Accounting Exam 2

A company purchase $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 8, it paid the full amount due. The amount of cash paid on July 8 equals:

$1,568

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Net income equals:

$115,000

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Gross profit equals:

$390,000

Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is $50,000, credit terms 2/10, n/30 that apply only to the $50,000. FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000. Avanti paid within the discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales commissions. Compute the cost that should be assigned to the inventory.

$52,000

The credit terms 2/10, n/30 are interpreted as:

2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.

A company has sales of $375,000 and it's gross profit is $157,500. It's cost of goods sold is:

217,500

An understatement of ending inventory will cause:

An understatement of assets and equity on the balance sheet.

When reimbursing the petty cash fund:

Appropriate expense accounts are debited

An error in ending inventory causes an error in the next period's:

Beginning inventory

Cost of goods sold:

Is the term used for the expense of buying and preparing merchandise for sale.

The cash over and short account:

Is used to record the income effects of errors in making change from a cash register and/or processing petty cash transactions.

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

LIFO method

Generally accepted accounting principles require that the inventory of a company be reported at:

Lower cost of market

Beginning inventory plus net purchases is:

Merchandise (goods) available for sale

Sales less sales discounts less sales returns and allowances equals:

Net sales

Preparing a bank reconciliation on a monthly basis is an example of:

Protecting assets by proving the accuracy of cash records

The LIFO conformity rule:

Requires when LIFO is used for tax reporting, it is also used for financial reporting

The principles of internal control include

Separate recordkeeping from custody of assets.

cash equivalents

Short-term, highly liquid investment assets

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

Specific identification method

The current period's ending inventory is:

The next period's beginning inventory

A seller (or supplier) of goods or services to a business organization is known as a

Vendor

Damaged and obsolete goods that can be sold:

are included in inventory at their net realizable value

Cash, not including equivalents, includes

customer checks, cashier checks, and money orders

Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between

ending inventory and costs of goods sold

Which of the following is not one of the policies and procedures that make up an internal control system?

guarantee a return to investors

A key factor in a voucher system includes all of the following except:

it is not necessary if the supplier provides both receiving report and invoice with the merchandise shipped

To document that the purchasing department prepares and sends to the vendor to place an order is called the:

purchase order