AC 300 videos, homework and quizzes

The Reingold Hat Company uses the allowance method to account for bad debts. During 2018, the company recorded $800,000 in credit sales. At the end of 2018, account balances were: Accounts receivable, $120,000; Allowance for uncollectible accounts, $3,000 (credit). If bad debt expense is estimated to be 3% of credit sales, the appropriate adjusting entry will include a debit to bad debt expense of:

24,000

Which of the following might be classified as a cash equivalent?

30-day treasury bill.

average days in inventory ratio

365/inventory turnover ratio

A company purchases inventory on account for $45,000 with terms 2/10, n/30. Under the net method of accounting for purchases, the purchase would be recorded at:

44,100 45000 x .98

The CECL model:

Allows a company to use an accounts receivable aging as part of its methodology for estimating credit losses.

Which of the following methods are used by managers to manipulate earnings quality?

Classifying cash flows associated with selling accounts receivable in the operating section of the statement of cash flows Adopting more liberal credit policies Correct Using a discretionary accrual such as bad debt expense Using a "bill-and-hold" strategy

LIFO liquidation profits occur when:

Costs are rising and inventory quantity declines.

Barrington Company began the year with inventory of $100,000. During the year, the company purchased inventory in the amount of $750,000. Sales revenue for the year totaled $800,000. A physical count determined the cost of inventory at the end of the year to be $90,000. The adjusting entry needed at the end of the year under a periodic inventory system includes a:

Debit to Cost of Goods Sold for $760,000. they had 100,000 at beginning, bought 750,000 more, but ended with 90,000, so 100 + 750 - 90 = how much the had used through the whole year

Using a perpetual inventory system, the sale of inventory on account is recorded with a:

Debit to cost of goods sold. Credit to inventory. Credit to sales revenue.

At the end of a reporting period, a company determines that its ending inventory has a net realizable value below cost. What would be the effect(s) of the adjusting entry to record inventory at net realizable value?

Decrease total assets. Increase total expenses. Decrease retained earnings.

For purposes of accounting for inventory, net realizable value is defined as:

Estimated selling price less any costs of completion, disposal, and transportation.

Which inventory method typically most closely matches the actual flow of inventory being sold?

FIFO

In a period of declining costs, the use of which of the following inventory cost methods would result in the highest ending inventory?

LIFO

Allister Company does not use the allowance method to account for bad debts and instead any bad debts that do arise are written off as bad debt expense. What problem might this create if bad debts are material?

Receivables likely will be overstated.

A company uses the gross method to account for cash discounts offered to its customers. If payment is made before the discount period expires, which of the following is correct?

Sales discounts is debited for the amount of discounts taken by customers.

Abbott Company uses a perpetual inventory system. When does Abbott record transactions relating to its inventory?

Sales revenue and cost of goods sold are both recorded at the time of the sale.

Under the gross method of accounting for purchases:

The purchase of inventory is recorded for its full amount. The amount paid for inventory during the discount period is the full amount of the purchase minus the discount. The amount paid for inventory after the discount period is the full amount of the purchase.

Which of the following is NOT true about accounting for merchandise returns?

The refund liability is credited when a customer makes a return

Which of the following statements about the types of inventory is (are) correct?

When the manufacturing process is complete, the cost of the related inventory items is transferred into finished goods. Inventory is classified as an asset in the balance sheet until it is sold, at which time the cost is transferred to cost of goods sold in the income statement.

Application of the lower of the lower of cost or market method is an example of which practice in accounting:

conservatism

inventory turnover ratio

cost of goods sold/average inventory cogs= beg inventory+ purchases- ending inventory

Using a perpetual inventory system, the purchase of inventory on account is recorded with a:

debt to inventory

In a perpetual inventory system, if merchandise is returned to a supplier:

inventory is credited

accounts receivable turnover ratio

net credit sales/average net accounts receivable

Applying the lower of cost or net realizable value rule

sell price minus cost, if its lower than cost price then it is the value of item

gross profit ratio

(sales- cogs)/ sales