ACC 202 Ch 4-6

Subsidiary ledger:

: A group of individual accounts associated with a particular general ledger control account.

Sales return

: Customer returns a product

LIFO conformity rule

: IRS rule requiring a company that uses LIFO for tax reporting to also use LIFO for financial reporting

Weighted-average cost method

: Inventory costing method that assumes both cost of goods sold and ending inventory consist of a random mixture of all the goods available for sale.

A company accepts a note receivable of $5,000 on September 1, 2021, that matures in 10 months and has stated interest of 6%. What amount of interest revenue will the company record in 2021 and 2022? a. 2021 = $100; 2022 = $150. b. 2021 = $125; 2022 = $125. c. 2021 = $150; 2022 = $100. d. 2021 = $0; 2022 = $250.

A

Which of the following generally is recorded at the time a company provides services to customers on account? a. Accounts receivable. b. Interest receivable. c. Notes receivable. d. Tax refund claims.

A

internal controls

A company's plans to (1) safeguard the company's assets and (2) improve the accuracy and reliability of accounting information

Net revenues

A company's total revenues less any discounts, returns, and allowances

Invoice:

A source document that identifies the date of sale, the customer, the specific items sold, the dollar amount of the sale, and the payment terms

Contra revenue account

An account with a balance that is opposite, or "contra," to that of its related revenue account.

LIFO adjustment:

An adjustment used to convert a company's own inventory records maintained throughout the year on a FIFO basis to LIFO basis for preparing financial statements at the end of the year

Multiple-step income statement:

An income statement that reports multiple levels of income (or profitability)

Average collection period:

Approximate number of days the average accounts receivable balance is outstanding. It equals 365 divided by the receivables turnover ratio

Average days in inventory

Approximate number of days the average inventory is held. It equals 365 days divided by the inventory turnover ratio

Which of the following would be true for a company that has an accounts receivable turnover of 10? a. The company turns over their accounts receivable more than once a month. b. The company would have an average collection period of 36.5 days. c. The company would be considered as doing an efficient job of collecting receivables if the terms were net 30. d. The company would have an average collection period of 20 days.

B

Aging method:

Basing the estimate of future bad debts on the various ages of individual accounts receivable, using a higher percentage for "old" accounts than for "new" accounts.

SALES/ REV IS A USUALLY A _________ BALANCE BUT A _________ WITH A CONTRA

CREDIT, DEBIT

Allowance for uncollectible accounts:

Contra asset account representing the amount of accounts receivable not expected to be collected.

Freight-out:

Cost of freight on shipments to customers, which is included in the income statement either as part of cost of goods sold or as a selling expense

Cost of goods sold

Cost of the inventory that was sold during the period

Freight-in

Cost to transport inventory to the company, which is included as part of inventory cost.

Uncollectible accounts

Customers' accounts that no longer are considered collectibl

WHAT IS THE ENTRY OF A SALE

DR A/R CR SALES/ REV

payment within the discount period would be recorded as

DR cash DR sales discounts CR A/R

positive adjustment in company books

DR. CASH CR. INTREST REV CR NOTES RECEIVABLE

Net income

Difference between all revenues and all expenses for the period

NEGATIVE adjustments in company books?

Dr. A/r Dr. Bank service fee cr. CASH

Net realizable value

Estimated selling price of the inventory in the ordinary course of business less any costs of completion, disposal, and transportation

Notes receivable

Formal credit arrangements evidenced by a written debt instrument, or note

First-in, first-out method (FIFO):

Inventory costing method that assumes the first units purchased (the first in) are the first ones sold (the first out)

Last-in, first-out method (LIFO):

Inventory costing method that assumes the last units purchased (the last in) are the first ones sold (the first out).

Specific identification method

Inventory costing method that matches or identifies each unit of inventory with its actual cost

Perpetual inventory system

Inventory system that maintains a continual record of inventory purchased and sold.

Periodic inventory system:

Inventory system that periodically adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand

Inventory:

Items a company intends for sale to customers in the ordinary course of business

Gross profit ratio:

Measure of the amount by which the sale of inventory exceeds its cost per dollar of sales. It equals gross profit divided by net sales.

Percentage-of-receivables method

Method of estimating uncollectible accounts based on the percentage of accounts receivable expected not to be collected

Allowance method:

Method of reporting accounts receivable for the net amount expected to be collected.

Lower of cost and net realizable value:

Method where companies report inventory in the balance sheet at the lower of cost and net realizable value, where net realizable value equals estimated selling price of the inventory in the ordinary course of business less any costs of completion, disposal, and transportation.

Receivables turnover ratio:

Number of times during a year that the average accounts receivable balance is collected (or "turns over"). It equals net credit sales divided by average accounts receivable

Income before income taxes:

Operating income plus nonoperating revenues less nonoperating expense

What type of activity, cash, flow: purchase supplies on account; $23,000

Operating, No, ---

Operating income:

Profitability from normal operations that equals gross profit less operating expenses.

Direct write-off method:

Recording bad debt expense at the time we know the account is actually uncollectible.

Sales discount:

Reduction in the amount to be received from a credit customer if collection on account occurs within a specified period of time

Trade discount

Reduction in the listed price of a good or service

Net sales =

Sales - returns- discount

Sales allowance:

Seller reduces the customer's balance owed or provides at least a partial refund because of some deficiency in the company's good or service

Accounts Receivable

The amounts owed to the company by its customers from the sale of goods or services on account

Bad debt expense:

The cost of estimated future bad debts that is reported as an expense in the current year's income statement

Gross profit:

The difference between net sales and cost of goods sold.

Net accounts receivable:

The difference between total accounts receivable and the allowance for uncollectible accounts. p

Inventory turnover ratio:

The number of times a firm sells its average inventory balance during a reporting period. It equals cost of goods sold divided by average inventory

Credit sales:

Transfer of goods or services to a customer today while bearing the risk of collecting payment from that customer in the future. Also known as sales on account or services on account.

10. Employee purchases of supplies with a company-issued credit card is typically recorded with a credit to ( LO4-6) a. Accounts Payable. b. Supplies. c. Cash. d. Supplies Expense.

a

11. Maxwell Corporation has the following inventory information at the end of the year: Inventory: item a, b, c quanity: 20, 50, 40 unit cost: 20, 30, 10 unit nrv: 35, 25, 15 Using the lower of cost and net realizable method, for what amount would Maxwell report ending inventory? a. $2,050. b. $2,300. c. $2,550. d. $2,800.

a

2. Measurement (end of the year): At the end of the year, an adjusting entry is recorded to estimate future uncollectible accounts. The adjusting entry involves: a. Debit Bad Debt Expense; credit Allowance for Uncollectible Accounts. b. Debit Bad Debt Expense; credit Accounts Receivable. c. Debit Service Revenue; credit Accounts Receivable. d. Debit Allowance for Uncollectible Accounts; credit Accounts Receivable.

a

3. For the year, Marvell Incorporated reports net sales of $100,000, cost of goods sold of $80,000, and an average inventory balance of $40,000. What is Marvell's gross profit ratio? ( LO6-7) a. 20%. b. 25%. c. 40%. d. 50%.

a

3. Which of the following levels of profitability in a multiple-step income statement represents revenues from the sale of inventory less the cost of that inventory? ( LO6-2) a. Gross profit. b. Operating income. c. Income before income taxes. d. Net income.

a

3. what is the concept behind separation of duties in establishing internal control a. employee fraud is likley to occur when access to assets and access to account records are seperate b. the company's financial accountant should not share info with the company's tax accountant c. duties of middle-level managers of the company should be clearly seperated from those of top executives d. the external auditors of the company should have no contact with managers while the audit is taking place

a

4. Madison Outlet has the following inventory transactions for the year: date: jan 1, march 14, jan 1-- dec. 31 transaction: beginning inventory, purchause, total sales to customers number of units: 10, 15, 12, unit cost: 200, 300 total cost: 2,000, 4,500 6,500 What amount would Madison report for cost of goods sold using FIFO? a. $2,600. b. $2,900. c. $3,600. d. $3,900.

a

5. Decision Making (ratio analysis): A company that achieves a higher markup on the sale of its inventory to customer would have a gross profit ratio. a. Higher. b. Lower.

a

5. Decision Making (ratio analysis): A company that provides credit sales or services to customers and then more effectively collects cash from those credit customers would report a _______ receivables turnover ratio. a. Higher. b. Lower.

a

7. Using the information in Self-Study Question 4, what amount would Madison report for ending inventory using weighted-average cost? ( LO6-3) a. $3,380. b. $3,250. c. $3,120. d. $3,000.

a

9. Which of the following adjusts the company's balance of cash in a bank reconciliation? a. Notes collected by the bank. b. Checks outstanding. c. Deposits outstanding. d. An error by the bank.

a

At the end of the year, a company reports the following inventory amounts ($ per unit): Item # of Units Cost Net Realizable Value A 100 $4 $8 B 150 $8 $6 The year-end adjustment using the lower of cost and net realizable value would include: a. A credit to Inventory for $300 b. A debit to Cost of Goods Sold for $400 c. A debit to Inventory for $500 d. A credit to Cost of Goods Sold for $700

a

Net sales are $100,000 and cost of goods sold is $70,000. Inventory balances for the past two years are $10,000 and $20,000. What is the inventory turnover? a. 4.67 times per year b. 7.00 times per year c. 6.67 times per year d. 3.50 times per year

a

On December 31 before adjusting entries, a GAAP company reports the following balances: Accounts Receivable $100,000 Allowance for Uncoll. Accts. $2,000 (credit) The company estimates bad debts to be 20% of accounts receivable. The adjusting entry would include: a. A debit to Bad Debt Expense = $18,000. b. A credit to Allowance for Uncoll. Accts. = $24,000. c. A credit to Allowance for Uncoll. Accts. = $22,000. d. A debit to Bad Debt Expense = $20,000.

a

Which inventory method or cost flow assumption most closely resembles the actual physical flow of goods? a. F I F O b. L I F O c. Weighted-average d. F I L O

a

an example of internal controls over cash includes a. bank reconciliation b. a balance sheet provided to investor at the end of the year c. disclosures by management related to planned operations

a

cost of goods sold is a. Reported in the income statement b. Reported in the balance sheet c. A current asset d. The cost of inventory on hand at the end of the period

a

Inventory is classified as

a current asset

What does a write off reduce the balance of?

a/r, and allowance for uncollectible debt

1. Measurement (during the year): During the year, a company provides services to customers on account and expects to receive cash in the future. The company records these services on account to which of the following accounts? a. Cash. b. Accounts Receivable. c. Allowance for Uncollectible Accounts. d. Services on account are not recorded until the cash is collected.

b

12. Operating cash flows would include which of the following? ( LO4-7) a. Repayment of borrowed money. b. Payment for employee salaries. c. Services provided to customers on account. d. Payment for a new operating equipment.

b

15. Suppose Ajax Corporation overstates its ending inventory amount. What effect will this have on the reported amount of cost of goods sold in the year of the error? ( LO6-9) a. Overstate cost of goods sold. b. Understate cost of goods sold. c. Have no effect on cost of goods sold. d. Not possible to determine with information given.

b

2. At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $4,000. What amount will Bennett report for cost of goods sold? ( LO6-2) a. $11,000. b. $11,500. c. $12,000. d. $12,500.

b

2. On January 1, 2024, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in eight months. Calculate the amount of interest revenue Nees will record on September 1, 2024, the date that the note is due. ( LO5-7) a. $300. b. $600. c. $900. d. $1,000

b

3. Communication (income statement): The balance of Bad Debt Expense from estimating future uncollectible accounts has what effect on the income statement in the current year? a. Increases net income. b. Decreases net income. c. No effect.

b

3. On May 1, 2024, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in 12 months. Nees has a December 31 year-end. Calculate the amount of interest revenue Nees will report in its 2024 and 2025 income statements. ( LO5-7) a. 2024 = $300; 2025 = $600. b. 2024 = $600; 2025 = $300. c. 2024 = $900; 2025 = $0. d 2024 = $0; 2025 = $900

b

3. Refer to the information in the previous question. What is the amount of net revenues (sales minus sales discounts) as of March 23? a. $0. b. $11,760. c. $12,000. d. $12,240

b

4. a primary benefit of performing a bank reconciliation is a. accuracy of rev in income statement b. accuracy of cash reported in the balance sheet c. accuracy of liabilites reported in the balance sheet.

b

5. A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates 1% of credit sales will be uncollectible. At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet? ( LO5 9) a. $4,000 b. $4,400 c. $3,600 d. $800

b

5. At the end of its first year of operations, a company estimates future uncollectible accounts to be $4,500. The company's year-end adjusting entry would include ( LO5-3) a. A credit to Accounts Receivable for $4,500. b. A credit to Allowance for Uncollectible Accounts for $4,500. c. A debit to Allowance for Uncollectible Accounts for $4,500 d. no adjusting entry is necessary because the accounts are not yet actual bad debts

b

5. Which of the following is considered cash for financial reporting purposes? ( LO4-3) a. Accounts receivable from customers who are expected to pay. b. Investments with maturity dates less than three months from the date of purchase. c. Credit cards used by the company to purchase office supplies. d. Accounts payable to local vendors used on a regular basis.

b

6. Using the allowance method, the entry to record a write-off of accounts receivable will include ( LO5-4) a. A debit to Bad Debt Expense. b. A debit to Allowance for Uncollectible Accounts. c. No entry because an allowance for uncollectible accounts was established in an earlier period. d. A debit to Service Revenue.

b

6. Which of the following generally would be considered good internal control of cash disbursements? ( LO4-4) a. Make all cash disbursements using cash rather than debit cards or credit cards. b. Set maximum purchase limits on debit cards and credit cards. c. Credit cards used by the company to purchase office supplies. d. Accounts payable to local vendors used on a regular basis.

b

7. Which of the following generally would not be considered good internal control of cash receipts? ( LO4-4) a. Allowing customers to pay with a debit card. b. Requiring the employee receiving the cash from the customer to also deposit the cash into the company's bank account. c. Recording cash receipts as soon as they are received. d. Allowing customers to pay with a credit card.

b

8. A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement? a. $400. b. $2,800. c. $3,200. d. $3,600.

b

8. Which inventory cost flow assumption generally results in the lowest reported amount for cost of goods sold when inventory costs are rising? ( LO6-4) a. Lower of cost and net realizable value. b. First-in, first-out (FIFO). c. Last-in, first-out (LIFO). d. Weighted-average cost.

b

A company has the following inventory transactions: Jan. 1 Beginning inventory 100 units @ $4 each Jan. 15 Purchase 100 units @ $5 each Jan. 31 Purchase 100 units @ $6 each What would be the cost of goods sold under the F I F O method if 120 units were sold in January? a. $ 600 b. $ 500 c. $ 620 d. $ 720

b

During a period of rising prices, which inventory cost flow assumption would result in the highest cost of goods sold, and thereby the lowest net income? a. F I F O b. L I F O c. Weighted-average d. FILO

b

The effect of a sales allowance will result in which of the following: a. An increase to net income. b. A decrease to net income. c. An increase to accounts receivable. d. An increase to sales revenue.

b

Which level of profitability is considered profit from normal operations? a. Gross profit b. Operating income c. Income before taxes d. Net income

b

1. Accounts receivable are best described as a. Liabilities of the company that represent the amount owed to suppliers. b. Amounts that have previously been received from customers. c. Assets of the company representing the amount owed by customers. d. Amounts that have previously been paid to suppliers.

c

1. Measurement (during the year) : During the year, a company purchases inventory on account for sale to customers. The company records the purchase (under a perpetual inventory system) to a. Cost of Goods Sold for the expected selling price. b. Inventory for the expected selling price. c. Cost of Goods Sold for the total cost of the items. d. Inventory for the total cost of the items.

c

1. the primary purpose of a company's internal controls are to a. safegaurd assets b. improve accuracy and reliability of acct info c. both a and b

c

10. Kidz Incorporated reports the following aging schedule of its accounts receivable with the estimated percent uncollectible. Age Group : 0-60, 61-90 days, more than 90 past dues account receivable: 20,000, 6,000, 2,000 TOTAL: 28,000 estimated percent uncollectible: 2%, 15%, 50% At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet? a. $1,150. b. $1,900. c. $2,300. d. $5,900.

c

11. The purpose of a petty cash fund is to ( LO4-6) a. Provide a convenient form of payment for the company's customers. b. Pay employee salaries at the end of each period. c. Provide cash on hand for minor expenditures. d. Allow the company to save cash for major future purchases.

c

14. Using a periodic inventory system, the purchase of inventory on account would be recorded as ( LO6-8) a. Debit Cost of Goods Sold; credit Inventory. b. Debit Inventory; credit Sales Revenue. c. Debit Purchases; credit Accounts Payable. d. Debit Inventory; credit Accounts Payable.

c

2. On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What amount would Fox record as revenue on March 17? a. $12,400. b. $11,760. c. $12,000. d. $2,240.

c

3. a bank reconciliation reconciles the difference between the bank's balance of cash and the company's balance of cash related to a. timing differences b. errors and fraud c. both a and b represent differences that should be reconciled

c

4. At the beginning of 2024, Clay Ventures has total accounts receivable of $100,000. By the end of 2024, Clay reports net credit sales of $900,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Clay Ventures? ( LO5-8) a. 2.0. b. 4.5. c. 6.0. d. 9.0.

c

4. At the end of the previous year, a company's balance sheet reports cash of $30,000. For the current year, the company's statement of cash flows reports operating cash inflows of $90,000; investing outflows of $110,000; and financing inflows of $40,000. What amount of cash will be reported in the current year's balance sheet? ( LO4-8) a. $90,000. b. $20,000. c. $50,000. d. $120,000.

c

4. Communication (balance sheet): Which of the follow best describes the amount at which ending inventory is reported in the balance sheet? a. Original purchase cost. b. Net realizable value (estimated selling price). c. Lower of original purchase cost and net realizable value. d. Higher of original purchase cost and net realizable value

c

4. Communication (balance sheet): Which of the following is reported in the balance sheet as a contra (or negative) asset account equal to the amount of estimated future uncollectible accounts? a. Bad Debt Expense. b. Accounts Receivable. c. Allowance for Uncollectible Accounts. d. Service Revenue

c

5. a primary benefit of internal controls over cash is to improve a. management's ability to asses which of its company's products is most profitable b. creditors' understanding of a company's total obligations c. the amounts reported in the statement of cash flows

c

6. Using the information in Self-Study Question 4, what amount would Madison report for cost of goods sold using LIFO? ( LO6-3) a. $2,600. b. $2,900. c. $3,600. d. $3,900

c

When an entry is made to write off an uncollectible account, a. Bad debt expense is debited. b. Net income is decreased. c. Net accounts receivable is unchanged. d. The allowance account is credited

c

When writing off an uncollectible account: a. Bad debt expense is debited. b. Net income is decreased. c. Total assets are unchanged. d. The allowance account is credited.

c

Which of the following computations would be used to compute Net Revenue? a. Total Revenue + Accounts Receivable - Sales Discounts - Sales Allowances. b. Net Revenue + Sales Allowances - Sales Discounts. c. Total Revenue - Sales Discounts - Sales Allowances. d. Net Income - Change in Accounts Receivable.

c

Which of the following is true regarding Allowance for Uncollectible Accounts? a. It is a liability account. b. It is added to the total of Sales Discounts, Sales Returns, and Sales Allowances. c. It is subtracted from the balance of Accounts Receivable in the balance sheet. d. It appears in the income statement as an expense.

c

deposit outstanding

cash receipts of the company that have not been added to the bank's record of the company's balance

NSF Check

check received and deposited by a company that is later determined by the bank to have nonsufficient funds "bad check from a customer"

checks outstanding

checks that the company wrote but did not subtract from bank's record of the company's balance

purchase cards

company-issued debit cards or credit cards that allow authorized employees to make purchases on behalf of the company

turnover ratio

cost of goods sold/ avg inventory

0. Using a perpetual inventory system, the sale of inventory on account would be recorded as ( LO6-5) a. Debit Cost of Goods Sold; credit Inventory. b. Debit Inventory; credit Sales Revenue. c. Debit Accounts Receivable; credit Sales Revenue. d. Both a. and c. are correct.

d

1. Which of following companies record revenues when selling inventory? ( LO6-1) a. Service companies. b. Manufacturing companies. c. Merchandising companies. d. Both manufacturing and merchandising companies.

d

1. fraudulent reporting by management could include a. fictitious revenues from a fake customer b. improper asset valuation c. mismatching revenues and expenses d. all of the above

d

11. The direct write-off method is generally not permitted for financial reporting purposes because ( LO5-6) a. Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income. b. This method is primarily used for tax purposes. c. It is too difficult to accurately estimate future bad debts. d. Accounts receivable are not stated for the amount of cash expected to be collected.

d

13. Investing cash flows would include which of the following? ( LO4-7) a. Payment for advertising. b. Payment of dividends to stockholders. c. Cash sales to customers. d. Payment for land.

d

15. Which of the following could cause a company to have a high ratio of cash to noncash assets? ( LO4-8) a. Highly volatile operations. b. Low dividend payments. c. Significant foreign operations. d. All of these factors could contribute to a high ratio of cash to noncash assets.

d

2. Measurement (end of the year): At the end of the year, an adjusting entry is recorded to reduce ending inventory from its recorded cost to net realizable value (NRV). The adjusting entry involves a. Debit Accounts Payable; credit Cost of Goods Sold. b. Debit Cost of Goods Sold; credit Accounts Payable. c. Debit Cost of Goods Sold; credit Inventory. d. All of the above are correct.

d

2. When a company determines that the net realizable value of its ending inventory is lower than its cost, what would be the effect(s) of the adjusting entry to write down inventory to net realizable value? ( LO6-6) a. Decrease total assets. b. Decrease net income. c. Decrease retained earnings. d. All of these answer choices are correct.

d

2. the Sarbanes-Oxley Act mandates which of the following a. Increased regulations related to auditor-client relations b. increased regulations related to internal control c. increased regulations related to corporate executive accountability d. all of the above

d

3.

d

4. The allowance method for uncollectible accounts ( LO5-3) a. Is required by generally accepted accounting principles. b. Allows for the possibility that some accounts will not be collected. c. Reports net accounts receivable for the amount of cash expected to be collected. d. All of the above are correct.

d

4. which of the following is an example of detective controls a. The company should establish formal guidelines to handle cash receipts and make purchases. b. Important documents should be kept in a safe place, and electronic files should be backed up regularly. c. Employees should be made aware of the company's internal control policies. d. Management periodically determines whether the amount of physical assets agree with the accounting records.

d

5. Using the information in Self-Study Question 4, what amount would Madison report for ending inventory using FIFO? ( LO6-3) a. $2,600. b. $2,900. c. $3,600. d. $3,900.

d

7. Using the allowance method, the effect on the current year's financial statements of writing off an account receivable generally is to ( LO5-4) a. Decrease total assets. b. Decrease net income. c. Both a. and b. d. Neither a. nor b.

d

8. Which of the following adjusts the bank's balance of cash in a bank reconciliation? ( LO4- 5) a. NSF checks from customers. b. Service fees. c. An error by the company. d. Checks outstanding

d

9. A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 debit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement? ( LO5-5) a. $400. b. $2,800. c. $3,200. d. $3,600.

d

9. Using a perpetual inventory system, the purchase of inventory on account would be recorded as ( LO6-5) a. Debit Cost of Goods Sold; credit Inventory. b. Debit Inventory; credit Sales Revenue. c. Debit Purchases; credit Accounts Payable. d. Debit Inventory; credit Accounts Payable.

d

A company has the following inventory transactions: Jan. 1 Beginning inventory 100 units @ $4 each Jan. 15 Purchase 100 units @ $5 each Jan. 31 Purchase 100 units @ $6 each What would be the cost of goods sold under the L I F O method if 120 units were sold in January? a. $ 600 b. $ 500 c. $ 720 d. $ 700

d

At the end of the year, a company reports the following inventory amounts ($ per unit): Item # of Units Cost Net Realizable Value A 100 $4 $8 B 150 $8 $6 The amount to report for ending inventory using the lower of cost and net realizable value is: a. $1,600 b. $1,700 c. $2,000 d. $1,300

d

Which of the following is true about the aging method? a. No estimate for uncollectible accounts is made. b. Older accounts are more likely to be collected. c. It is not acceptable for G A A P. d. Older accounts are less likely to be collected.

d

Contra revenue account is

debit, close with credit

What type of activity, cash, flow: borrow 100,000 from a local bank and sign a note promising to repay the full amount of the debts in three years

fiancing, yes, inflow

What type of activity, cash, flow: sell shares of common stock for $200,000 to obtain the funds necessary to alert the business

financing, yes, inflow

What type of activity, cash, flow: pay cash dividends of $4,000 to shareholders

financing, yes, outflow

gross profit

gross profit/ net sales

What type of activity, cash, flow: purchase equipment necessary for giving soccer training, $120,000 each

investing, yes, outflow

bank reconciliation

matching the balance of cash in the bank account with the balance of cash in the company's own records

fraud triangle

motivation, opportunity, rationalization

What type of activity, cash, flow: provide soccer training to customers on account, $20,000

operating, no, ---

What type of activity, cash, flow: provide soccer training to customers for cash, $43,000

operating, yes, inflow

What type of activity, cash, flow: receive cash in advance for 12 soccer training sessions to be given in the future, 6,000

operating, yes, inflow

What type of activity, cash, flow: pay salaries to employees 38,000

operating, yes, outflow

What type of activity, cash, flow: pay 1 year of rent in advamce, $40,000

operating, yes, outflow

cash equivalents

short-term investments that have a maturity date no longer than 3 months of purchase

petty cash fund

small amount of cash kept on hand to pay for minor purchases

Occupational fraud

the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources.

collusion

two or more people acting in coordination to circumvent internal controls