Chapter 6 multiple choice

When a company using the allowance method writes off a specific customer's $100,000 account receivable from the accounting system, which of the fallowing statements are true? 1. total stockholders equity remains the same 2. total assets remain the same 3. total expenses remain the same a. 2 b. 1 and 3 c. 1 and 2 d. 1,2 and 3

1,2 and 3

Sales discounts with terms 2/10, n/30 mean: a. 10% discount for payment within 30 days b. 2% discount for payment within 10 days, of the full amount (less returns) due within 30 days. c. two-tenths of a percent discount for payment within 30 days d. none of the above

2% discount for payment within 10 days, of the full amount (less returns) due within 30 days.

you have determines that company x estimates bad debt expense with an aging of accounts receivable schedule. Company X's estimate of uncontrollable receivables resulting from the aging analysis equals $250. The beginning balance in the allowance for doubtful accounts was $220. Write offs of bad debts during the period were $180. What amount would be recorded as bad debt expense for the current period? a.180 b.250 c.210 d.220

210

A company has been successful in reducing the costs of its manufacturing process by relocating the factory to another locale. What effect will this factor have on the company's gross profit percentage ratio, all other things equal? a. The ratio will not change b. The ratio will increase c.the ratio will decrease d. Either (b) or (c)

The ratio will increase

When using the allowance method, as bad debt expense is recorded, a. total assets remain the same and stockholders equity remains the same b. total assets decrease and stockholders equity decreases c. total assets increase and stockholders equity decreases d. total liabilities increase and stock holders equity decreases.

b. total assets decrease and stockholders equity decreases

Gross sales total $250,000, one-half of which were credit sales. Sales returns and allowences of $15,000 apply to the credit sales, sales discounts of 2% were taken on all of the net credit sales, and credit sales of $100,000 were subject to a credit card discount of 3%. what it the dollar amount of net sales? a. $227,000 b.$229,800 c.$250,000 d.$240,000

b.$229,800 (how you do it: 250,000/2 = 125,000 - 15,000 = 110,000. 110,000*2%= 2,200. 110,000-2200 = 107,800. the other 125,000 take 100,00 from it. 125,000-100,000 = 25,000. 100,000*3%=3,000. 100,00-3,000 = 97,000 +25,000 from before = 122,000. 107,800 + 122,000 = 229,800)

Which of the fallowing is NOT a component of net sales? a. sales returns and allowances b. sales discounts c. cost of goods sold d credit card discounts

c. cost of goods sold

Upon review of the most recent bank statement, you discover that you recently received an "insufficient funds check" from a customer. Which of the fallowing describes the actions to be taken when preparing you bank reconciliation? BALANCE PER BOOKS BALANCE PER BANK SMT a. no change decrease b. decrease increase c. decrease no change d. increase decrease

c. decrease no change

Which of the fallowing is NOT a step toward effective internal control over cash? a. require signature from a manager and one financial officer on all checks b. require that cash be deposited daily at the bank c. requires that the person responsible for removing the cash from the register have no access to the accounting records. d. all of the above steps toward effective internal control

d. all of the above steps toward effective internal control

Which of the fallowing best describes the proper presentation of accounts receivable in the financial statements? a. gross accounts receivable plus the allowance for doubtful accounts in the asset section of the balance sheet. b. Gross accounts receivable in the asset section of the balance sheet and the allowance for doubtful accounts in the expense section of the income statement. c. gross accounts receivable less bad debt expense in the asset section of the balance sheet d. gross accounts receivable less the allowance for doubtful accounts in the asset section of the balance sheet.

d. gross accounts receivable less the allowance for doubtful accounts in the asset section of the balance sheet.