Accounting Exam 2

The following data is available for BOX corporation at December 31, 2017: Common stock, par $10 (authorized 30,000 shares) Treasury stock (at cost $15 per share) Based on this, how many shares of common stock are outstanding?

26,920 (27,000 shares-80 shares)

Sales allowance:

A price reduction given to a customer who is unhappy with the something that the business did.

Under a perpetual inventory system

Accountings records continuously disclose the amount of inventory

Which of the following represents the largest number of common shares?

Authorized Shares

Cash of goods sold equals:

Beginning inventory + net purchases − ending inventory

Convertible bonds

Bonds that may be exchanged for common stock at thet option of the bondholders

Which of the following/ bank reconciliation items would NOT result in a journal entry

Collection of a note by the bank on our behalf

The exclusive right to benefit from a creative work, such as a film, is a:

Copyright

Current Ratio:

Current Assets/Current Liabilities

After preparing the bank reconciliation, an NSF check would result in which of the following when recording the adjustment to the company's cash balance?

Debit to Accounts Receivable.

A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders; equity?

Decreased by $700,000

A check written by the company for $176 is incorrectly recorded by a company as $167. On the bank reconciliation, the $9 error should be:

Deducted from the balance per books

Which of the following bank reconciliation items would not result in an adjusting entry?

Deposits in transit.

What is the concept behind separation of duties in establishing internal controls?

Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

Which of the following is NOT a design feature of effective internal controls?

Ensure the company's price advantage over competitors

Research and development costs should be

Expensed in the period incurred

In a period when inventory costs are rising, the inventory method that most likely results in the highest ending inventory is:

FIFO

Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost?

FIFO

Calculating average number of days in inventory for the year

First, calculate cost of goods sold; then calculate inventory turnover (COGS/half of(ending+beginning inventory) ); then take that number and divide by 365

Which one of the following would not be considered an advantage of the corporate form of organization?

Government Regulation

Which of the following is NOT one of the main factors that contribute to fraudulent activity?

Incompatible duties

Interest:

Interest = Principal x rate x time

FOB Destination

Item belongs to shipper until customer receives them. While in transit, seller is owner

Ending inventory is equal to the cost of items on hand plus:

Items in transit sold FOB destination.

In accounting, goodwill

May be recorded when a company purchases another business

Return on assets is calculated as:

Net income divided by average total assets

Stock dividends and stock splits have the following effects on retained earnings:

No charge in stock splits and a decrease in stock dividends

NRV = A/R - AFDA

Non realizable value= Accounts receivable- allowance for doubtful accounts

Which of the following would be added to the balance per books on a bank reconciliation?

Notes collected by the bank

A corporation has the following account balances: Common Stock, $1 apr value, $80,000; Paid- in Capital in Excess of Par Value, $2,700,000. Based on this info the...

Number of shares issued is 80,000

Which of the following activities is not a component of the operating cycle?

Payment of employees' salaries

Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct?

Returns of merchandise by Adams Company to a manufacturer are credited to Inventory

The LIFO conformity rule states that if LIFO is used for

Tax purposes, it must be used for financial reporting.

Which of the following is not a typical right or preference associated with preferred stock?

The right to vote

In computing depreciation, salvage value is

an estimate of a plant asset's value at the end of its useful life.

Accounts receivable are valued and reported on the balance sheet

at net realizable value

interest rates

base amount X interest rate X (# of months/12)

The account allowance for doubtful accounts is classified as a

contra account to accounts receivable

Over the term of the bonds, the balance in the discount on Bonds Payable will

decrease

Under the allowance method, Bad Debt Expense is recorded

for an amount that the company estimates it will not collect

A merchandiser will earn an operating income of exactly $0 when

gross profit equals operating expenses

Gross profit=

gross profit= net sales revenue- cost of goods sold

When the allowance method of accounting for uncollectible accounts is used, bad debt expense is recorded...

in the same year as the credit sale

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them:

increases the potential for errors and fraud

One might infer from a debit balance in Allowance for Doubtful Accounts that

more accounts have been written off than had been estimated

Gross profit does not appear

on a single-step income statement.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

the Patent account.

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is...

this requirement does not exist