Chapters 4,5,6
Which of the following methods are not used for inventory costing?
Simple-average NIFO
Receivables not expected to be collected should
not be counted in assets of the company
A formal credit arrangement between a creditor and debtor is called a(n)
note receivable
Sales to customers in which the customers pay within 30 to 60 days are referred to as
sales on account. credit sales.
Accounts receivable are typically classified as current assets because
they will be converted to cash within 1 year.
The allowance method estimates
uncollectible accounts
Kilian 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
Items held for sale in the normal course of business are referred to as
inventory
The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a
multiple-step income statement
When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?
An entry to reinstate the account receivable and an entry to record payment.
Where is inventory reported in the financial statements?
Balance sheet as a current asset
Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.
Cost of Goods Sold Inventory
the definition of inventory includes which items?
Items held for resale Materials used currently in the production of goods to be sold Items currently in production for future sale
What is the formula for the receivables turnover ratio?
Net credit sales divided by average accounts receivable (net).
A trade discount is
a percentage reduction from list price.
a _________ _________ is the legal right to receive cash from a credit sale and represents an asset of the company
account receivable
The amount of cash owed to a company by its customers from the sale of goods or services is referred to as
accounts receivable
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 concurrent asset
The cost of estimated accounts receivable that will 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
Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for
cost of goods sold. inventory.
When a business provides services to a customer, and the customer promises to pay later, this is referred to as
credit sales
The income statement approach for estimating bad debts focuses on
current year's credit sales.
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
The Accounts Receivable account is reduced when the seller:
determines that a specific customer account will not be collectible
A trade discount is a reduction from the list price, which is used to
disguise real prices from competitors give quantity discounts to customers change prices without publishing a new catalog
A multiple-step income statement reports multiple levels of
income
In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs
incurred several years earlier.
A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:
inventory