ACCT 2101 midterm

Inventory errors affect which of the following: 1. Balance sheet 2. Income Statement 3. Statement of Shareholder's Equity 4. Statement of Cash Flows

1 & 2: Balance sheet and income statement

Name 1 advantage of a perpetual system

1. Traditionally used for merchandise with high unit values 2. Shows the quantity and cost of the inventory that should be on hand at any time 3. Provides better control over inventories than a periodic system

Dave & Busters Corporation has purchased raw materials from a vendor and was offered credit terms of 2/10, n/30. Which of the following reflects these terms? A. 2% discount if paid within 10 days B. 2% discount if paid within 30 days C. 2% discount if paid between 10 and 30 days D. 20% discount if paid within 30 days

A. 2% discount if paid within 10 days

Which of the following will require the cash on the books of the company to be adjusted? A. Bank Service Charges B. Outstanding Checks C. Bank errors D. Bank Service Charges

A. Bank Service Charges

The inventory costing system that charges inventory to cost of goods sold in chronological order is referred to as: A. FIFO B. LIFO C. specific identification D. periodic identification

A. FIFO

In times of rising prices, ______ generally result(s) in the ______ cost of goods sold. A. FIFO, lower B. LIFO and FIFO, same C. LIFO, lower D. FIFO, higher

A. FIFO, lower

Veta Corporation purchased $14,650 in supplies from a vendor offering credit terms of 2/10, n/30. If Veta takes advantage of the discount, the amount paid to the vendor (rounded to the nearest dollar) will be: A. $14,650 B. $14,357 C. Cannot be determined from the information given D. None of the above are correct

B. $14,357

On May 31, Allegro Company had a general ledger cash balance of $7,400. At the end of May, the bank statement had a balance of $7,500. Deposits in transit amounted to $1,000 and there was a service charge of $10. Outstanding checks totaled $1,110. What is the correct amount of cash? A. $7,000 B. $7,390 C. $6,390 D. $6,380

B. $7,390

Apple, Inc. purchased $76,500 of parts from a vendor who offered credit terms of 3/15, n/45. If Apple takes advantage of the discount, the amount paid to the vendor (rounded to the nearest dollar) will be: A. $76,500 B. $74,205 C. $76,271 D. Cannot be determined from the information given

B. $74,205

If net income is -$1,000, how do you report it? A. 1,000 B. (1,000) C. -(1,000) D. None of the above

B. (1,000)

FOB shipping point indicates that goods in transit belong to the: A. Seller B. Buyer C. Common carrier D. either the buyer or seller depending upon the terms of the bill of lading

B. Buyer

Revenues are recognized when they are: A. Realized B. Earned and Realized C. Received Cash D. Earned and have received cash

B. Earned and Realized

On a bank reconciliation, which of the following will reduce the bank's cash balance? A. Deposit in transit B. Outstanding Check C. Non-sufficient Funds Check D. Failure of the company to record the correct amount of the check on the company's records

B. Outstanding Check

Which of the following reflects a weakness in the internal control for cash? A. Cash register generates receipt that documents the cash sale which is given to the customer. B. Two employees have access to the same cash register in order to reduce chance of theft. C. Person making out a check must get authorization before the check is sent. D. The person receiving cash in the mail can not make entries into the accounting records.

B. Two employees have access to the same cash register in order to reduce chance of theft.

Which of the following is not an advantage of LIFO over FIFO? A. lower income taxes B. better inventory figure on balance sheet C. better matching of revenues and costs on the income statement D. cost of goods sold better approximates current replacement cost

B. better inventory figure on balance sheet

How do you calculate goods available for sale?

Beginning Inventory + net purchases

How do you calculate COGS?

Beginning Inventory + net purchases - ending inventory

On July 31, Sonata Company had a general ledger cash balance of $5,900. Deposits in transit amounted to $1,200 and there was a service charge of $20. Outstanding checks totaled $1,500. What is the balance shown on the bank statement at the end of July? A. $5,310 B. $5,880 C. $6,180 D. unable to determine from the information given

C. $6,180

Anthony Company sold merchandise on account to a customer at a price of $5,000. The merchandise cost Anthony $4,200. The terms of the sale were 3/10,n/30. If the customer paid within the discount period, by how much did this transaction increase Anthony's net income? A. $5,000 B. $800 C. $650 D. $300

C. $650

The Quinter Corporation ordered material for its manufacturing process with a price of $75,000 and that had terms of 1/10 net/30. What is the lowest amount of cash Quinter will have to pay if it meets the terms of the discount agreement? A. $67,500 B. $75,000 C. $74,250 D. $52,500

C. $74,250

In times of declining prices, ______ generally result(s) in the ______ net income. A. LIFO, lower B. FIFO, higher C. LIFO, higher D. LIFO and FIFO, same

C. LIFO, higher

Net income is found on which of the following two statements? A. Statement of Cash Flows and Balance Sheet B. Balance Sheet and Income Statement C. Statement of Changes in Stockholders' Equity and Income Statement D. Statement of Changes in Stockholders' Equity and Balance Sheet

C. Statement of Changes in Stockholders' Equity and Income Statement

The 5 primary components of Internal Control are:

Control environment, Risk assessment, Control Activities, Information and communication, Monitoring

What is COGS?

Cost of Goods Sold

Which of the following is not a factor in getting bank and book balances to reconcile? A. Outstanding Checks B. Bank Service Charges C. Deposits in Transit D. Deposits for Cash

D. Deposits for Cash

A bank reconciliation will identify all of the following except? A. Unrecorded bank service charges B. Deposits in Transit C. Outstanding Check D. Double payment of a bill

D. Double payment of a bill

Goods shipped from a seller's warehouse on June 10, 2006, arrived at the buyer's warehouse on June 16, 2006. The invoice for the goods arrived at the buyer's accounting department on June 13, 2006 and was paid on June 20, 2006. If the goods were sold FOB destination, the buyer took legal title on: A. June 20, 2006 B. June 13, 2006 C. June 10, 2006 D. June 16, 2006

D. June 16, 2006

Internal control tries to safeguard assets, increase efficiency of operations, ensure compliance with laws and regulations, and _______?

Enhance accuracy and reliability of accounting records

The ending inventory represents the most recent purchase.

FIFO

This costing system assumes the first item purchased is the first item sold

FIFO

What is "Legal title transfers to customer when goods are received"?

FOB Destination

Shipping terms indicating that legal title passes to the buyer when goods arrive at the buyer's warehouse are:

FOB destination

What is "Legal title transfers when goods leave the seller's place of business"?

FOB shipping point

What is "The set of policies and procedures that promotes operational efficiency, accurate accounting information, and compliance with laws and regulation"?

Internal Control

In periods of inflation this inventory method will result in the lowest income tax.

LIFO

This costing system assumes the last items in are the first items sold.

LIFO

Low inventory levels may lead to a GAIN or LOSS of sales?

LOSS

"Each mail clerk signs the list to establish responsibility for the data"... which type of cash control is this?

Mail receipts

1. Raw materials 2. Work in progress 3. Finished goods These 3 are classifications of what type of company?

Manufacturing Company

Goods shipped from a seller's warehouse on Nov 10, 2006, arrived at the buyer's warehouse on Nov 16, 2006. The invoice for the goods arrived at the buyer's accounting department on Nov 13, 2006 and was paid on Nov 20, 2006. If the goods were sold FOB shipping point, the buyer took legal title on:

November 10, 2006

M&M Corporation ordered materials from Bizet Manufacturing on November 1, 2006, Bizet shipped the materials by barge on November 5 and the barge company notified the consumer on November 22, that the goods had arrived. The consumer picked up the materials on November 23. The terms of the sale are FOB destination. On what date should the consumer consider this a purchase?

November 23

Tri-State Corporation ordered materials from Down-State Manufacturing on October 1, 2006. Down-State shipped the materials by rail on October 5 and the railroad notified Tri-State on October 12, that the goods had arrived. Tri-State picked up the materials on October 13. The terms of the sale are FOB shipping point. On what date should Tri-State consider this a purchase?

October 5

This inventory system determines the amount of inventory by physical count and calculates the cost of goods sold only at the end of specified time periods.

Periodic Inventory System

Which inventory system determines COGS by count at the end of the accounting period?

Periodic System

The Sarbanes-Oxley Act created what Board?

Public Company Accounting Oversight Board (PCAOB)

What are "Reduction in price of goods purchased as a result of dissatisfaction by customer (buyers books)"?

Purchase Allowances

What is "Discount given buyer for paying amount due early"?

Purchase Discounts

What are "Goods return by buyer on buyer's books"?

Purchase Returns

_______ should support each credit purchase.

Purchase invoice

How do you calculate gross profit?

Sales revenue - Cost of Goods Sold

Does the use of a bank help internal control? YES OR NO

YES! The use of a bank contributes significantly to good internal control over cash. - minimizes the amount of currency on hand - creates a double record of bank transactions - bank reconciliation

FOB destination: who pays freight costs?

the seller