Acct Chapter 5

Which of the following statements is correct? a) The allowance for doubtful accounts is an actual amount and the NRV of accounts receivable is an estimated amount. b) Both the allowance for doubtful accounts and the NRV of accounts receivable are estimated amounts. c) The allowance for doubtful accounts is an estimated amount and the NRV of accounts receivable is an actual amount. d) Both the allowance for doubtful accounts and the NRV of accounts receivable are actual amounts.

Both the allowance for doubtful accounts and the NRV of accounts receivable are estimated amounts.

Which method do companies most often use to physically flow inventory items through a store?

FIFO

True or False, When companies use one accounting method for financial reporting and a different method to compute income taxes, they can get both the lower tax benefit provided by LIFO and the financial reporting advantage offered under FIFO.

False

Which of the following statements about aging accounts receivable is true? a) Newer accounts are less likely to be collected. b) An existing balance in the Allowance for Doubtful Accounts account is ignored when when determining uncollectible accounts expense. c) The total of the aging schedule represents the amount of uncollectible accounts expense. d) Higher percentages are applied to older accounts.

Higher percentages are applied to older accounts.

Estimating uncollectible accounts improves the usefulness of the ______.

Income Statement and Balance Sheet

A company purchased two identical inventory items. Item 101 was purchased in October for $100. Item 102 was purchased in November for $110. Assuming the item purchased in October was sold, which cost flow method will report the lowest inventory balance on the balance sheet?

LIFO

Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $20 gross margin?

LIFO

Which of the following statements is true? a) LIFO may be the preferred cost flow method even when it results in lower reported income and asset values. b) Companies that use FIFO for physical flow must use FIFO for cost flow, regardless of tax consequences. c) GAAP requires consistency between the cost flow method used for financial reporting and that used for tax reporting.

LIFO may be the preferred cost flow method even when it results in lower reported income and asset values.

True or False, Recognizing bad debts expense increases the accuracy of the financial statements

True

True or False, The person responsible for making payment on the due date is the maker of the promissory note.

True

Relatively small amounts that are collected within 30 days are called ________________ receivable, whereas longer term or large amounts that require interest are called _______________ receivable

accounts, notes

The net realizable value of accounts receivable is ________

an estimate of the amount a company expects to collect from its accounts receivable face value of accounts receivable less an allowance for doubtful accounts

Writing off an uncollectible accounts receivable is a(n) ___________ transaction.

asset exchange

Estimated uncollectible accounts expense is frequently called ___________ _____________ expense

bad debts

Because the percent of receivables method focuses on determining the best estimate of the allowance account, it is often called the ________ _______ approach.

balance sheet

Cost of goods available for sale is the amount of the ______.

beginning inventory + purchases made during the accounting period

Assets belonging to the maker of a promissory note that are assigned as security to ensure the principal and interest will be paid when due are called __________

collateral

Because the percent of revenue method focuses on determining the uncollectible accounts expense, it is often called the ___________ _________approach

income statement

When goods are sold, product costs flow from the ______ account. a) inventory account to the cost of goods sold b) cost of goods available for sale to the inventory c) cost of goods sold account to the inventory d) inventory account to the cost of goods available for sale

inventory account to the cost of goods sold

A company experienced an event that had no affect on the amount of total assets or net income, but did cause a cash outflow from investing activities. The event that caused this could have been ______. a) loaning money with a three year term to maturity b) collecting an account receivable c) reinstating an account receivable d) borrowing money with a two year term to maturity

loaning money with a three year term to maturity

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the specific identification cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold _____

may be $30 or $34

ABS accepted a credit card payment for $1,200. Assuming the credit card company charges a 3% fee, ABS will recognize __________

net income of $1,164 expense of $36

Interest is normally shown as a(n) ______ item on the income statement and ______ item on the statement of cash flows.

nonoperating, operating

Generally accepted accounting principles (GAAP) require how interest is reported ______.

on the statement of cash flows only

Western Company loaned Eastern Company money. This event affects Western Company's ______.

statement of cash flows and balance sheet

Differences between accounts receivable and notes receivable include...

the size of the receivable whether or not interest is due the collection period

When uncollectible accounts are estimated, ______.

there is a better matching of revenues with expenses the balance sheet reports the amount of cash the company expects to collect

Stair Company accepted a credit card with a fee for services rendered. As a result of this transaction ______. a) operating cash flows increased b) total assets increased c) recorded revenue exceeds accounts receivable d) total liabilities increased e) stockholders' equity increased

total assets increased, recorded revenue exceeds accounts receivable, stockholders' equity increased

True or False, A company may use LIFO or weighted average for financial reporting even if its goods flow physically on a FIFO basis.

true

A company recorded an event that had no affect on total assets, net income, or cash flow. This could have been caused by __________.

writing off an uncollectible account

Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses FIFO cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is ______.

$100

Before adjusting its accounts on December 31, Year 2, Silver Co. had a $20,000 balance in its Accounts Receivable account and a $300 credit balance in its Allowance for Doubtful Accounts account. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Allowance for Doubtful Accounts shown on the Year 2 balance sheet will be _______.

$1000

Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses the weighted-average cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is ______.

$105

Benson Company's beginning inventory consisted of 150 units that cost $200 each. Two inventory purchases were made. Purchase 1 for 500 units @ $210 each and Purchase 2 for 350 units @ $220 each. If Benson uses weighted-average and sold a total of 700 units, cost of goods sold equals ______

$148,400

Benson Company's beginning inventory consisted of 150 units that cost $200 each. Two inventory purchases were made. Purchase 1 for 500 units @ $210 each and Purchase 2 for 350 units @ $220 each. If Benson uses LIFO and sold a total of 700 units, cost of goods sold equals ______.

$150,500

Benson Company's beginning inventory consisted of 150 units that cost $200 each. Two inventory purchases were made. Purchase 1 for 500 units @ $210 each and Purchase 2 for 350 units @ $220 each. Benson's cost of goods available for sale is ______.

$212,000

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the FIFO cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______

$30

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the weighted-average cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______

$32

Ted's Sports Center purchased two identical basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. Assume Ted's uses the last-in, first-out (LIFO) cost flow method. If Ted's sells one of the balls in August, which of the following amounts would be charged to the Cost of Goods Sold account?

$34

Benson Company's beginning inventory consisted of 150 units that cost $200 each. Two inventory purchases were made. Purchase 1 for 500 units @ $210 each and Purchase 2 for 350 units @ $220 each. If Benson uses LIFO and sold a total of 700 units, ending inventory equals ______

$61,500

Benson Company's beginning inventory consisted of 150 units that cost $200 each. Two inventory purchases were made. Purchase 1 for 500 units @ $210 each and Purchase 2 for 350 units @ $220 each. If Benson uses weighted-average and sold a total of 700 units, ending inventory equals _____.

$63,600

Benson Company's beginning inventory consisted of 150 units that cost $200 each. Two inventory purchases were made. Purchase 1 for 500 units @ $210 each and Purchase 2 for 350 units @ $220 each. If Benson uses FIFO and sold a total of 700 units, ending inventory equals ______.

$66,000

Before adjusting its accounts on December 31, Year 2, Silver Co. had a $20,000 balance in its Accounts Receivable account and a $300 credit balance in its Allowance for Doubtful Accounts account. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Year 2 uncollectible accounts expense shown on the income statement will be ______.

$700

Inventory item 101 cost $100. Inventory item 102 cost $110. If the business uses the specific identification cost flow method and Item 102 is sold to a customer, the amount assigned to cost of goods sold is ______.

110

Which of the following is not a common feature of a promissory note? a) A statement of the maturity date b) A statement of the principal amount c) The identification of the payee, also know as the creditor d) The identification of the maker of the note, also known as the borrow

A government loan guarantee

Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $22 gross margin?

Weighted average