Accounting Exam Two

LIFO

provides better matching of current revenues with current inventory cost

_________ _________ inventory includes the cost of components that will become part of the finished product but have not yet been used in production

raw materials

which inventory account includes the cost of components that will become part of the finished product but have not yet been used in production

raw materials inventory

which of the following accounts are typically recorded in the balance sheet of a manufacturing company

raw materials, work in process, cost of goods sold

two entries are required when a previously written off account is collected. these two entries include:

record the collection on the account receivable, reinstate the account receivable

the difference between LIFO and FIFO disclosed in the notes to the financial statements of a company currently utilizing the LIFO cost flow assumption is sometimes referred to as the LIFO ___________

reserve

the allowance method is required by ___________

GAAP

ophelia inc. just learned that patton inc. one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. assuming that the company utilizes the allowance method, ophelia should record a(n)

decrease in accounts receivable

a partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer's expectations is referred to as a sales

allowance

to record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to

allowance for uncollectible accounts

a company that expects that some of its customers will not pay the agreed upon sales price must utilize the

allowance method

raven receives a 3-year note receivable from a customer for goods sold. how should raven report this note receivable in its financial statements?

as a noncurrent asset

accounts receivable should be classified as a(n)

asset

using the perpetual inventory system, what is the effect of a sale of inventory on assets

assets decrease by the cost of inventory; assets increase by the sales price of inventory

a sales allowance _________ the amount owed by the customer for merchandise that is ________ by the customer

decreases; retained

the accounts receivable account is reduced when the seller

determines that a specific customer account will not be collectible

true or false: accounts receivable not expected to be collected should not be counted in the assets of the company until they are later written off

false

the shipping term FOB stands for

free on board

under the allowance method, companies estimate _________ uncollectible amounts and report those estimates in the ___________ year

future; curent

a trade discount is a reduction from the list price which is used to: (select all that apply). encourage customers to pay quickly, give quantity discounts to customers, disguise real prices from competitors, change prices without publishing a new catalog, reduce the sale price for interest received

give quantity discounts to customers, disguise real prices from competitors, change prices without publishing a new catalog

when the allowance method is used, the write-off of an uncollectible account has what effect on net income

has no effect on net income

sales to customer in which the customers pay within 30 to 60 days are referred to as (select all that apply). deferred sales, noaccrured sales, credit sales, sales on account

credit sales, sales on account

shannon corp. uses the aging method for bad debt expense. shannon determines that a customer account of $10,000 should be written off as uncollectible. the write off of the account will include

debit allowance for uncollectible accounts

the journal entry to record bad debt expense

debit bad debt expense, credit to allowance for uncollectible accounts

josh corporation uses the perpetual inventory system. josh sells goods to a customer on account for $2,000. the cost of goods sold is $1,500. what is the entry required to record the expense of the inventory sold

debit cost of goods sold $1,500; credit inventory $1,500

clark uses the perpetual inventory system. clark sells goods to a customer on account for $1,000. the cost of the goods sold was $700. which of the following entries are required

debit cost of goods sold $700, credit inventory $700; debit accounts receivable 1,000; credit sales revenue $1,000

norma inc uses the perpetual inventory system. when the company records a sale, it should make entries to

decrease an asset and increase revenue; increase an asset and increase revenue

in times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ____________ than cost of goods sold determined using the FIFO inventory assumption

higher

a cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specific period of time is also referred to as a(n) _______________ discount

sales

net revenues is calculates as total revenues minus which of the following items? (select all that apply). sales discounts, sales allowances, sales returns, accounts receivable, allowance for uncollectible accounts

sales discounts, sales allowances, sales returns

when a customer returns a product for a refund, in which account is the entry recorded?

sales return

where is a note receivable reported in the balance sheet

in either current or non-current assets, as appropriate

a multiple-step income statement records multiple levels of ______________

income

the direct write-off method is required for

income tax purposes

items held for sale in the normal course of business are referred to as

inventory

a formal credit arrangement between a creditor and debtor is called a(n)

note receivable

prime corp. has an ending balance in the accounts receivable of $100,000. prime records bad debt expense of $3,000. prime has an ending balance in the allowance for uncollectible accounts of $7,000. what is the net accounts receivable balance?

$93,000 (10,000 - 7,000)

the approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the _________ method of accounts receivable

aging

assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory

LIFO

which methods are available for costing inventory

LIFO, FIFO, specific identification, weighted-average

inventory is classified as

a current asset

a trade discount is

a percentage reduction from list price

an informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

account receivable

the allowance for uncollectible accounts is a contra account to

accounts receivable

meller purchases inventory on account. as a result, meller's

assets will increase

the estimated expense for accounts that may not be collected is referred to as

bad debt expense

compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate

amend inc. debited accounts receivable and credited allowance for uncollectible accounts to reestablish an account previously written off. amend inc. should also debit _________ and credit _________

cash; accounts receivable

allowance for uncollectible accounts has a credit balance because it is a(n) ___________ account

contra-asset

a periodic inventory system measures cost of goods sold by

counting inventory at the end of the period

in times of rising prices, ending inventory determined using the LIFO inventory assumption will be __________ than ending inventory determined using the FIFO inventory assumption

lower

what type of company purchases raw materials and makes goods to sell

manufacturers

FIFO

most closely approximates the actual physical flow of inventory

FOB shipping point means title to the good passes when

they are shipped

FOB destination means title to the goods passes when

they arrive at the destination

in a perpetual inventory system, when a company sells inventory on account, how many entries are required

two

the direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial

killian company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. if the error is not discovered until the following year, the financial statement effect in the current year will be

understated assets, retained earnings, and net income

when the direct write-off method is used, an entry for bad debt expense is requried

when the account receivable is determined to be uncollectible

which of the following accounts would be found in the balance sheet of a manufacturing company

work in process