Accounting Midterm 2

Which of the following is correect regarding LIFO and FIFO?

In a period of decreasing costs, FIFO will result in lower total assets than LIFO

The entry to record the receipt of payment within the discount period on a sale of $700 with terms of 2/10, n/30 will include a

credit to Accounts Receivable for $700

The entry to record a sale of $1,200 with terms of 2/10, n/30 will include a

credit to Sales Revenue for $1,200 (use historic cost)

The use of the allowance method of accounting for bad debts is prefered over the direct write-off method because of the

matching principle

A fund with a small amount of cash on hand for minor disbursements is called a

petty cash fund

A company has $40,000 in cash, $75,000 in short-term investments,, $263,000 in net current receivables, and $110,000 in inventory. The total current liabilities of the firm are $305,000. The quick ratio (acid test) of the company is

1.24 40,000+75,000+263,000=378,000 378,000/305,000=1.24

On January 1, 2014, Houstonian Inc. has beginning inventory of $3,000. It purchases additional inventory totaling $1,500. On January 31, 2014, Houstonian Inc.'s ending inventory decreases to $2,000. What is the cost of goods sold for the company in January 2014?

$2,500 3,000+1,500=4,500 4,500-2,000=2,500

Alex Rhodes' annual net sales for the current period were $114,000 and average receivables were $96,250. What is the amount of one day's sales rounded?

$312 $114,000/365days=roughly $312/day

On February 14, 2014, HUDI Co. purchases 2,000 units of the new KOON e-book reader developed by N&B Inc., which costs $200 each. HUDI Co. pays $500 for shipping and has later returned 100 units on February 20, 2014. What is the net purchase of KOON e-book reader for HUDI Co. in February 2014?

$380,500 2000units @ $200 = $400,000 $400,000(inventory) + $500(shipping)= 400,500 100units*$200=$20,000returned(money back) 400,500-20,000=380,000(money spent)

If a bookkeeper mistakenly records a disbursement as $810 instead of the correct amount of $180, the error should be shown on the bnk reconciliation as a(n)

$630 addition to the books

A diesal-powered generator with a cost of $390,000 and estimated residual value of $60,000 is expected to have a useful life of 30,000 hours. During August, the generator worked 700 hours. What amount should be recorded as depreciation expense for the month?

$7,700 390,000-60,000=330,000 $330,000/30,000hrs=$11/hr 700hrs*$11=$7,700

The following balances come from the financial statements of WBT Industries Accounts receivable $140,000 Beginning Inventory $25,000 Ending Inventory $15,000 Net Purchases $230,000 Sales returns $25,000 Sales discount $10,000 What is the WBT Industries' Inventory Turnover (=cost of goods sold divided by average inventory)

12

Piper company sells merchandise on account or $1,500 to Morton Company with credit terms of 2/10, n/30. Morton Company returns $500 of merchandise that was damaged, along with a check to settle the account within the period. What entry does Piper Company make upon receipt of the check?

Cash 980 Sales and Returns Allowances 500 Sales Discounts 20 Accounts Receivable 1,500

The book side of a bank reconciliation includes:

NSF checks, bank collections, and interest earned on the checking account

Which one of the following is correct regarding inventory error?

Overstating ending inventory will result in overstated net income

Internal controls are so critical to a company that congress passed the

Sarbanes-Oxley Act of 2002

When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

To check the accurcy of the perpetual inventory system is used

Another term for uncollectible-account expense is

doubtful account expense AND/OR bad-debt expense

Trading securities purchased in 2013 for $85,000 were valued at $80,000 on December 31, 2013. The securities were sold at the beginning of 2014 for $83,000. The 2014 income statement should report a(n)

realized gain of $3,000 (Because valued at $80,000 but sold for $83,000

The net realizable value of accounts receivable is

the difference between accounts receivable and its contra asset account AND the amount of accounts receivable that the company expects to collect