accounting exam 2

On January 1, Year 2 Grande Company had a $14,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $64,000 of service on account. The company collected $60,500 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. What is the amount of uncollectible accounts expense recognized on the Year 2 income statement?

$1,280 (Uncollectible accounts expense = Sales on account of $64,000 × 2% = $1,280)

Hancock Medical Supply Co., earned $86,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $68,200 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1?

$16,940

On January 1, Year 2 Grande Company had a $14,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $64,000 of service on account. The company collected $60,500 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. What is the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows?

$60,500

Assume the perpetual inventory system is used. 1) Green Company purchased merchandise inventory that cost $16,100 under terms of 3/10, n/30 and FOB shipping point. 2) Green Company paid freight cost of $610 to have the merchandise delivered. 3) Payment was made to the supplier on the inventory within 10 days. 4) All of the merchandise was sold to customers for $23,700 cash and delivered under terms FOB destination with freight cost amounting to $410. What is the net cash flow from operating activities that results from these transactions?

$7063 inflow

Rosewood Company made a loan of $16,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. What is the amount of interest revenue that Rosewood would report in Year 1 and Year 2, respectively?

$720 in Year 1 and $240 in Year 2

A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: Account No.Account Title (1)Cash (2)Merchandise inventory (3)Cost of goods sold (4)Transportation-out (5)Dividends (6)Common stock (7)Selling expense (8)Loss on the sale of land (9)Sales. which of these accounts show up on the balance sheet

1,2,6

during its first month of operations. The company uses a perpetual inventory system. 1) The company purchased $13,900 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,400 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,800 cash what is the gross margin of all four activities

11,510

during its first month of operations. The company uses a perpetual inventory system. 1) The company purchased $13,900 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,400 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,800 cash what is the net cash flow from operating activities

11510

The inventory records for Radford Co. reflected the following: Beginning inventory @ May 11,300 units @ $4.20 First purchase @ May 71,400 units @ $4.40 Second purchase @ May 171,600 units @ $4.50 Third purchase @ May 231,200 units @ $4.60 Sales @ May 314,200 units @ $6.10 What is the amount of cost of goods sold assuming the LIFO cost flow method?

18,880

Taylor Co. had beginning inventory of $400 and ending inventory of $600. Taylor Co. had cost of goods sold amounting to $1,800. What is the amount of inventory that was purchased during the period?

2000

A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: Account No.Account Title (1)Cash (2)Merchandise inventory (3)Cost of goods sold (4)Transportation-out (5)Dividends (6)Common stock (7)Selling expense (8)Loss on the sale of land (9)Sales. Which accounts would appear on the income statement?

3,4,7,8,9

A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: Account No.Account Title (1)Cash (2)Merchandise inventory (3)Cost of goods sold (4)Transportation-out (5)Dividends (6)Common stock (7)Selling expense (8)Loss on the sale of land (9)Sales. which of these affect the gross margin

3,9

On January 1, Year 1, the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800. On January 15, Year 1, an $800 uncollectible account was written-off. What is the net realizable value of accounts receivable immediately after the write-off?

34,200

The inventory records for Radford Co. reflected the following: Beginning inventory @ May 11,300 units @ $4.20 First purchase @ May 71,400 units @ $4.40 Second purchase @ May 171,600 units @ $4.50 Third purchase @ May 231,200 units @ $4.60 Sales @ May 314,200 units @ $6.10 What is the amount of individual goods assuming the weighted average flow method?

4.43

The Miller Company earned $135,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $88,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. What is the net realizable value of Miller's receivables at the end of Year 1?

42,950

The inventory records for Radford Co. reflected the following: Beginning inventory @ May 11,300 units @ $4.20 First purchase @ May 71,400 units @ $4.40 Second purchase @ May 171,600 units @ $4.50 Third purchase @ May 231,200 units @ $4.60 Sales @ May 314,200 units @ $6.10 What is the amount of ending inventory assuming the FIFO cost flow method?

5970

The inventory records for Radford Co. reflected the following: Beginning inventory @ May 11,300 units @ $4.20 First purchase @ May 71,400 units @ $4.40 Second purchase @ May 171,600 units @ $4.50 Third purchase @ May 231,200 units @ $4.60 Sales @ May 314,200 units @ $6.10 What is the amount of gross margin assuming the weighted average flow method?

7014

The inventory records for Radford Co. reflected the following: Beginning inventory @ May 11,300 units @ $4.20 First purchase @ May 71,400 units @ $4.40 Second purchase @ May 171,600 units @ $4.50 Third purchase @ May 231,200 units @ $4.60 Sales @ May 314,200 units @ $6.10 What is the amount of gross margin assuming the FIFO flow method?

7250

Anton Co. uses the perpetual inventory system and FIFO cost flow method. During the year, Anton purchased 400 units of inventory that cost $12.00 each and then purchased an additional 600 units of inventory that cost $16.00 each. If Anton sells 700 units of inventory, what is the amount of cost of goods sold?

9600

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost. Assuming the amount of the write-down is immaterial , which of the following journal entries would be recorded?

Cost of goods sold 5,200 (debit) Inventory 5,200 (credit)

How does the year-end adjusting entry to recognize uncollectible accounts expense affect the elements of the financial statements?

Decrease total assets and decrease stockholders' equity.

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $71,800 and $3,100, respectively. During Year 2, Kincaid reported $194,000 of credit sales, wrote off $1,800 of receivables as uncollectible, and collected cash from receivables amounting to $234,500. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. Which of the following describes the effects of Kincaid's entry to recognize the write-off of the uncollectible accounts?

Does not affect assets or stockholders' equity.

The company carries inventory at lower-of-cost-or-market applied to the entire stock of inventory in the aggregate. How would the implementation of the lower-of-cost-or-market rule impact the elements of the company's financial statements?

Have no effect on total assets or stockholders' equity

Middleton Company uses the perpetual inventory system. The company purchased an item of inventory for $85 and sold the item to a customer for $140. How will the sale affect the company's Inventory account?

Inventory will decrease by $85

What happens when prices are falling?

LIFO will result in higher net income and a higher inventory valuation than will FIFO.

The balance in Accounts Receivable at the beginning of the year amounted to $2,640. During the year, $9,040 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $1,740, and uncollectible accounts expense amounted to $720, what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?

The $720 in uncollectible accounts expense does not affect accounts receivable, and does not affect cash flows. Ending accounts receivable of $1,740 = Beginning accounts receivable of $2,640 + Credit sales of $9,040 − Collections on account Collections on account (that is, cash inflow from customers) = $2,640 + $9,040 − $1,740 = $9,940

What is meant by "market" in the lower-of-cost-or-market rule?

The amount that would have to be paid to replace the merchandise.

Hoover Company purchased two identical inventory items. The item purchased first cost $33.50. The item purchased second cost $36.75. Then Hoover sold one of the inventory items for $70. Based on this information, which of the following statements is true?

The gross margin is $34.88 if Hoover uses the weighted-average cost flow method.

The Wilson Company purchased $32,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,500 for freight costs to have the goods shipped to its location. The company uses the perpetual inventory system. Which of the following summarizes the effects of the journal entries required to record these transactions for The Wilson Company? (Consider the effects of both business events.)

Total debits to the inventory account would be $34,500.

Which of the following general journal entries would be used to recognize $7,500 of uncollectible accounts expense under the direct write-off method?

Uncollectible accounts expenses 7,500 (debit) Accounts receivable 7,500 (credit)

Foote Company was granted a purchase discount of $200 on merchandise the company had purchased a few days ago. Foote uses the perpetual inventory system. Which of the following reflects the effects of this event on the financial statements?

asset and liability decrease by $200

Darlington Company entered into the following business events during its first month of operations. The company uses a perpetual inventory system. 1) The company purchased $13,900 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,400 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,800 cash What effect will the return of the merchandise to the supplier in the event (2) have on Darlington's financial statements?

assets and liabilities decrease by 3400

How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year?

assets, equity and net income increase; expenses decrease; no affect on cashflow

On April 1, Snell Company made a $50,000 sale giving the customer terms of 3/10, n/30. The receivable was collected from the customer on April 8. How does the collection of cash from the customer affect the company's financial statements?

decrease of $1500 to : assets, equity, revenue, & net income (48,500 of operating costs)

Galaxy Company sold merchandise costing $3,400 for $5,800 cash. The merchandise was later returned by the customer for a refund. The company uses the perpetual inventory system. What effect will the sales return have on the financial statements? (Consider the effects of both parts of this event.)

total asset and stockholders equity would decrease $2400

Faust Company uses the perpetual inventory system. Faust sold goods that cost $6,100 for $10,200. The sale was made on account. What is the net effect of the sale on the company's financial statements? (Consider the effects of both parts of this event.)

total assets increase by 4100