AC Learnsmarts

Reconsiliation

A bank ___ is an internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash. (Enter one word per blank.)

$8,750

A company has a $8,000 cash balance per its books. The bank statement has a balance of $8,450. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, EFTs of $1,000 were received from customers, a $200 NSF check from a customer, and a $50 bank service charge. Given the above reconciling items, the up-to-date cash balance equals

estimated amount of this period's credit sales that customers will fail to pay

A company's Bad Debt Expense reports the ______. Multiple choice question. estimated amount of this period's credit sales that customers will fail to pay amount owed on loans increase in accounts receivable cost of defaulting on its notes payable

The same period as credit sales

The estimated amount of credit sales that customers will likely fail to pay is recorded as bad debt expense in which period? Multiple choice question. The same period as credit sales The period after credit sales are made The period before credit sales are made

decrease

The gross profit percentage is the ratio to watch if you are worried about increased competition. If the company lowers its prices to retain market share without lowering its cost of goods sold, its gross profit percentage will ______. Multiple choice question. increase decrease stay the same

revenue

When a seller fulfills its performance obligation, it credits ______. Multiple choice question. Accounts Payable Revenue Accounts Receivable Deferred Revenue

Allowance for Doubtful Accounts

Which of the following is contra-asset account? Multiple choice question. Common Stock Depreciation Expense Allowance for Doubtful Accounts Deferred Revenue

outstanding checks

Which of the following is subtracted from the bank balance on a bank reconciliation? Multiple choice question. Deposits in transit Bank service charge EFT received from customers Outstanding checks

periodic

under the ___ inventory system, inventory records are updated only at the end of the accounting period. (Enter one word per blank.)

monitoring activities

The ______ component of an internal control system refers to the evaluation of internal controls to identify deficiencies. Multiple choice question. risk assessment control environment monitoring activities control activities

book

The company needs to record the reconciling items that are on the ______ side of the bank reconciliation. Multiple choice question. book bank

perpetual

a benefit of the ___ inventory system is that inventory shrinkage from theft, fraud and error is able to be estimated. (Enter one word per blank.)

goods sold

FIFO, an inventory costing method, actually describes how to calculate the cost of ______. Multiple choice question. beginning inventory goods available for sale goods sold

they arrive at the buyer's place of business

FOB destination means that goods are owned by the buyer as soon as ______. Multiple choice question. the sales contract is signed they arrive at the buyer's place of business they leave the seller's place of business

minus Sales Returns, Allowances and Discounts

Net Sales on an income statement equals Sales Revenue ______. Multiple choice question. minus Sales Returns, Allowances and Discounts plus Sales Returns, Allowances, and Discounts minus Cost of Goods Sold plus Sales Returns and Allowance less Sales Discounts

deduction from sales

Sales discounts should appear in the financial statements as a(n) ______. Multiple choice question. addition to inventory deduction from sales addition to sales part of current liabilities operating expense

The company's management

Who decides which of the many inventory accounting methods a company should use? Multiple choice question. The Securities and Exchange Commission (SEC) GAAP The Public Company Accounting Oversight Board (PCAOB) The company's management Competitive companies get together and agree on a single method that all will use

sufficient

"NSF" checks stands for "non-_____ funds". (Add only one word per blank.)

temporary account so its balance is closed (zeroed out) at the end of the accounting period

Bad Debt Expense is a ______. Multiple choice question. temporary account so its balance carries forward to the next accounting period temporary account so its balance is closed (zeroed out) at the end of the accounting period permanent account so its balance is closed (zeroed out) at the end of the accounting period permanent account so its balance carries forward to the next accounting period

reconciling

Comparing two sets of records is called ______. Multiple choice question. differentiation reconciling clearing requisitioning

added to the book balance

In a bank reconciliation, interest revenue earned on the bank account balance is ______. Multiple choice question. deducted from the bank balance added to the bank balance deducted from the book balance added to the book balance

deduction from the book balance

A bank service charge should be a(n) ______ on a bank reconciliation. Multiple choice question. deduction from the bank balance deduction from the book balance addition to the book balance addition to the bank balance

amounts owed to a business by its customers

Accounts Receivable represent ______. Multiple choice question. cash sales made by the business over the period amounts owed by a business to its suppliers amounts owed to a business by its customers

a write-off

Removing an uncollectible account and its corresponding allowance from the accounting records is called ______. Multiple choice question. a write-up double entry accounting subsidiary accounting a write-off

$9,910 Reason: The correct cash balance is $9,910 (=$10,000 - 100 + 10).

Acme, Inc.'s books show an ending cash balance of $10,000 before preparing the bank reconciliation. Given the bank reconciliation shows outstanding checks of $3,000; deposits in transit of $2,000; NSF check of $100; and interest earned on the bank account of $10, the company's up-to-date ending cash balance equals ______. Multiple choice question. $9,910 $6,910 $8,910 $10,110

purchase order

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered ___ ______that identifies the supplier, the delivery location, and the approved quantity and cost. (Enter one word per blank.)

are convenient and efficient

An advantage of direct deposits is they ______. Multiple choice question. prevent wrong amounts from being recorded require checks be deposited once and payment is made automatically are EFTs are convenient and efficient

notes to the financial statements

Companies generally report their accounting method for inventory in the ______. Multiple choice question. balance sheet bottom section of the balance sheet and income statement notes to the financial statements income statement

notes to the financial statements

Companies generally report their accounting method for inventory in the ______. Multiple choice question. income statement balance sheet notes to the financial statements bottom section of the balance sheet and income statement

the FIFO

If a company's inventory costs are rising, ______ inventory costing method(s) typically results in a higher income tax expense. Multiple choice question. the FIFO the LIFO both FIFO and LIFO

book

In a bank reconciliation, interest revenue on the bank account balance is added to the ______ balance. Multiple choice question. bank book

voucher

A(n) ______ system involves the processing of purchases and payments made on account. Multiple choice question. accounts payable cash receipts reconciliation voucher imprest

become Cost of Goods Sold on the income statement

Goods Available for Sale will ______ when sold. Multiple choice question. be reported as Cost of Goods Sold on the balance sheet be reported as Sales Revenue on the balance sheet be reported as Inventory on the income statement become Cost of Goods Sold on the income statement

Cost of Goods Sold on the income statement differs between the methods causing Income Tax Expense to differ.

How does the inventory costing methods affect the income statement when costs tend to rise over time? Multiple choice question. Inventory on the income statement differs between the methods causing Income Tax Expense to differ. The methods do not have an effect on the income statement. Sales and Cost of Goods Sold on the income statement differ between the methods causing Income Tax Expense to differ. Cost of Goods Sold on the income statement differs between the methods causing Income Tax Expense to differ. Inventory on the income statement differs between the methods causing Sales to differ.

Only the items that have market values lower than the costs will be written down.

How is the lower-of-cost-or-market rule applied when there are more than 2 types of inventory? Multiple choice question. The differences between the costs and market values of each item is determined and any increases in value will offset any decreases. Only the items that have costs lower than market values will be written down. Only the items that have market values lower than the costs will be written down.

its assets and stockholders' equity would be overstated

If a company were to ignore the fact that the market value of its inventory is lower than its cost, then ______. Multiple choice question. its assets and liabilities would be overstated its assets and stockholders' equity would be overstated its liabilities would be understated and its stockholders' equity overstated its accounting equations is correctly stated since the effect of the drop in value will be recorded when the goods are sold

correct

Under a perpetual inventory system, the entry to record the return of goods you had previously purchased on account was recorded with a debit to Accounts Payable and a credit to Inventory. This entry is ______. Multiple choice question. incorrect and will cause assets to be understated incorrect and will cause assets to be overstated incorrect and will cause liabilities to overstated correct

Weighted average cost

What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then divides that by the number of units available for sale to get a value to assign to all goods sold and all goods remaining in inventory? Multiple choice question. FIFO Weighted average cost LIFO Specific identification

the same period the related credit sales are recorded

An objective of the expense recognition (matching) principle is to have bad debt expense debited in ______. Multiple choice question. the same period that the related accounts receivable is determined to be uncollectible a later period after the related credit sales are recorded the same period the related credit sales are recorded

market value if lower than cost

Applying the lower of cost or market rule results in inventory being reported at the ______. Multiple choice question. cost because the historical cost rule takes precedence higher market values market value if lower than cost

its assets and stockholders' equity would be overstated

If a company were to ignore the fact that the market value of its inventory is lower than its cost, then ______. Multiple choice question. its assets and stockholders' equity would be overstated its accounting equations is correctly stated since the effect of the drop in value will be recorded when the goods are sold its assets and liabilities would be overstated its liabilities would be understated and its stockholders' equity overstated

deducted from the bank balance

In a bank reconciliation, an outstanding check is ______. Multiple choice question. added to the bank balance deducted from the book balance added to the book balance deducted from the bank balance

added to the book balance

In a bank reconciliation, the electronic funds transfer (EFT) received by the bank from a customer's note receivable owed to the company is ______. Multiple choice question. deducted from the bank balance added to the bank balance added to the book balance deducted from the book balance

LIFO would result in a higher Cost of Goods Sold making the Income Tax Expense lower than FIFO.

In times of rising prices, why would a company choose LIFO over FIFO? Multiple choice question. LIFO would result in a higher Cost of Goods Sold making the Income Tax Expense lower than FIFO. LIFO would result in a lower Cost of Goods Sold making the company look more profitable than FIFO. LIFO would result in a higher Inventory balance making the company's current assets look more favorable than FIFO.

current asset on the balance sheet

Inventory is reported as a(n) ______. Multiple choice question. current asset on the income statement expense on the balance sheet current asset on the balance sheet noncurrent asset on the balance sheet expense on the income statement

subtraction from the book balance

NSF checks from customers should be a(n) ______ on a bank reconciliation. Multiple choice question. subtraction from the book balance addition to the book balance subtraction from the bank balance addition to the bank balance

deduction from the bank balance

Outstanding checks written by the company should be a(n) ______ on the company's bank reconciliation. Multiple choice question. addition to the bank balance addition to the book balance deduction from the book balance deduction from the bank balance

cost of goods available for sale

The Inventory balance on the balance sheet reports the ______. Multiple choice question. cost of goods available for sale price times the quantity of goods sold cost of goods that have been delivered to customers during the period cost of merchandise purchased during the period

receiving

The document that indicates the date, quantity, and condition of the goods is called a ____ report. It is then sent to the accounting department to notify that the purchase can be recorded. (Enter one word per blank.)

write-off of a specific customer's account

The entry that includes a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable is a(n) ______. Multiple choice question. write-off of a specific customer's account adjusting entry to allow for estimated bad debts net realizable entry to report the amount expected to be collected

Accounts Payable; Cash

The journal entry to record the payment for merchandise previously purchased on account includes a debit to ______ and a credit to ______. Multiple choice question. Inventory; Accounts Payable Accounts Payable; Cash Accounts Receivable; Cash Accounts Receivable; Inventory Inventory; Accounts Receivable Accounts Payable; Inventory

of 2% if paid within 10 days of the purchase date

The purchase discount term, 2/10, n/30, means that the purchaser may receive a discount ______. Multiple choice question. between 2% and 10% of 2% if paid within 10 days of the purchase date of 10% discount if the invoice is paid within two days of the purchase date of 2/10 of the invoice price if paid within 30 days

requisition

The purchasing system begins with an authorized employee completing a manual or electronic purchase _____form which is then reviewed and approved by a supervisor before an order is placed with a supplier.

supplier invoice

This document is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting records. Multiple choice question. purchase order supplier invoice purchase requisition voucher receiving report

supplier invoice

This document is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting records. Multiple choice question. receiving report purchase order voucher purchase requisition supplier invoice

It would be deducted from the book balance.

This month's bank statement includes a check from a customer that was marked NSF. How would this item be treated on the bank reconciliation? Multiple choice question. It would be added to the bank balance. It would be deducted from the bank balance. It does not belong on the bank reconciliation. It would be added to the book balance. It would be deducted from the book balance.

false

True or false: Gross Profit is a stockholders' equity account and is credited when goods are delivered to customers. True false question. True False

LIFO

Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased? Multiple choice question. LIFO FIFO Periodic Perpetual Weighted average Specific identification

perpetual

Which inventory system requires purchases of merchandise to be recorded in the inventory account instead of the purchases account?

periodic

Which inventory system updates the inventory account only at the end of the accounting period? Multiple choice question. FIFO LIFO Perpetual Periodic

control environment

Which is the control component of an internal control system that refers to the attitude of employees in the organization? Multiple choice question. assignment of responsibilities independent verification compliance control environment

deposits in transit

Which of the following is added to the bank balance on a bank reconciliation? Multiple choice question. Deposits in transit Bank service charge EFT received from customers Outstanding checks

deducted from the Cash balance in your accounting records

Your customer's NSF check found on the bank statement is a reconciling item on a bank reconciliation and will need to be ______. Multiple choice question. added to the Cash balance in your accounting records added back to the bank balance deducted from the Cash balance in your accounting records deducted from the bank balance twice since it was added in error originally

deducted from the Cash balance in your accounting records

Your customer's NSF check found on the bank statement is a reconciling item on a bank reconciliation and will need to be ______. Multiple choice question. deducted from the bank balance twice since it was added in error originally added back to the bank balance added to the Cash balance in your accounting records deducted from the Cash balance in your accounting records

Raw materials; work in process; finished goods

______ inventory will enter the production process and become ______ inventory. Once complete, the goods will become ______ inventory. Multiple choice question. Raw materials; in transit; finished goods Raw materials; finished goods; consignment Raw materials; work in process; finished goods Raw materials; consignment; finished goods Merchandise; finished goods; cost of goods sold Merchandise; work in process; finished goods

outstanding, bank

____checks written by the company that have not cleared the bank are subtracted from the____balance on a bank reconciliation. (Enter one word per blank.)

invoice

The supplier___ is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting records. (Enter one word per blank.)

cleared

When a check is presented to a bank for payment and the amount is deducted from the payer's account, the check is said to have ___ the bank. (Enter one word per blank.)

revenue

When a seller fulfills its performance obligation, it credits ______. Multiple choice question. Deferred Revenue Accounts Payable Revenue

higher Inventory on the balance sheet

When costs to purchase inventory are falling over time, using LIFO leads to reporting ______ than FIFO. Multiple choice question. lower Inventory on the balance sheet higher Inventory on the balance sheet lower Inventory on the income statement higher Inventory on the income statement

lower value for Inventory on the balance sheet

When costs to purchase inventory are rising, using LIFO leads to reporting a ______ than FIFO. Multiple choice question. lower value for Inventory on the income statement lower value for Inventory on the balance sheet higher value for Inventory on the income statement higher value for Inventory on the balance sheet

Freight-in with terms FOB shipping point

Which of the following costs should be added to the buyer's Inventory account? Multiple choice question. Freight-in with terms FOB destination Freight-out with terms FOB destination Freight-in with terms FOB shipping point

An estimate is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Account in the same period as the related sale.

Which of the following is recorded at the end of an accounting period when accounting for receivables using the allowance method? Multiple choice question. An estimate is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Account in the same period as the related sale. The write off of specific customer accounts is recorded by debiting Allowance for Doubtful Accounts and crediting Bad Debt Expense. The write off of specific customer accounts is recorded by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts. The write off of specific customer accounts is recorded by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable.

freight-in if shipped FOB shipping point purchases of merchandise on account

Which of the following should be debited to Inventory? (Select all that apply.) Multiple select question. freight-in if shipped FOB shipping point freight-out purchases of merchandise on account purchase discounts

Accounts Receivable consists of many customer accounts and thus cannot be credited unless it is known which specific customer is not going to pay.

Why is Allowance for Doubtful Accounts credited, instead of Accounts Receivable, when recording the adjusting entry for bad debts? Multiple choice question. Allowance for Doubtful Accounts is not credited; Accounts Receivable is credited when recording the adjusting entry for bad debts. Accounts Receivable consists of many customer accounts and thus cannot be credited unless it is known which specific customer is not going to pay. Allowance for Doubtful Accounts is credited because if Accounts Receivable were credited, the assets would be overstated. Allowance for Doubtful Accounts is credited because if Accounts Receivable were credited, the assets would be understated.