Accounting Exam I review Finished

In a periodic inventory system, the cost of purchases is recognized as

an integral part of the calculation of cost of goods sold.

In a periodic inventory system, the cost of purchases recognized as

an integral part of the calculation of cost of goods sold.

Business entities generally carry on:

Operating, investing, and financing activities

Roki Inc. uses the periodic inventory system, if Roki uses the weighted average cost inventory method, the amount assigned to the June 30th inventory would be

$1,359.90 ($3,626.50/240 = $15.11; $15.11 * 90 = $1,359.90)

Floors Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2016, on account. Tile Magic Corp. paid the invoice on August 31, 2016. How much sales discount will Floors recognize?

$0

If a company understates its ending inventory balance for 2016 by $15,500, what are the effects on its net income for 2017 and 2016?

2017: Understated by $15,500 2016: No effect

Grinn Inc. offers terms of 2/10, n/30 to credit customers. Great Buy Corp. purchased 100 tile cutters with a list price of $20 each on March 5, 2016, on account. If Great Buy Corp. pays the amount of the invoice for its purchase on March 14, 2016, how much cash will Grinn receive from Great Buy Corp?

$1,960 ($20 * 100) - .98 = $1,960

What was the amount of net increase or decrease in the cash balance for Marvel Shoes for the current year?

$10,000 increase ($70,000 Operating activities - $20,000 Investing activities - $40,000 financing activities)

Rosu Company has total current assets of $150,000 and total current liabilities of $50,000. What is the amount of working capital for Rosu Company?

$100,000

How much will Goldman report as its cost of goods sold in its 2016 income statement?

$172,000 (Purchases) - $8,400 (Purchase returns and allowances) + $11,000 (Transportation-in) + $26,500 (Inventory Jan 1, 2016) - $28,800 (Inventory December 31, 2016) = $172,300

Roki uses periodic system; IF the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Roki's COGS for June under the specific identification method would be

$2,263.00

Read the information about Marvel shoes: What was the cash balance for Marvel shoes at the end of the current year?

$40,000 (Beginning balance + increase in cash)

What is Seikson's net income?

$46,470 (Net Income = $130,800 - $37,100 - $34,900 - $900 - $11,430 = $46,470)

What are Bevco's current Assets?

$55,000 Cash + $45,000 Accounts Receivable + $65,000 inventory = $165,000 CA

If a company overstates its ending inventory balance for 2017 by $10,000, and overstates its ending inventory balance for 2016 by $5,000, what are the effects on its net income for 2017 and 2016?

2017: overstated by $5,000 ; 2016: overstated by $5,000

Roki uses the periodic inventory system. How many units did Roki sell during June?

150 (50 + 115 + 75 - 90 = 150)

Which of the following would NOT appear on an income statement?

Accounts Receivable

If the amount assigned to ending inventory is incorrect,

Both the balance sheet and the income statement are affected

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

Both the periodic and perpetual inventory systems

Which one of the following statements regarding changing inventory methods is true

Changing inventory methods affects consistency.

Lottony Inc. is concerned about its profitability for the current year, since its profit margin has dropped 10% since last year. Which of the following is the least useful comparison in evaluating the drop in Lottony's profit margin?

Comparison with its current ratio for the current year.

Which of the following terms best describes "Cost of goods available for sale?

Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year.

Many companies assign only the net invoice price for merchandise to inventory and cost of goods sold. All other costs, including transportation and other costs of bringing merchandise to the place of business, are charged to expense of the period in which they are incurred. Which accounting principle is applied in this example?

Cost/Benefit

How are assets which are expected to be realized in cash, sold, or consumed within the normal operating cycle of a business or within one year (if the operating cycle is shorter than one year) reported on a classified balance sheet?

Current Assets

What is the correct method for calculating working capital?

Current Assets minus Current liabilities

You are comparing three companies that use different depreciation methods. Which of the following would help you the most in making a comparison of the companies?

Disclosure of accounting policies.

Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?

FIFO

Texas Inc. sold merchandise to Fagin Corp. on December 28, 2016, with shipping terms of FOB destination. Fagin Corp. received the merchandise on January 3, 2017. Which one of the following statements is true?

Fagin Corp. should record a liability for the purchase on January 3, 2017.

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Finished Goods inventory

The cost of goods sold is

Goods available for sale less ending inventory

Which statement best represents Hopper's performance?

Hopper's profit margin ratio decreased

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

In contra accounts to the purchases account

Forman Inc. earned $600,000 profit during 2016. On which financial statement(s) will you find the dollar amount of the profit earned by the company?

Income statement and statement of retained earnings

Xu Corp started business at the beginning of 2016. Xu selected the FIFO method for its inventory. In order to maximize its profits for 2016 under this method, prices must be

Increasing

The average current ratio for stores such as Guinther & Sones is 2.4 to 1. What does this comparison tell you about its liquidity?

It is more liquid than its competitors

Which method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income?

LIFO

Federal income tax rules allow businesses to use different inventory costing methods for tax reporting and financial reporting with one exception. Which of the following situations is NOT allowed by federal income tax rules? Inventory for Tax Reporting ; Inventory for Financial Reporting:

LIFO; FIFO

Blenham Inc. sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation?

No net effect

Which of the following is NOT a major category for long-term assets?

Receivables

Which method of inventory costing is NOT acceptable for financial accounting purposes?

Replacement Cost

Tavella Company applies the consistency convention. What does this mean?

Tavella Co. applies the same accounting principles each accounting period.

Caruso, Inc. has an inventory turnover rate of 8 times. If its cost of goods sold is $150,000, then

The company's average inventory is $18,750.

Excursion Corp. increased its dollar amount of working capital over the past several years. To further evaluate the company's short-run liquidity, which one of the following measures should be used?

The current ratio

Which of the following statements regarding the application of the lower of cost or market method is true?

The lower of cost or market method is an exception to the historical cost principle.

Which of the following represents one of the purposes of the notes to financial statements

To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position

All of the following statements are true except:

Write-downs of inventory can be reversed in later periods under U.S. GAAP.

Sales discounts is classified as what type of account?

a contra-revenue

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

an overstatement of cost of goods sold for the current year.

Which of the following would not be found as an asset on the balance sheet of a manufacturer?

merchandise inventory

Transportation-in is

part of cost of goods purchased

The qualitative characteristics of accounting data include

reliability

Vern Corp. sold merchandise to a customer on credit. The invoice amount was $2,000; the invoice date was June 10; Credit terms were 1/2, n/30. Which one of the following statements is true?

the customer should pay $2,000 if the invoice is paid on July 9.

In order to evaluate a company's gross profit ratio

the ratio should be compared with those of both prior years and competitors.

Which of the following is the best description of the purpose of financial reporting?

to help the users reach their decisions in an informed manner