of net accounts receivable after the adjustment for bad debts.
A) $19,750
B) $17,550
C) $18,850
D) $17,950
Answer: C
Diff: 2 Type: MC
AACSB: Analytical Thinking
20) The Allowance for doubtful debts account has a credit balance of $4000. The company's management estimates that 3%
of net credit sales will be uncollectable for the year 2016. Net credit sales for the year amounted to $260,000. What will be
the amount of Bad debts expense reported on the income statement for 2016?
A) $3900
B) $11,800
C) $7800
D) $3800
Answer: C
Diff: 1 Type: MC
21) The Allowance for doubtful debts has a credit balance of $8000 before the adjusting entry for bad debt expense. After
analysing the accounts in the accounts receivable subsidiary ledger using the ageing method, the company's management
estimates that uncollectable accounts will be $15,000. What will be the amount of bad debts expense reported on the
income statement?
A) $23,000
B) $8000
C) $15,000
D) $7000
Answer: D
Diff: 2 Type: MC
22) The Allowance for doubtful debts account has a credit balance of $8500 before the adjusting entry for bad debt expense.
After analysing the accounts in the accounts receivable subsidiary ledger using the ageing method, the company's
management estimates that uncollectable accounts will be $14,500. What will be the balance of the Allowance for doubtful
debts reported on the balance sheet?
A) $6000
B) $13,050
C) $23,000
D) $14,500
Answer: D
Diff: 2 Type: MC
23) The Allowance for doubtful debts account has a debit balance of $9000 before the adjusting entry for bad debt expense.
After analysing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that
uncollectable accounts will be $13,000. What will be the amount of the adjustment in the Allowance for doubtful debts
account?
A) $22,000
B) $13,000
C) $21,250
D) $20,900
Answer: A
Diff: 2 Type: MC
24) The following information is from the 2016 records of Armand Camera Shop:

Accounts written off as uncollectable during 2016 16,000
Cash sales during 2016 30,000
Bad debts expense is estimated by the percentage of sales method. The management estimates that 4% of net credit sales
will be uncollectable. Calculate the amount of bad debts expense for 2016.
A) $5320
B) $7120
C) $5620
D) $8320
Answer: B
Diff: 1 Type: MC

Bad debts expense is estimated by the percentage of sales method. Management estimates that 5% of net credit sales will be
uncollectable. The balance of the Allowance for doubtful debts after adjustment will be:
A) $8750
B) $10,250
C) $11,550
D) $7450
Answer: D
Diff: 2 Type: MC
Bad debts expense is estimated by the ageing of accounts receivable method. Management estimates that $8000 of accounts
receivable will be uncollectable. Calculate the Allowance for doubtful debts after the adjustment for bad debt expense at 31
December 2016.
A) $5340
B) $8000
C) $6000
D) $11,800
Answer: B
Diff: 1 Type: MC
27) Smart Art is a new establishment. During the first year, there were credit sales of $45,000 and collections of credit sales
of $32,000. One account for $550 was written off. The company decided to use the percentage of sales method to account
for bad debts expense and decided to use a factor of 2% for their year-end adjustment of bad debts expense. The ending
balance in Allowance for doubtful debts account would be:
A) $350.
B) $900.
C) $1529.
D) $249.
Answer: A
Diff: 2 Type: MC
28) Smart Art is a new establishment. During the first year, there were credit sales of $40,000 and collections of credit sales
of $35,000. One account for $650 was written off. The company decided to use the percentage of sales method to account
for bad debts expense and decided to use a factor of 3% for their year-end adjustment of bad debts expense. At the end of
the year, the balance of bad debts expense would be:
A) $550
B) $650
C) $2250
D) $1200
Answer: D
Diff: 2 Type: MC
29) A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there
were credit sales of $40,000 and collections of credit sales of $33,000. One account for $675 was written off. Smart Art uses
the ageing method to account for bad debts expense. It has estimated $275 as uncollectable at year-end. At the end of the
year, what is the ending balance in the Bad debts expense account?
A) $6050
B) $275
C) $675
D) $950
Answer: D
Diff: 2 Type: MC
30) At the beginning of 2016, Peter Dots has the following ledger balances:
Accounts receivable
Bal
$40,000
Allowance for doubtful debts

Bal
$8000
Bad debts expense
During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $780,000 and $18,000 was
written off. At the end of the year, the company adjusted for bad debts expense using the percentage of sales method and
applied a rate, based on past history, of 3.5%. The ending balance of Accounts receivable would be:
A) $18,000
B) $40,000
C) $42,000
D) $56,700
Answer: C
Diff: 2 Type: MC
Accounts receivable
Bal
$44,000

Bal
$8000
Bad debts expense
written off. At the end of the year, the company adjusted for bad debts expense using the percentage of sales method and
applied a rate, based on past history, of 3.5%. The ending balance in Bad debts expense would be:
A) $57,540
B) $28,350
C) $16,000
D) $20,350
Answer: B
Diff: 2 Type: MC
Accounts receivable
Bal
$41,000

Bal
$5000
written off. At the end of the year, the company adjusted for bad debts expense using the ageing method. The amount
estimated as uncollectable was $29,000. The ending balance in the Allowance for doubtful debts would be:
A) $18,000
B) $29,000
C) $24,000
D) $42,000
Answer: B
Diff: 2 Type: MC
33) Accounts receivable has a balance of $31,000 and the Allowance for doubtful debts has a credit balance of $3100. The
allowance method is used. What is the net realisable value before and after a $2400 Account receivable is written off?
A) $27,900; $25,500
B) $25,500; $25,500
C) $25,500; $30,300
D) $27,900; $27,900
Answer: D
Diff: 2 Type: MC
34) Accounts receivable has a balance of $8000 and the Allowance for doubtful debts has a credit balance of $450. The
allowance method is used. What is the net realisable value after a $170 account receivable is written off?
A) $7550
B) $7720
C) $7380
D) $8000
Answer: A
Diff: 1 Type: MC
35) A company reports net accounts receivable of $152,000 on its 31 December 2016 balance sheet. The Allowance for
doubtful debts has a credit balance of $20,000. What is the balance in Accounts receivable?
A) $157,000
B) $172,000
C) $152,000
D) $132,000
Answer: B
Diff: 1 Type: MC
36) The allowance method is a method of recording collection losses by estimating uncollectable amounts.
Answer: True False
Diff: 1 Type: TF
37) The percentage of sales method calculates bad debts expense as a percentage of net credit sales.
Answer: True False
Diff: 1 Type: TF
38) The percentage of sales method calculates bad debts expense by analysing accounts receivable.
Answer: True False
Diff: 1 Type: TF
39) The ageing of accounts receivable method calculates bad debts expense as a percentage of net credit sales.
Answer: True False
Diff: 1 Type: TF
40) The ageing of accounts method is a balance sheet approach of estimating bad debts.
Answer: True False
Diff: 2 Type: TF
41) Which of the following entries would be used to account for bad debts using the direct write-off method?
A) Accounts receivable is debited and Bad debts expense is credited.
B) Bad debts expense is debited and Allowance for doubtful debts is credited.
C) Bad debts expense is debited and Accounts receivable is credited.
D) Allowance for doubtful debts is debited and Bad debts expense is credited.
Answer: C
Diff: 1 Type: MC
42) The following information is from the 2016 records of Armadillo Camera Shop:
Accounts receivable, 31 December 2016 $20 000 (debit)

Net credit sales for 2016 95 000
Accounts written off as uncollectable during 2016 7 000
Cash sales during 2016 27 000
Bad debts expense is determined by the direct write-off method. Which of the following will be the amount of Bad debts
expense?
A) $2 250
B) $2 850
C) $3 450
D) $7 000
Answer: D
Diff: 2 Type: MC
43) A company has significant bad debts. Why is the direct write-off method unacceptable?
A) Direct write-offs would be immaterial.
B) It is not allowed for tax reasons.
C) It is not in accordance with the accrual method of accounting.
D) Assets will be understated on the balance sheet.
Answer: C
Diff: 1 Type: MC
44) When a company is using the direct write-off method and an account is written off, the journal entry consists of a:
A) credit to Accounts receivable and a debit to Interest expense.
B) debit to Accounts receivable and a credit to Cash.
C) credit to Accounts receivable and a debit to Bad debts expense.
D) debit to the Allowance for doubtful debts and a credit to Accounts receivable.
Answer: C
Diff: 1 Type: MC
45) Charlton Sales has a receivable for $92 that they now deem to be uncollectable. Charlton uses the direct write-off
method. Which of the following entries correctly records the write-off?
A)
Accounts receivable 92
Bad debts expense 92
B)
Cash 92
C)
Bad debts expense 92
D)
Allowance for doubtful debts 92
Answer: C
Diff: 2 Type: MC
46) Zorro Company has significant amounts of accounts receivable and experiences bad debts from time to time. Zorro
uses the direct write-off method. When Zorro Company writes off a bad debt, what is the effect of that single transaction?
A) It will increase total assets of the company.
B) It will reduce profit.
C) It will have no effect on profit.
D) It will generate positive cash flow.
Answer: B
Diff: 2 Type: MC
47) The following information is from the records of Armadillo Camera Shop:

The company uses the direct write-off method for bad debts. What is the amount of bad debts expense?
A) $15,000
B) $85,000
C) $60,000
D) $41,000
Answer: A
Diff: 2 Type: MC
48) On 1 January, Davidson Services has the following balances:
Accounts receivable
Bal
$25,000
Bad debts expense

Bal
$0
Davidson has the following transactions during January: Credit sales of $120,000, collections of credit sales of $87,000 and
write-offs of $16,000. Davidson uses the direct write-off method. At the end of January, the balance in Accounts receivable
is :
A) $42,000.
B) $22,069.
C) $58,000.
D) $11,600.
Answer: A
Diff: 2 Type: MC
49) On 1 January, Davidson Services has the following balances:
Accounts receivable
Bal
$23,000
Bad debts expense

Bal
$0
Davidson has the following transactions during January: Credit sales of $100,000, collections of credit sales of $85,000,and
write-offs of $20,000. Davidson uses the direct write-off method. At the end of January, the balance in Bad debts expense is:
A) $23,529
B) $23,000
C) $20,000
D) $17,000
Answer: C
Diff: 1 Type: MC
50) The direct write-off method is in accordance with the accrual method of accounting, whereas the allowance method is
not.
Answer: True False
Diff: 1 Type: TF
51) A company uses the direct write-off method to account for bad debts. Bad debts expense will be estimated as a
percentage of sales.
Answer: True False
Diff: 1 Type: TF
52) The direct write-off method is used primarily by large, publicly owned companies.
Answer: True False
Diff: 1 Type: TF
53) Archer Company and Zorro Company both have significant amounts of accounts receivable at any time and both
experience bad debts from time to time. Archer uses the percentage of sales method to account for bad debts and Zorro
uses the direct write-off method. Archer Company's method complies with IFRS and produces a better matching of
revenues and expenses than Zorro Company's method.
Answer: True False
Diff: 1 Type: TF
54) The direct write-off method requires an entry with a credit to Accounts receivable to record the Bad debts expense.
Answer: True False
Diff: 1 Type: TF
55) The direct write-off method would be considered acceptable if bad debts were very low.
Answer: True False
Diff: 1 Type: TF
56) Target allows customers to use MasterCard. It reports Sales revenue of $24 000 for the week. MasterCard charges
Target a 3% fee. The journal entry for this transaction would be:
A)
Sales revenue 24 000
Card fee expense 720
Cash 24 720
B)
Cash 23 280
C)
Cash 24 000
D) None of the above.

Answer: B
Diff: 1 Type: MC
57) Which of the following is NOT one of the benefits of a business accepting credit cards from its customers?
A) The business does not have to check the credit ratings of customers.
B) The business can attract more customers and more sales.
C) The business doesn't take the risk of the customer failing to pay.
D) The business earns a higher profit on credit card sales than cash sales.
Answer: D
Diff: 1 Type: MC
58) Anchor Sales accepts credit cards from its customers. Assume Anchor makes a sale of $100 and the processor charges a
3% fee. Assume that the credit card processing company uses the net method of depositing funds. Which of the following
is the journal entry made by Anchor to record the sales revenue?
A)
Cash 100
Sales revenue 100
B)
Cash 97
Card fee expense 3
C)
Card fee expense 3
Sales revenue 100
D)
Cash 97
Card fee expense 3
Sales revenue 100
Answer: D
Diff: 2 Type: MC
59) A credit card processing company generally uses one of two methods of payment—the net and the gross method.
Answer: True False
Diff: 1 Type: TF
60) When a business accepts credit cards from customers in payment of sales, the business has to pay a fee to the credit card
processor.
Answer: True False
Diff: 1 Type: TF
61) Which of the following is the party borrowing funds on a bill?
A) The acceptor of the bill
B) The drawer of the bill
C) The payee of the bill
D) The principal of the bill
Answer: A
Diff: 2 Type: MC
62) Which of the following is the party lending funds on a bill?

A) The debtor of the bill
B) The principal of the bill
C) The acceptor of the bill
D) The drawer of the bill
Answer: D
Diff: 2 Type: MC
63) Which of the following exists if the maker of a promissory bill fails to pay the bill on the due date?
A) A depreciated bill
B) A dishonoured bill
C) An amortised bill
D) A discounted bill
Answer: B
Diff: 1 Type: MC
64) On which of the following dates does a three-month bill dated 12 November mature?
A) 11 February
B) 10 February
C) 12 February
D) 13 February
Answer: C
Diff: 1 Type: MC
65) What is the maturity value of a bill?

A) The principal amount minus interest due
B) The principal amount times the interest rate
C) The principal amount plus interest due
D) The face amount of the bill
Answer: C
Diff: 1 Type: MC
66) What is the maturity value of a 3-month, 12% bill for $50,000?
A) $51,500
B) $56,000
C) $50,000
D) $52,000
Answer: A
Diff: 2 Type: MC
67) A company issues a 100-day, 14% bill for $17,000. What is the principal amount of the bill?
A) $16,339
B) $17,000
C) $17,661
D) $19,380
Answer: B
Diff: 1 Type: MC
68) On 1 October 2016, Ealys Jewellers accepted a 4-month, 10% bill for $8000 in settlement of an overdue account
receivable. The company closes its accounts at the year-end. Calculate and record the accrued interest on the bill at 31
December 2016.
A) $400
B) $200
C) $267
D) $800
Answer: B
Diff: 2 Type: MC
69) On 1 January, Ajax Company accepted a one-year bill for $50,000 at 5% from one of its customers. When the bill
matured on 31 December, the customer was unable to pay and the company recorded the dishonour. The amount of the
debit in the dishonour entry would be:
A) $50,000
B) $47,500
C) $2500
D) $52,500
Answer: D
Diff: 2 Type: MC
70) On 1 October 2016, Android Ltd made a loan to one of its customers. The customer signed a 4-month note for $100,000
at 13%. How much interest revenue did the company record in the year 2016?
A) $4333
B) $1083
C) $3250
D) $1300
Answer: C
Diff: 2 Type: MC
71) On 1 October 2016, Android Ltd made a loan to one of its customers. The customer signed a 4-month bill for $130,000 at
13%. How much interest revenue did the company record in the year 2017 for this bill?
A) $2817
B) $5633
C) $1408
D) $4225
Answer: C
Diff: 2 Type: MC
15%. Calculate the maturity value of the bill.
A) $161,000
B) $133,000
C) $147,000
D) $119,000
Answer: C
Diff: 2 Type: MC
14%. Calculate the total interest earned on the bill.
A) $3501
B) $1167
C) $10,500
D) $14,000
Answer: C
Diff: 1 Type: MC
74) On 1 December 2016, Parsons Ltd sold machinery to a customer for $20,000. The customer could not pay at the time of
sale but agreed to pay 9 months later and signed a 9-month bill at 9% interest. How much interest revenue was earned for
the entire term of the bill?
A) $1350
B) $1200
C) $1800
D) $150
Answer: A
Diff: 2 Type: MC
75) On 1 December 2016, Parsons Ltd sold machinery to a customer for $25,000. The customer could not pay at the time of
sale but agreed to pay 11 months later and signed a 11-month bill at 8% interest. What was the total amount of cash
collected by Parsons on the maturity of the bill?
A) $1833.33333
B) $27,000
C) $23,166.6667
D) $26,833.3333
Answer: D
Diff: 2 Type: MC
76) A six-month bill receivable for $6000 at 11%, dated 1 September 2017, has accrued interest revenue of ________ on 31
December 2017.
A) $220
B) $660
C) $110
D) $330
Answer: A
Diff: 2 Type: MC
77) Interest revenue must be reported for a bill receivable that is outstanding at the end of the accounting period.
Answer: True False
Diff: 1 Type: TF
78) The maturity value of a bill is the sum of the principal plus interest due at maturity.
Answer: True False
Diff: 1 Type: TF
79) A bill is dishonoured when the debtor of the bill fails to pay the bill at maturity.
Answer: True False
Diff: 1 Type: TF
80) Assets are listed on the balance sheet in order of liquidity. Which of the following items reflects the normal order of
liquidity?
A) Cash, Accounts receivable, Inventory, Bills receivable
B) Non-current assets, Inventory, Bills receivable, Cash
C) Cash, Inventory, Bills receivable, Accounts receivable
D) Bills Receivable, Inventory, Accounts receivable, Cash
Answer: A
Diff: 2 Type: MC
81) Which of the following describes the key significance of the acid ratio?
A) It reflects how much long-term debt a company has.
B) It measures a company's ability to pay its current liabilities by using its current assets.
C) It indicates how much cash could be realised by selling off all the inventory.
D) It measures the profitability of a company.
Answer: B
Diff: 2 Type: MC
82) The accounts receivable turnover ratio measures:

A) how many days it takes, on average, to sell the inventory.
B) how well a company can pay its current liabilities with its current assets.
C) how many days it takes, on average, to collect receivables.
D) the number of times per year a company sells goods and collects receivables.
Answer: D
Diff: 1 Type: MC
83) The days' sales in receivables measures:

B) how many days it takes, on average, to collect receivables.
C) the number of times per year a company sells goods and collects receivables.
D) how well a company can pay its current liabilities with its current assets.
Answer: B
Diff: 1 Type: MC
84) The acid-test ratio measures:

B) how well a company can pay its current liabilities with its most liquid current assets.
C) the number of times per year a company sells goods and collects receivables.
D) how many days it takes, on average, to collect receivables.
Answer: B
Diff: 1 Type: MC
85) A company has net credit sales of $92,000, beginning net accounts receivable of $20,000 and ending net accounts
receivable of $16,000. Calculate the days' sales in receivables. Use a 365-day year. (Round to the nearest day.)
A) 41 days
B) 71 days
C) 73 days
D) 61 days
Answer: B
Diff: 2 Type: MC
86) What is the acid-test ratio for a retailer who has the following balances? (Round to two decimal places.)
Cash $20,000
Short-term investments 41,000
Net current receivables 52,000
Inventory 95,000
Total current liabilities 279,000
A) 0.41
B) 0.75
C) 0.8
D) 0.6
Answer: A
Diff: 2 Type: MC
87) A company has net credit sales of $1,200,000, beginning net accounts receivable of $260,000 and ending net accounts
receivable of $203,000. What is the days' sales in receivables? Use a 365-day year. (Round to the nearest day.)
A) 62 days
B) 79 days
C) 70 days
D) 141 days
Answer: C
Diff: 2 Type: MC
88) Martin Sales provides the following information:

Net credit sales: $800,000
Beginning net accounts receivable: $40,000
Ending net accounts receivable: $23,000
Calculate the accounts receivable turnover ratio. (Round to the nearest whole number.)
A) 25 times
B) 33 times
C) 20 times
D) 35 times
Answer: A
Diff: 2 Type: MC
89) The acid-test ratio appears in the current assets section of the balance sheet.
Answer: True False
Diff: 1 Type: TF
90) Accounts receivable amounts are generally shown on the balance sheet net of the allowance.
Answer: True False
Diff: 1 Type: TF
91) The acid-test ratio is calculated as current assets divided by current liabilities.
Answer: True False
Diff: 1 Type: TF
92) Days' sales in receivables is the ratio of average net accounts receivable to one day's sales.
Answer: True False
Diff: 1 Type: TF
93) An acid-test ratio of at least 1.0 is generally considered safe.

Answer: True False
Diff: 1 Type: TF
94) The acid-test ratio is also known as the quick ratio.

Answer: True False
Diff: 1 Type: TF
95) The ratio that indicates whether a company could pay all its current liabilities if it were to become due immediately is
known as the acid-test ratio.
Answer: True False
Diff: 1 Type: TF
96) The number of times per year a company sells goods and collects receivables is known as the accounts receivable
turnover.
Answer: True False
Diff: 1 Type: TF
97) Barker Sales has a days' sales in receivables figure of 40 and Xanadu Company has a days' sales in receivables of 32.
This would suggest that Xanadu is having greater difficulty collecting its accounts receivable than Barker.
Answer: True False
Diff: 3 Type: TF
1) C
2) B
3) D
4) B
5) D
6) TRUE
7) FALSE
8) TRUE
9) FALSE
10) TRUE
11) C
12) C
13) B
14) A
15) B
16) TRUE
17) C
18) C
19) C
20) C
21) D
22) D
23) A
24) B
25) D
26) B
27) A
28) D
29) D
30) C
31) B
32) B
33) D
34) A
35) B
36) TRUE
37) TRUE
38) FALSE
39) FALSE
40) TRUE
41) C
42) D
43) C
44) C
45) C
46) B
47) A
48) A
49) C
50) FALSE
51) FALSE
52) FALSE
53) TRUE
54) TRUE
55) TRUE
56) B
57) D
58) D
59) TRUE
60) TRUE
61) A
62) D
63) B
64) C
65) C
66) A
67) B
68) B
69) D
70) C
71) C
72) C
73) C
74) A
75) D
76) A
77) TRUE
78) TRUE
79) TRUE
80) A
81) B
82) D
83) B
84) B
85) B
86) A
87) C
88) A
89) FALSE
90) TRUE
91) FALSE
92) TRUE
93) TRUE
94) TRUE
95) TRUE
96) TRUE
97) FALSE
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more energetic policy in the Netherlands, a sharp retort came, bidding
that Minister remember “the disgraceful conduct” of England in the late
war, and asserting that he (George III) refused to act as the Draw-can-
528
sir of Europe.
From the tenour of the King’s letter to Pitt on 8th January we may
infer that Carmarthen had kept his overture to Windsor secret; and Pitt,
on hearing of it from the King, must have felt piqued at his colleague’s
action. Already they were on strained terms owing to Pitt having
insisted on Carmarthen’s presence at Court, despite indisposition, in
order to present the Portuguese envoy; and a chief who demanded so
strict an observance of etiquette was certain to resent any private
attempt of his Foreign Minister to influence the King’s opinions on a far
weightier question. There is an apologetic tone in Carmarthen’s
hitherto unpublished letter of 8th January to Pitt. The first sentences
refer to his ill health, and are omitted:
Hendon, Jan. 8, 1787.

My dear Sir,
I wish to lay before you in confidence my letter to the
King of yesterday, together with His Majesty’s answer of this
morning’s date, which I am free to confess to you has occasioned
me a considerable degree of uneasiness.... You will, I am sure, do
me the justice to remark the manner in which I have stated my
opinion to the King and I have always understood your sentiments
to be precisely the same in regard to the object, though perhaps
more cautious (from prudential and well founded motives) in the
means to be employed. I am free to own that, eager as I am for
preventing France acquiring the absolute command of Holland, I
have always thought we might succeed by means of private
negotiation and intrigue. The experiment of trying to combat her
with her own weapons would have some merit; and, convinced as
I am that she has reckoned all along upon England not interfering,
I think the present moment must not be passed by without our
endeavouring to make the most we can of the Provinces which are
opposed to Holland, and of the present firmness of the Prince and
Princess of Orange. L’Assemblée des Notables is I think some
security for the pacific disposition of France, or rather for her
inability of indulging any of a contrary nature at present. I should
hope we might have a meeting on Thursday for the Dutch
529
business.
The differences between Pitt and Carmarthen were greater than

are here represented; and the joint influence of the King and Pitt
prevented the adoption of the more spirited measures towards which
he inclined. This was gall and wormwood to Harris. That able envoy,
looking on helplessly at the brilliant diplomatic successes of France,
failed to see the canker which was eating at her heart. The Assembly
of the Notables was “the beginning of the end.” It implied the inability of
the absolute monarchy to carry the urgently needed reforms or to meet
the ordinary expenses of the State. Pitt saw this. Further, while Harris
admitted that he regarded France as “a natural enemy,” Pitt looked on
her as a possible friend. On the Dutch Question alone was there keen
rivalry between the two States; and, in view of the growing financial
difficulties of France, delay was more than ever advisable; for her
efforts abroad must slacken as her vitality lessened under the load of
debt that Calonne was gaily heaping up. In the meantime, until the
Prussian monarch had the will, and England had the power, to
intervene, Harris must continue his Sisyphus toil, and the Prince and
Princess must suffer further indignities. Such was Pitt’s policy. To our
envoy it seemed unbearably mean; but it won in the end, and all the
more surely for the delay. A Minister at the centre can often see things
in truer perspective than an ambassador who is, after all, only at one
point on the circumference.
Harris continued stoutly to roll the stone uphill. He helped to form
an Association of the Provinces, towns and persons opposed to any
change in the constitution; and, as the Stadholder in the early part of
1787 showed far more spirit and tact, the Patriots found it by no means
easy to push the stone backwards. Harris declared on 20th April 1787
that the popular indignation ran strongly against the Patriots, who had
not one-twentieth of the people on their side. This is incredible; but it is
quite certain that his activity and the less determined policy of
Montmorin, the successor of Vergennes at Versailles, put new heart
into the Stadholder’s party. Nevertheless, the Patriots carried the day
at Amsterdam by sheer audacity, and compelled the Regents, or
magistrates, to dismiss nine of their number. This act of violence,
together with the increasing activity of William V and the signs of
wavering at Versailles, led Harris to request an interview with Ministers
530
at Whitehall. He also bore a letter of the Princess to George III,
which met with no favourable response.
A Cabinet meeting was held on 23rd May 1787, at which Harris
was present, and submitted his opinions to a full discussion. Ministers
met at Thurlow’s house for dinner; and he in due course launched forth
on the troubled sea of Dutch politics, stating at great length the
arguments against intervention, then tearing them to pieces, and
declaring even for war with France, if the need arose. Richmond,
Master of the Ordnance, called for maps, discussed the military
situation, and urged the need of speedy preparations. Pitt then
admitted the immense importance of preserving the independence of
Holland, and of facing war as a possible, but not probable, alternative;
then, turning to Harris, he pressed him to say which course involved
the greater risk, that of opposing France at once before she entirely
dominated the Dutch Netherlands, or that of awaiting the issue of her
present efforts. He also asked what kind of help the Orange party most
needed. In reply to this and to similar questions from Thurlow, Harris
urged that money should be supplied, especially to the Province of
Guelderland; he declared that the supporters of the constitution would
probably be overborne if they were not helped by England; that France
was not in such a condition as to go to war in order to conquer
Holland, but that when she had the upper hand there she probably
would throw down the gauntlet. Stafford then declared in favour of
intervention. Nevertheless, Pitt held firmly to his conviction, that no
case was yet made out for a course of conduct which might possibly
lead to war and so blight the budding prosperity of Great Britain.
Carmarthen and Sydney did not speak. We may plausibly conjecture
that the silence of the Foreign Minister betokened his disapproval of
Pitt’s views and his inability to controvert them.
So far as we can judge, Pitt alone was for complete neutrality.
Nevertheless, his view prevailed. An interview which Harris had with
him on the morrow did not change his sentiments; but, on 26th May,
the Cabinet agreed to allow our envoy the sum of £20,000 so as to
enable the loyal provinces to take into their pay the troops which had
been disbanded by, or had deserted from, the forces of the Province of
531
Holland. On 10th June the further sum of £70,000 was
532
advanced.
Pitt’s resolve was doubtless based on the difficulty of gaining an
ally, for, as we have seen, the King of Prussia had recently refused the
request of his sister for a loan of cannon and was proposing to concert
533
plans with France for a joint mediation in Dutch affairs. How was it
possible for England alone to interfere for the Prince and Princess of
Orange while their natural protector was making advances to their
enemy? So little hope was there at present of aid from Prussia that on
12th June Carmarthen expressed to Harris his belief that the Orange
party would get more help from the Emperor Joseph than from
Frederick William. The torpor of that party was another depressing
symptom. Time after time Carmarthen informed Harris that if the
Prince’s supporters desired help, they must bestir themselves: they
had as yet the majority of the regular army and of the States-General
on their side; and a fit use of this strength would save the situation.
Despite the efforts of Harris, the Patriots continued to gain ground.
At the end of May their partisans wrecked the houses of the Prince’s
friends at Amsterdam, and crushed the reaction in his favour which
534
had gathered head. On 15th June the States-General decided, on
the casting vote of the President, to admit the deputies sent by the
illegal Estates of the city of Utrecht. This gave a bare majority to the
Patriots, who then proceeded to deprive the Stadholder of the right to
order the march of troops or the distribution of stores in the provinces
outside Holland. Four days later, however, Harris was able to procure
the rejection of this decree as illegal; and it was further decided that
the Estates of Utrecht meeting at Amersfoort were the legal Estates of
that province and could alone send deputies. Of course this change of
front has been ascribed to English gold, and certainly it was due to
Harris. This rebuff to the Patriots and the coyness of the French Court
to their urgent demands for help may have led to the formation of a
resolve which was to end the balancings of statesmen and the even
pulls of parties. The solution of the Dutch problem was, in the first
instance, due to a woman’s wit.
* * * * *
About the middle of the month of June 1787, the Princess of
Orange framed a plan for leaving her city of refuge, Nymeguen, and
proceeding to The Hague with the aim of inspiring her crestfallen
partisans. Hitherto the Orange party had shown the torpor which is the
outcome of poor leadership. Of the Prince of Orange it might have
been said, as it was said of Louis XVI, that he cooled his friends and
heated his foes; but his consort had the fire and energy which he
lacked. Harris once confessed that her frank, blue eyes could be
“dangerous”; and in many ways her presence promised to breathe new
life into her party.
As the journey to The Hague would involve some risk of insult from
the Free Corps which formed a cordon on the frontier of the Province
of Holland, she proceeded first to Amersfoort, where her consort was
holding together his partisans in the Province of Utrecht, in order to
gain his consent to this daring step. Thereafter she warned Harris and
her chief friends at The Hague of her resolve, and asked their
sanction, adding that the magnitude of the object at stake impelled her
to run some measure of personal risk in order to compass it. Harris
saw objections to the plan, but yielded to the representations of the
Dutchmen. He, however, stated to Carmarthen his doubts whether she
could make her way through the bodies of armed burghers, and asked
his chief for instructions as to his course of action in case any violence
535
were offered to Her Royal Highness.
His apprehensions were in part to be realized. The princess set out
from Nymeguen on 28th June with the ordinary retinue. While seeking
to enter the Province of Holland near Schoonhoven, she was stopped
by a lieutenant commanding a body of Free Corps, who refused to
allow her to proceed; his action was endorsed by the authorities; and
she was obliged, though without much personal indignity, to put up at
the nearest house where the lieutenant kept her and her ladies-in-
waiting under close and embarrassing surveillance, until she
consented that the question of her journey should be decided by the
Estates of Holland. Then she was allowed to return to Schoonhoven,
where she indited letters to the Grand Pensionary and others,
declaring that her sole aim was to promote a reconciliation. The
Estates of Holland refused to allow her to proceed, and she had finally
to return to Nymeguen. This insult to royalty sent a thrill of indignation
through every Court but that of Versailles.
Before describing the political results of the incident, we may
pause to ask whether the plan of the Princess’s journey was the
outcome of the fertile brain of Harris. That was the insinuation of the
French Foreign Minister, Montmorin, and it has often been
536
repeated. The charge has never been proven; and the following
reasons may be urged against it. Harris certainly hoped to profit by her
presence at The Hague, but obviously he doubted the possibility of her
entering the province. Further, on 29th June, when he heard of her
detention, he wrote to Carmarthen: “The event which has happened
oversets our whole plan. Check to the queen, and in a move or two
checkmate is, I fear, the state of our game.” Not yet did he see that the
check might be worth a Prussian army to the Orange party. All he saw
was the present discouragement of that party, and the timidity of the
States-General of the United Provinces, who now refused to censure
the outrage. Carmarthen saw more clearly. “Don’t be so disheartened
by a check to the queen,” he replied. “Cover her by the knight and all’s
safe.... If the King, her brother, is not the dirtiest and shabbiest of
537
Kings, he must resent it.”
But had the Princess throughout laid her plans with a view to such
an event? In this connection it is significant that Frederick William of
Prussia had latterly shown great irritation against the Court of
Versailles owing to its summary rejection of his offer of a joint
mediation in the Dutch troubles. Montmorin curtly declined every one
of the preliminary terms which Hertzberg had succeeded in appending
to that proposal. He also blamed the Stadholder for all the ferment,
and stated that, if the Prussian monarch intervened in favour of the
Orange party, he would “only compromise himself to his entire
538
loss.” This nagging reply to a friendly overture cut the sensitive
monarch to the quick; he sent a spirited remonstrance, declaimed
against the bad faith of the French Government, and stated that he
meant now to complete his own plans in Holland, that he hoped to
have the support of England, and might draw the sword sooner than
539
was expected. Ewart expected little result from all this; but he was
mistaken. Frederick William was a man of sentiment; and the appeal
which now came from Holland was one that stirred his being to its
depths.
The Princess, on hearing of his resentment against France, seems
to have devised a course of action which would be likely to make this
mood lasting. Harris reported on 22nd June that on the day before, “in
consequence of a courier from Berlin, the Princess of Orange, a few
hours after he arrived, left Nymeguen and set out for Amersfoort. She
had time to write to nobody, and the cause of this sudden departure is
540
not to be guessed at.” The short journey to Amersfoort was for the
purpose described above. That the Princess was acting in close
concert with her brother, and that Harris knew nothing as to the
motives of her conduct further appear in statements which (strange to
say) are omitted from his despatch of 25th June, printed in the
“Diaries.” He informed Carmarthen that she was sending a courier to
Berlin, and that the present plan “completely does away all the ideas
which have been very prevalent here for these three or four days, that
His Prussian Majesty was so irritated at the late answer from France
as to be decided to assist the Prince of Orange with men and money.”
Obviously the guile of Sir James Harris was of the diplomatic, not of
the feminine, kind. Further, the fact that the Princess travelled with a
retinue made it almost certain that she would be stopped by the cordon
of Free Corps on the frontier of Holland. If her chief aim had been to
arrive at The Hague, she would have gone in disguise; for only so
could she hope to pass through the troops. Her chief aim surely was to
be stopped; and the more contumeliously, the better for her purpose.
Her letters written after the incident show that she desired to reap
the full advantage from it. On 6th July Harris reported her expectation
that, if England proposed to Prussia a plan for rescuing the Republic
from France, it would be well received at Berlin; and that she grounded
her confidence in the reports of those who knew the King of Prussia
well. Ewart also on 10th July stated that she had written to Berlin in
terms implying that the honour of the King was at stake fully as much
541
as her own. With these proofs of the discouragement of Harris, and
of the keen insight of the Princess before us, may we not infer that she
deliberately chose to submit herself to an insult from the Patriots in
order to clinch a resolve which she knew to be forming in her brother’s
mind? His anger against France might then be fanned to a flame of
resentment fed by injured family pride.
Fortunately for her purpose, the Estates of Holland waived aside
the demand of the King of Prussia for immediate and complete
satisfaction for the insult; and Frederick William vowed that he would
exact vengeance at the sword’s point. Hertzberg now saw within his
reach the great aims which Ewart and he had so long pursued, an
Anglo-Prussian compact which might ripen into alliance. But it was a
task of much difficulty to stiffen that monarch’s wavering impulses.
Hertzberg rightly saw that English influence should not at first be
542
pushed; and only when the King’s resentment at the insult began to
cool, were the wider questions of the future discreetly opened to his
gaze. Here again the situation was complicated; for Finckenstein
worked on his fears of an attack from Austria, if he intervened in
Holland; and Thulemeyer, the Prussian envoy at The Hague, darkened
the royal counsels by sending an official warning that Prussia must
expect no help from England, even if France struck at the Prussian
expeditionary corps. Ewart, however, was able to show that this report
closely resembled an earlier one from the same source. The only
result, then, was to discredit Thulemeyer and pave the way for his
disgrace. When further friendly assurances came from the Pitt Ministry,
Frederick William gave orders for the mustering of 25,000 troops at his
fortress of Wesel on the lower Rhine. Even now he was afflicted by the
irresolution which for so many years was to paralyze the power of his
kingdom; and it is doubtful whether he would have acted at all but for
543
the initiative now taken by the Prime Minister of England.
Pitt’s change of attitude at this time is the decisive event of the
situation. At once, on hearing the news of the insult to the Princess of
Orange, he saw that the time for action had come. In a personal
interview with Count Lusi, Prussian ambassador at London, he pointed
out that this was a matter which solely concerned the Prussian
544
monarch, and in which France had no right to interfere. George III
spoke in the same terms to Lusi at a levée. Further, on the receipt of
Ewart’s despatch of 7th July, reporting that Pitt had declared against
any intervention whatever by Great Britain, Carmarthen sent a sharp
denial, and stated that diplomatic support would have been offered
earlier to Prussia in Dutch affairs, but for the strange conduct of
Thulemeyer at The Hague. If that conduct did not represent the wishes
of the Prussian Government, His Majesty “will be extremely ready to
enter into a most confidential communication with His Prussian
Majesty” on the means of preserving the independence of the Dutch
Republic and the rights of the Stadholder. Carmarthen added the
important information that Montmorin had declared that France would
not thwart the Prussian monarch’s resolve to gain reparation for the
insult. That question he declared to be totally distinct from an
interference in the domestic affairs of the Republic, which might be
settled amicably by a joint mediation of the Powers most concerned in
them, namely, the Emperor, Great Britain, Prussia, and France. The
draft of this important despatch closed with this sentence, in Pitt’s
handwriting: “Could such a good understanding be agreed on, there
can be little doubt that the affairs of Holland would be settled in an
amicable way, to the satisfaction of all those who are interested in the
545
welfare of the Republic.”
It is clear, then, that Pitt meant to encourage Prussia to energetic
action, in case the Estates of Holland did not grant full reparation for
the insult; but he looked on that step merely as preliminary to the
others which would solve the whole question by a peaceful mediation
of the four Powers above named. On learning that the Emperor had
expressed his friendly interest in the Prince of Orange and his approval
of Prussia’s conduct, the Foreign Office sent off a despatch to Keith,
British Ambassador at Vienna, bidding him to urge his active co-
operation “and to make it, if possible, the means of establishing a
546
cordial and confidential correspondence with that Court in future.”
Joseph II did not respond to this friendly proposal, probably because of
troubles lowering in the East. But the incident proves the reluctance of
our Foreign Office to act with Prussia alone, and also its hopes of a
peaceful mediation in Dutch affairs. According to news received from
Paris, France did not seem likely to oppose Prussia’s action, and even
favoured the scheme of a joint mediation of the three Powers, which
547
were then on cordial terms.
In spite of the friendly assurances that came from London, and the
manly advice of Hertzberg, Frederick William continued to vacillate in
his usual manner. As we have seen, he had recently coquetted with
the notion of a mediation conjointly with France alone; but, despite its
curt rejection by the Court of Versailles, he now recurred to a similar
548
scheme. If France had played her cards well, she might even then
have won the day at Berlin.
The conduct of the French Government at this crisis is hard to
fathom. Its swift and unaccountable changes may perhaps be
explained by the alternate triumph of peaceful and warlike counsels in
the Ministry, which in the month of August underwent some alterations.
Towards Great Britain the tone was at first quite reassuring, a fact
which may be ascribed to the friendly relations between Montmorin
and Eden. Our envoy had visited London in July, and therefore, on his
return to Paris at the end of the month, fully knew the intentions of his
chiefs. Their pacific nature appeared in a proposal, which he was
charged to make to Montmorin, for the discontinuance of warlike
preparations on both sides until such time as notice might be given for
their renewal. On 4th August the French Minister cordially received this
549
proposal, and it was acted on with sincerity until the crisis of the
middle of September. But Eden soon found that the French Court
intended forcibly to intervene if the Prussian troops entered the United
Provinces, and that Montmorin had rejected the recent proposal from
550
Berlin for a Franco-Prussian intervention. Here, surely, the French
Minister committed a surprising blunder. The traditional friendship
between their Courts should have led him to welcome a proposal
which would have kept England entirely out of the question. Probably
he counted on procuring better terms from the ever complaisant Court
of Berlin. If so, he erred egregiously. By repelling the advances of
Prussia, he threw that Power into the arms of Great Britain; and Pitt
was shrewd enough to accord a hearty welcome.
CHAPTER XVI
THE TRIPLE ALLIANCE
This treaty produced an effect throughout the whole of Europe

by its mere existence, without military preparations or force of
arms.—Von Sybel.
Pitt has already astonished all Europe by the alacrity of the
late armament, and his name as a War Minister is now as high as
that of his father ever was.—The Earl of Mornington to the
Duke of Rutland, 17th October 1787.
T HE events described in the last chapter had brought England and

Prussia to a crisis at which, despite their strong mutual suspicion,
common action was imperiously needed in order to save the Dutch
Netherlands from French domination. As we have seen, no British
statesman had ever acquiesced in the supremacy of France in that
country; and it is clear from the British archives that Pitt now took a
keen interest in thwarting her designs. The draft of the official answer
to Eden’s despatch of 4th August 1787 is entirely in Pitt’s writing, and it
was sent without alteration or addition by the Foreign Minister, Lord
Carmarthen—an unusual circumstance, which shows the masterful
grip of the chief over matters of high import. In this despatch, of 10th
August, he welcomed the assurance of Montmorin that warlike
preparations would be stopped until further notice. Great Britain would,
however, renew them after due notice if France assembled a force at
Givet, on the Belgian border. He then referred pointedly to rumours
that French transports had sailed for Amsterdam—a measure which
would prejudice “the great work of conciliation which it is so much the
object of the two Courts to forward and promote.” French ships were
also reported as laying in stores of food in British ports, a proceeding
which would have been stopped but for the friendly assurances now
received. He then referred to the invitation of the loyal provinces of
Friesland and Zealand, that Great Britain would mediate on their
behalf, and hinted that this might be done. The despatch closed with
the following dignified remonstrance on the subject of the outrages of
the Free Corps in Holland:
I am here also under the painful necessity of adding that the

conduct held in the Province of Holland, apparently instigated by
those who have all along appeared the instruments of France,
seems to increase, instead of diminishing in violence. I enclose a
copy of an address presented by the Free Corps of that Province,
which it is intended that you should show to M. de M[ontmorin]. It
cannot escape that Minister how little such a step is calculated to
promote an accommodation or a suspension of hostilities, which
551
his language so strongly recommends.
Meanwhile Pitt had sent his cousin, William Wyndham Grenville, to

collect information at The Hague. As we saw in Chapter XII, the
attainments of that young statesman, then Paymaster of the Forces,
were eminently sound. His hard and practical nature stood in contrast
to the sensitive and imaginative Harris, about whom George III
trenchantly wrote to Pitt, that he was so easily discouraged that it was
well he held no military command. Probably Pitt held the same opinion
about Harris, whose forward policy he had long held in check. That
there was some widespread distrust of him is clear from the
observation of the Duke of Dorset, that “he was playing the devil at
552
The Hague.” In any case, it was well to have independent advice,
and the selection of so young a man as Grenville is a tribute to his
prudence and ability.
He reached The Hague on 30th July, and during his stay of about
three weeks succeeded in clearing up many points preliminary to the
mediation. The letters which passed between him and Pitt bespeak a
resolve on both sides to settle matters peaceably if possible. The
following sentence in Pitt’s letter of 1st August is noteworthy: “It is very
material that our friends should not lose the superiority of force within
the Republic, while we are labouring to protect it from interference from
without.” Six days later he wrote that the prospect was still favourable,
but that, if French troops were to assemble at Givet, it might be needful
553
to resume naval preparations, so as to reassure Prussia. Equally
hopeful in tone is his letter of 2nd August to Earl Cornwallis, Governor-
General of India. After pointing out that Great Britain could not allow
France to become mistress of the Dutch Netherlands, and thereby add
enormously to her naval strength and her power of aggression in India,
he expressed the hope that the mediation of the three Powers would
take place; but, failing an apology from the Estates of Holland, the King
of Prussia would order his troops into that province, and take steps for
“maintaining the just rights of the Stadholder and the constitution and
independence of the Republic.” If war broke out, Cornwallis was at
once to strike at the Dutch settlement of Trincomalee, in Ceylon; while
a force from England would be sent to reduce the Cape of Good Hope
—the first sign in Pitt’s letters of the importance which he attached to
554
that post.
Despite suspicious signs to the contrary, the French Cabinet at that
time probably wished for a peaceful mediation; but the Courts of
London and Versailles differed sharply as to the way of action. Pitt and
Carmarthen held that reparation to the King of Prussia for the insult to
his sister was a purely personal affair, distinct from the political issues.
France now denied this; she belittled the affront to the Princess, and
induced the Estates of Holland to frame an apology which was in the
main a justification of their conduct. If Montmorin had pressed that
body to make an adequate apology, it would certainly have been
forthcoming. The stiff-neckedness of the Estates of Holland was due to
their expectation of armed support from France if matters came to the
sword; and the action of the Marquis de Vérac, the French envoy,
justified their confidence.
In truth, French policy wore different aspects at Paris and at The
Hague. Montmorin assumed an air of injured innocence when Eden
transmitted to him Pitt’s remonstrances. On 15th August he indignantly
denied the truth of the rumours about French transports sailing to
Holland and of the food supplies drawn from England. He also
complained of the harshness of Pitt’s reference to the assembling of
troops at Givet, an action which was a natural retort to the muster of
Prussians at their fortress of Wesel on the Rhine; and he merely
555
laughed at the address of the Free Corps. A week later Eden
reported that Montmorin was anxious to settle the Dutch troubles
peacefully and speedily, and would therefore recall the over-zealous
Vérac from The Hague. Pitt, however, refused to allow that Prussia
was exceeding her just rights in claiming satisfaction for the insult. The
fit way of ending the matter, he argued, would be for the Estates of
Holland to apologize frankly and fully, whereupon the three Powers
must insist on the dispersal and disarming of the Free Corps as a
556
needful preliminary to the joint mediation. On 28th August Eden
heard that the French Government would not form the camp at Givet, it
being understood that the Prussian monarch would limit his claims to
the gaining of personal satisfaction, which France promised to procure
from the Estates of Holland. This welcome news led Pitt to express the
hope that an agreement would at once be framed for stopping the
excesses of the Free Corps. Thus, so far as our dealings with
Montmorin ran, there seemed, even at the end of August 1787, the
likelihood of a peaceful settlement. A signal proof of Pitt’s hopefulness
is afforded by his letter of 28th August to Cornwallis at Calcutta. In this
he speaks of the need of settling the personal question between the
King of Prussia and the Estates of Holland as preliminary to the
general settlement of the dispute. Even of that he cherished hopes, but
he deemed caution and preparation so eminently necessary as to
557
order the despatch of another regiment to Bombay.
In truth, the central knot of the whole tangle was at The Hague. In
order to understand the position there we must remember that the
States-General, representing the Union, had not called on France for
aid, in case of hostilities. Thanks to the skill and private influence of
Harris, a majority of that body still upheld the claims of the Stadholder,
deprecated any appeal to the Court of Versailles, and sought to
procure from the Estates of Holland an apology to the King of Prussia.
The Estates, however, stoutly refused to give anything more than a
complacent explanation of the incident. The spirit which animated that
assembly appears in the comment of one of the leading Patriots on the
Prussian ultimatum: “A sovereign body can never apologize to the wife
558
of its first servant.” The Memoirs of Count de Portes, a Swiss officer
who espoused the cause of the Dutch Patriots and helped to raise a
regiment for them, show the cause of their confidence. He wrote on
14th September: “Though the Prussians are at our gates, they seem to
me still at the sport of politics, and I can scarcely believe that they will
put themselves between our waters and our French. At the worst we
559
will open our sluices and drown ourselves.”
There was the strength of the Patriots. In a legal sense their case
was weak; but their audacious energy even now promised to snatch
victory from the inert Orange party. The Free Corps in the months of
July and August became more numerous and insolent than ever, and it
was a notorious fact that hundreds of French officers and soldiers had
560
passed into their ranks. Thus strengthened, they marched about the
country, taking some places by force, and in several cases deposing
the Regents, or chief magistrates appointed by the Stadholder. On all
sides they despoiled the property of opponents, and carried confusion
to the gates of The Hague. On 1st August Harris thus summed up his
hopes and wishes to Carmarthen: “If I am de-Witted, don’t let me be
561
outwitted, but revenge me.” Count Bentinck also wrote: “the
majority of Holland have made themselves masters of our lives and
property; ... they are masters of the purse, and of the sword, and of the
562
Courts of Justice.” That arch-intriguer, Vérac, on 31st August, the
very day of his recall, assured the Patriots that France would never
desert them. This boast was consonant with the whole policy of France
respecting the Free Corps. She had rejected the Prussian proposal for
their suppression, which accompanied the plan of a Franco-Prussian
mediation. On 29th August Montmorin stated to Eden that it was
impossible to disarm the Free Corps, and on 11th September when
stiff remonstrances came from London on this subject, he airily
declared that France could no more control those troops than the
563
waves of the sea.
Is it surprising that the Pitt Ministry came to the conclusion that the
real aim of the French Government was to amuse England and
Prussia with fair words, until its partisans gained a complete mastery in
the United Provinces and forced the States-General to send to Paris a
formal demand for help, with which the Court of Versailles could not
but comply? Whether Montmorin was playing a double game, or
whether his hand was forced by other members of his Cabinet, is far
564
from clear. Certainly the contrast between his fair professions and
French intrigues in Holland inspired increasing distrust, and served to
bring about the dénouement which shattered the prestige of the
French monarchy.
It was long before the crisis came. Only by slow degrees did Pitt,
Carmarthen, and Harris shake off distrust of Prussia. The length of
time attending the transit of despatches between London and Berlin
(eleven days on the average even in summer) clogged the
negotiations. At Paris the Prussian envoy, Görtz, intrigued against the
Anglo-Prussian understanding, and represented Eden as minimizing
the insult to the Princess of Orange. At once Pitt sent to Eden a
courteous but firm request for an explanation of his words, which had
caused a sensation at Berlin. Of course Eden was able to explain them
565
entirely to Pitt’s satisfaction. But it is clear that the mutual dislike at
London and Berlin could have been ended only by the fears aroused
by the action of France.
In order to remove the distrust prevalent at Berlin, Pitt and
Carmarthen sent to that Court full copies of their correspondence with
France, which convinced Frederick William of their good faith and the
566
duplicity of Versailles. He saw that France was dragging on the
affair so that the approach of autumn might hinder the effective action
of his troops. Suspicion of this helped to bring England and Prussia to
accord. But the tidings which spurred on Pitt and Carmarthen to more
decisive action came from The Hague. On 20th August Harris reported
that a body of Free Corps was approaching that town, that he was
preparing to leave it in haste, and had sent all important papers away.
On hearing this news and perhaps that brought back by Grenville on
23rd August, the Cabinet resolved to send General Fawcett to Cassel
to hire 5,000 Hessians for the help of the loyal Dutch provinces, and
others for the British service—that detestable expedient which
parsimony made inevitable at every alarm of war. Harris was also
empowered to order up a British ship lying at Harwich, laden with
567
gunpowder and stores for the help of the Stadholder’s forces. On
the same day Carmarthen instructed Ewart to warn the Prussian Court
that, though we had agreed with France to suspend warlike
preparations, yet we were ready to send out at least as large a fleet as
568
France could possibly equip. Ewart, in his reply of 4th September,
stated that but for this encouraging news Frederick William might once
more have wavered, owing to the insidious intrigues of the French
party, and the discouraging reports which came from the Duke of
Brunswick. The nerves of that veteran were unstrung by visions of the
spectral camp at Givet, and he mourned over the unpreparedness of
his own force at Wesel, which, he declared, could not march before 7th
569
September. These tidings had once more depressed the royal
thermometer at Berlin; but the news from London came just in time to
send the mercury up again. On 3rd September, then, Frederick William
drew up an ultimatum to the Estates of Holland, and bade Hertzberg
come to a close understanding with England. On 7th September he
resolved to recall Thulemeyer, and urged the British Government to
declare what forces it would set in motion if France attacked the
570
Prussian army in Holland.
* * * * *
Late on that day there arrived at Berlin news which ended the last
hesitations of Frederick William. The Porte, long fretting under the
yoke imposed by the Treaty of Kainardji, and irritated by the
proceedings of the Czarina, had declared war on Russia. This came
almost as a bolt from the blue. No one had believed the Sultan capable
of so much energy as to attack the Muscovites; and rumours spread at
Vienna and Petersburg that this was due to British gold. The
insinuation was probably false. As will appear in Chapter XXI, the
Turks had been goaded into war, and relied on help from Sweden,
perhaps also from Prussia. Undoubtedly their action greatly
embarrassed Joseph II, who was bound by compacts with Russia, the
enemy of Turkey, and with France, her friend. Late on 7th September
Finckenstein pointed this out to Ewart, and added that Prussia and
England ought at once to frame an agreement, and intervene
571
effectively without fear of France. This time the decision was final.
Ewart reported that the news of Turkey’s challenge to Russia caused
all the more joy at Berlin as the party of Marie Antoinette had gained
an ascendancy at Versailles, which implied the strengthening of the
Franco-Austrian alliance and a proportionate loosening of the ties
572
linking Joseph II to Russia. The reasoning was not sound; for it was
probable that France, acting in close concert with the two Empires,
would partition Turkey with a view to the seizure of Egypt and other
commanding posts in the East.
Nevertheless, Prussia looked on the war in the East as giving her a
free hand in the West; and on 7th September she decided to act in the
Netherlands. Four days later a French envoy, Groschlag, arrived in
Berlin with offers, partly enticing, partly threatening, which might once
573
more have drawn the wavering impulses of the King towards Paris.
But now, after many months of uphill fight, all the omens favoured the
Anglo-Prussian cause.
On 13th September, before the refusal of the Prussian ultimatum
by the Estates of Holland had been received, the Duke of Brunswick
crossed the Dutch frontier. In Guelderland and parts of Utrecht the
Prussians were hailed as deliverers; even the city of Utrecht opened its
gates, owing to the cowardice of the Rhinegrave of Salm, who soon
abandoned the cause for which he had blustered so long. Nowhere did
the Free Corps make any firm stand. Even in Holland their excesses
had turned public opinion strongly against them. It is said that the
weather prevented the opening of the sluices; but the half-heartedness
of the defence, and the eagerness of the Orange party for deliverance,
probably explain the débâcle. When the Dutch have been united and
determined, their defence of their land has always been stubborn. Now
it was not even creditable; and this fact may be cited as damning to the
Patriots’ claim that they stood for the nation. On 20th September the
Prince of Orange made his entry into The Hague amidst boundless
enthusiasm. Sir James Harris also received a striking ovation, which
rewarded him for the long months of struggle.
Now, while the Patriots were in consternation at their overthrow,
our envoy clinched his triumph by persuading the Estates of Holland to
reverse their previous acts against the Stadholder’s authority, and to
rescind a resolution which they had passed on 9th September
appealing for armed aid from France. The cancelling of this appeal on
21st September was a matter of great importance, as it deprived
France of a pretext for armed intervention. The receipt of this news at
Versailles helped to cool the warlike ardour of the French Court.
There the temper of the Ministry had fluctuated alarmingly. The
recall of Vérac seemed to assure a peaceful settlement. But on 4th
September Montmorin sent to Eden a despatch which ran directly
counter to the British and Prussian proposals. It stated that the Dutch
towns, where the Free Corps had forcibly changed the magistrates,
“ont déjà consommé la réforme; ... c’est une affaire terminée.” As for
the Prince of Orange, he would do well to abdicate in favour of his
574
son. Pitt of course indignantly rejected both proposals; and his
temper is seen in the phrase of his letter of 14th September to Eden,
that if France was determined to keep her predominance in the United
575
Provinces, she must fight for it.
An acute crisis now set in. While Carmarthen warned Montmorin
that England would not remain a quiet spectator of French intervention,
that Minister on 16th September issued a Declaration that France
could not refuse the appeal for help which had come from the Estates
of Holland. He charged England with having plotted the whole affair
with Prussia, and asserted that, inconvenient though the time was now
that the fate of the Turkish Empire stood at hazard, France must in
576
honour draw the sword.
This Declaration drew from Pitt an equally stiff retort. In a circular
despatch intended for all our ambassadors, which he himself drew up,
he declared that England could not admit the right of France, owing to
its treaty with the Dutch Republic, “to support a party in one of the
Provinces in a measure expressly disavowed by a majority of the
States-General; and His Majesty has repeatedly declared the
impossibility of his being indifferent to any armed interference of
France in the affairs of the Republic, which, if unopposed, must
necessarily tend to consequences dangerous to the constitutional
independence of those Provinces, and affecting in many respects the
interests and security of his dominions. His Majesty has therefore
found himself under the necessity of taking measures for equipping a
considerable naval armament and for augmenting his land forces.”
Nevertheless he still desired “an amicable settlement of the points in
577
dispute.” As many as forty sail of the line were immediately
prepared for sea; and here we may notice that Pitt’s care for the navy
ensured a preponderance which virtually decided the dispute.
In order to see whether war might be averted, George III
suggested, on 16th September, that someone should be sent to Paris
who could deal with the French Ministers better than Eden did. Pitt
therefore decided, on 19th September, to despatch Grenville, charging
him distinctly to declare that Great Britain approved the action of the
King of Prussia, and would resist an armed intervention by France;
also that the settlement in the United Provinces must be such as to
restore to the Stadholder his constitutional powers, and prevent the
ascendency of the party hostile to Britain. A secondary aim of
Grenville’s mission was the forming of a friendly understanding with
France for the cessation of warlike preparations on both sides of the
578
Channel—a proof of Pitt’s watchful care over the exchequer.
Montmorin received Grenville coldly on 28th September at
Versailles; but his reserve was merely a cloak to hide his discomfiture.
Nine days before he had assured Eden, in the confidence which
followed on a private dinner, that “if the Estates of Holland should
prove so defenceless, or so intimidated as to give way to whatever
might be forced under the present attack, he would advise His Most
Christian Majesty not to engage in war.” If matters went more
favourably he would advise him to draw the sword; but, as for his own
feelings, he was weary of the Dutch Question, and only sought the
means for getting rid of it creditably, so that France might turn her
579
attention to another quarter, obviously the East. Grenville, after
hearing all this from Eden, and receiving the good news from The
Hague, of course put the right interpretation on Montmorin’s non
possumus, and sought to facilitate his stately retreat. He was at once
waved back. Montmorin would make no promise as to her course of
action so long as the Prussians were in Holland. Even on the question
of disarmament by the two Powers—a matter of the utmost moment to
France—he would make no pledge, though Grenville strongly urged
him to do so. Two more interviews passed with the same frigid
negations; and on 3rd October Grenville returned to London,

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Horngrens Accounting The Managerial Chapters 10th

3) A creditor is a person or business who:

5) Which of the following duties should NOT be performed by a credit department?

7) The creditor is the entity that signs a bill.

8) Bills receivable are usually longer in term than accounts receivable.

10) Accounts receivable are also known as trade receivables.

12) Which of the following is NOT a cost of selling on credit?

15) AASB requires companies to use the:

Accounts receivable, 31 December 2016 $22,000 (debit)

Accounts receivable, 31 December 2016 $45,000 (debit)

Accounts receivable, 31 December 2016 $44,000 (debit)

Allowance for doubtful debts

Bad debts expense

Allowance for doubtful debts

Bad debts expense

Allowance for doubtful debts

Accounts receivable, 31 December 2016 $20 000 (debit)

Accounts receivable, 31 December 2016 $85,000 (debit)

48) On 1 January, Davidson Services has the following balances:

Bad debts expense

49) On 1 January, Davidson Services has the following balances:

Bad debts expense

D) None of the above.

62) Which of the following is the party lending funds on a bill?

65) What is the maturity value of a bill?

82) The accounts receivable turnover ratio measures:

83) The days' sales in receivables measures:

84) The acid-test ratio measures:

88) Martin Sales provides the following information:

93) An acid-test ratio of at least 1.0 is generally considered safe.

94) The acid-test ratio is also known as the quick ratio.

Hendon, Jan. 8, 1787.

The differences between Pitt and Carmarthen were greater than

This treaty produced an effect throughout the whole of Europe

T HE events described in the last chapter had brought England and

I am here also under the painful necessity of adding that the

Meanwhile Pitt had sent his cousin, William Wyndham Grenville, to

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