Accounting 1 Exam

Which inventory costing method results in the lowest income tax expense during a period of decreasing prices? Specific Identification LIFO FIFO Weighted Average Cost

FIFO

Texas Inc. sold merchandise to Fagin Corp on December 28, 2016, with shipping items of FOB destination. Fagin Corp. received the merchandise on January 3, 2017. Which one of the following statement is true? Fagin Corp should pay the transportation costs Fagin Corp should record a liability for the purchase on January 3, 2017 Fagin Corp should include the merchandise in its inventory at December 31, 2016 Texas should record sales revenue on December 28, 2016

Fagin Corp should record a liability for the purchase on January 3, 2017

The qualitative characteristics of accounting data include Reliability Cash flows Assets reported on the balance sheet All accounting information

Reliability

Which method of inventory costing is not acceptable for financial accounting purposes? LIFO Replacement Cost FIFO Specific Identification

Replacement Cost

All of the following statement are true except: IFRS uses net realizable with no upper or lower limits imposed Write-downs of inventory can be reversed in later periods under U.S. GAAP Both U.S. GAAP and international financial reporting standards (IFRS) require the use of the lower-of-cost-or-market rule to value inventories

Write-downs of inventory can be reversed in later periods under U.S. GAAP

Marvel Shoes reported the following items on its statement of cash flows for the current year: Net cash inflows from operating activities 70,000 Net cash outflows from investing activities (20,000) Net cash outflows from financing activities (40,000) Cash balance at the beginning of the year 30,000 Read the information about Marvel Shoes. What was the amount of net increase or decrease in the cash balance for Marvel Shoes for the current year? 30,000 increase 40,000 increase 30,000 increase 10,000 increase

(70,000 Operating activities - 20,000 investing activities - 40,000 financing activities = 10,000

Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2017, on account. Tile Magic Corp. paid the invoice on August 31, 2017. How much sales discount will Floors recognize? 440 236 0 200

0

Rosu Company has total current assets of $150,000 and total current liabilities of $50,000. What is the amount of working capital for Rosu Company? 100,000 200,000 125,000 179,000

100,000

Bevco Company has provided the following information from its accounting records for the current year: Cash 55,000 Accounts receivable 45,000 Inventory 65,000 Land 75,000 Accounts payable 50,000 Notes payable (due 2020) 150,000 retained earnings? Capital stock 20,000 Read the information for Bevco Corporation. What are Bevco current assets? 240,000 165,000 100,000 210,000

165,000

The following is from Goldman Inc's 2016 income statement Purchases 172,000 Transportation-In 11,000 Inventory, January 1, 2016 26,500 Inventory, December 31, 2016 28,800 Purchases Returns and Allowances 8,400 How much will Goldman report as its cost of goods sold in its 2016 income statement? None of these choices 161,300 172,300 161,500

172000 - 8400 + 11000 + 26500 - 28800 172300

Grinn, Inc. offers terms of 2/10, n/30 to credit customers, Great Buy Corp. purchase 100 tile cutters with a list price of 20 each on March 5, 2016, on account. If Great Buy Corp. pays the amount of the invoice for its purchase on March 14, 2016, how much cash will Grinn receive from Great Buy Corp? 1,800 2,000 1,764 1,960

20*100 - 98% = 1,960

Roki Inc. uses the periodic inventory system. June 1 On hand, 50 units @ 15.00 each $750 June 5 purchased 115 @ 15.10 each 1,736.50 June 14 purchased 75 units @ 15.20 each 1,140 Total cost of goods available for sale 3,626.50 June 30 90 on hand units If Roki uses the weighted average cost inventory method, the amount assigned to the June 30th inventory would be 1,591.5 1,549 1,359.9 1,486.5

3,626.5/240 = 15.11 15.11 * 90 = 1,359.9

Marvel Shoes reported the following items on its statement of cash flows for the current year: Net cash inflows from operating activities 70,000 Net cash outflows from investing activities (20,000) Net cash outflows form financing activities (40,000) Cash balance at the beginning of the year 30,000 Read the information about Marvel shoes. What was the cash balance for Marvel shoes at the end of the current year? 70,000 10,000 40,000 30,000

30,000 beginning balance + 10,000 increase in cash = 40,000

Roki Inc, uses the periodic inventory system. June 1 On hand, 50 units @ 15 each 750 June 5 purchased 115 units @ 15.10 each 1,736.5 June 14 purchased 75 units @ 15.20 each 1,140 Total cost of goods available for sale 3,626.5 June 30 On hand, 90 units How many units did Roki, Inc. sell during June? 50 100 90 150

50 + 115 + 75 - 90 = 150 150

Roki Inc., uses the periodic inventory system June 1 On hand, 50 units @ 15 each 750 June 5 purchased 115 units 15.10 each 1,736.5 June 14 purchased 75 units @ 15.20 each 1,140 Total cost of goods available for sale 3,626.50 June 30 On hand, 90 units If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Roki's good sold for June under the specific identification method would be 2,373 2,263 2,945 3,626

51 *45 + 70 * 15.10 + 30 * 15.20 = 2,263 2,263

Bevco Company has provided the following information from its accounting records for the current year: Cash 55,000 Inventory 65,000 Accounts payable 50,000 Retained earnings ? Accounts receivable 45,000 Land 75,000 Notes payable(due 2020) 150,000 Capital stock 20,000 Read the information for Bevco Corporation. What are Bevco current assets? 240,000 210,000 100,000 165,000

55,000 Cash + 45,000 Accounts Receivable + 65,000 Inventory = 165,000

Which of the following would not appear on an income statement? Accounts receivable Sales revenue Insurance expense Cost of goods sold

Accounts receivable

If the amount assignment to ending inventory is incorrect, The balance sheet is affected, but the income statement is not The income statement is affected, but the balance sheet is not The balance sheet is affected, but cost of goods sold is not Both the balance sheet and the income statement are affected

Both the balance sheet and the income statement are affected

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for Neither the periodic nor perpetual inventory systems The periodic inventory system The perpetual inventory system Both the periodic and perpetual inventory system

Both the periodic and perpetual inventory system

Lottony, Inc. is concerned about its profitability for the current year, since its profit margin has 10% since last year. Which of the following is the least useful comparison in evaluating the drop in Lottony's profit margin? Comparison with its current ratio for the current year Comparison with the industry average for the current year Comparison with its profit margins for the past five years Comparison with the profit margins for its major competitors for the current year

Comparison with its current ratio for the current year

Which of the following terms best describes "Cost of goods available for sale"? Cost of goods available is an expense account Cost of goods available for sale is substracted from net sales to arrive at the gross margin Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year Cost of goods available for sale is added to beginning to determine cost of purchase during the period

Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year

Many companies assign only the net invoice price for merchandise to inventory and cost of goods sold. All other costs including the place of business, are charged to expense of the period in which they are incurred. Which accounting principle or concept is applied in this example? Conservatism Historical cost Cost/Benefit Matching

Cost/Benefit

What is the correct method for calculating working capital? Current Assets minus Current Liabilities Current Assets plus Current Liabilities Current Assets minus Total Liabilities Total Assets minus Total Liabilities

Current Assets minus Current Liabilities

What is the correct method for calculating working capital? Current Assets minus Current Liabilities Total Assets minus Total Liabilities Current Assets plus Current Liabilities Current Assets minus Total Liabilities

Current Assets minus Current Liabilities

How are assets which are expected to be realized in cash, sold, or consumed within the normal operating cycle of a business or within one year (if the operating cycle is shorter than one year) reported on a classified balance sheet? Current assets Property, plant, and equipment Intangible assets Current liabilities

Current assets

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called Merchandise inventory Work in process inventory Finished goods inventory Raw materials inventory

Finished goods inventory

The cost of goods sold is: Goods available for sale less ending inventory Purchases less beginning plus ending inventory Equal to the amount of inventory on hand at the end of the accounting period Reported on the balance sheet in the inventory account

Goods available for sale less ending inventory

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system? As a direct reduction to the Purchases account In contra accounts to the Purchases account As miscellaneous expenses As operating expenses

In contra accounts to the Purchase account

Forman, Inc earned 600,000 profit during 2016. On which financial statement(s) will you find the dollar amount of the profit earned by the company? Income statement and statement of retained earnings Income statement only Balance sheet and income statement Statement of retained earnings only

Income statement and statement of retained earnings

Xu Corp. started business at the beginning of 2016. Xu selected the FIFO method for its inventory. In order to maximize its profits for 2016 under this method, prices must be Stable Decreasing Increasing Fluctuating up and down at the same amount consistently over the year

Increasing

Guinther & Sons, Inc. a retailer of men's clothing, earned a net profit of 77,000 for 2016. The balance sheet for Guinther & Sons includes the following items: Cash 29,000 Inventory 79,000 Land 90,000 Taxes payable 29,000 Retailed earnings 97,000 Accounts receivable 39,000 Prepaid Insurance 3,000 Accounts payable 14,000 Capital stock 50,000 Long-term notes payables 43,000 Read the information for Guinther & Sons, Inc. The average current ratio for stores such as Guinther & Sons is 2.4 to 1. What does this comparison tell you about its liquidity? It is more liquid than its competitors. It has more long-term assets than its competitors. Since a rule of thumb for current ratios is 2 to 1, neither Guinther & Sons, Inc. nor its competitors is liquid. Guinther & Sons, Inc. is more profitable than its competitors

It is more liquid than its competitors.

Which method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income? Specific Identification FIFO LIFO Weighted Average Cost

LIFO

Federal income tax rules allow business to use different inventory costing methods for tax reporting and financial reporting with one exception. Which of the following situations is not allowed by federal income tax rules? LIFO LIFO FIFO LIFO LIFO FIFO Weighted Average FIFO

LIFO FIFO

The 2016 income statement of Seikoson shows operating revenues of 130,800, selling expense of 37,100, general and administrative expenses of 34,900, interest expense of 900, and income tax expense of 11,430. Seikoson's stockholders' equity was 280,000 at the beginning of the year and 320,000 at the end of the year. The company has 20,000 shares of stock outstanding at December 31, 2016. Read the information about Seikoson. What is Seikoson's net income? 46,470 92,190 130,800 80,000

Net Income = 130,800 - 37,100 - 34,900 - 900 - 11,430 = 46,470 46,470

Blenham, Inc sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation? Assets and stockholders; equity increase No net effect Assets decrease and liabilitues increase Assets and stockholders' equity decrease

No net effect

Business entities generally carry on: Operating, investing, and financing activities Operating activities, but only corporations engage in financing and investing activities Investing and operating activities, but only corporations engage in financing activities Either investing or financing activities, but not both

Operating, investing, and financing activities

If a company overstates its ending inventory balance for 2017 by $10,000, and overstates its ending inventory balance for 2016 by $5,000 what are the net income for 2017 and 2016? Overstated by 5,000 Overstated by 15,000 Overstated by 10,000 Understated by 5,000

Overstated by 5,000

Which of the following is not a major category for long-term assets? Receivables Intangibles Property, plant, and equipment Goodwill

Receivable

Tavella Company applies the consistency convention. What does this mean? Tavella Co. applies the same accounting principles as it competitors Tavella Co. uses the same names for all its expenses as its competitors Tavella Co. applies the same accounting principles each accounting period Tavella Co has selected selected certain accounting principles that can never be changed

Tavella Co applies the same accounting principles each accounting period

What is the primary objective of financial reporting? To provide useful information for decision making To help investors make credit decisions To help management assess cash flows To protect users from fraudulent financial information

To provide useful information for decision making

Excursion Corp. increased its dollar amount of working capital over the past several years. To further evaluate the company's short-run liquidity, which one of the following measures should be used? An analysis of the company's long-term debt The current ratio An analysis of the return on stockholders' equity An analysis of retained earnings

The current ratio

Vern Corp. sold merchandise to a customer on credit. The invoice amount was $2,000; the invoice date was June 10; credit terms were 1/20, n/30. Which one of the following statements is true? The customer must pay 2,020 if payment is made after June 20 The customer can take a 20 discount if the invoice is paid on June 30 The customer must pay a 20 penalty if payment is made after July 9 The customer should pay 2,000 if the invoice is paid on July 9

The customer should pay 2,000 if the invoice is paid on July 9

Which one of the following statements regarding the application of the lower of cost or market method is true? Generally, market value is greater than replacement cost The lower of cost or market method is an exception to the historical cost principle When the lower of cost or market method is used, inventories are valued at selling price The lower of cost or market method is most commonly applied on a total inventory basis because it is a more conservative approach

The lower of cost or market method is an exception to the historical cost principle

Which of following is the best description of the purpose of financial reporting? To allow users to access to the daily detailed records of a business To provide users with an assessment of how long the company will continue as a going concern To help the users reach their decisions in an informed manner To allow the users access to a list of all the individuals who owe the company money

To help the users reach their decisions in an informed manner

Which of the following is the best description of the purpose of financial reporting? To allow users to access to the daily detailed records of a business To allow users to access to a list of all the individuals who owe the company money To provide users with an assessment of how long the company will continue as a going concern To help the users reach their decisions in an informed manner

To help the users reach their decisions in an informed manner

Sales Discounts is classified as what type of account? Revenue a contra-asset an expense a contra-revenue

a contra-revenue

In a periodic inventory system, the cost of purchases is recognized as an integral part of the calculation of cost of goods sold the only part of the calculation of cost of goods sold an increase in an asset account an increase in the inventory

an integral part of the calculation of costs of goods sold

Which one of the following would not be found as an asset on the balance sheet of a manufacturer? work in process merchandise inventory raw materials finished goods

merchandise inventory

Transportation-in is: part of purchases added to transportation-out as part of the calculation of cost of goods sold part of cost of goods purchased an operating expense

part of cost of goods purchased