ACTG 211 Practice Questions (Midterm 1-2)
Why do companies offer discounts?
- A/R is risky - timely collection (need influx of cash) - managing cash
Garcia Co. owns equipment that cost $77,600, with accumulated depreciation of $41,200. Record the sale of the equipment under the following two separate cases assuming Garcia sells the equipment for (1) $47,600 cash (2) $31,300 cash.
1. Dr. cash 47600 Dr. accumulated depreciation 41200 Cr. equipment 77600 Cr. gain from sale of equipment 11200 2.. Dr. cash for 31300 Dr. accumulated depreciation 41200 Dr. loss from sale of equipment 5100 Cr. equipment 77600
Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.
1850 book value is 12,000 - accumulated depreciation = 7400 (7400 - 0) / 4 yrs remaining = 1850
Lani Co. uses the allowance method to account for bad debts. At the end of the year their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
4400 0.01*400,000 + 400 because it says % of A/R and not % of just sales
what is the formula for ending inventory?
Beginning Inventory + Purchases - Cost of Goods Sold = ending inventory
Find journal entry: Z-Mart makes a sale on credit $1000 on November 12 with terms 2/10 n/45. Cost of merchandise is $300.
Dr. A/R $1000, Cr. sales $1000 AND Dr. COGS $300, Cr. inventory $300
How is the shipping expense accounted for when buyer pays?
Dr. inventory, Cr. Cash
T OR F, Ordinary repairs to long-term assets are added to the cost of the asset and depreciated.
False
True or false: The allowance method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts.
False The allowance method estimates bad debt expense before an uncollectible account receivable has been determined to be uncollectible.
True or false: The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation
False, Costs should not include repairs to damages or errors incurred after installation.
True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.
False, The allowance method estimates bad debts. The direct write-off method waits until an actual accounts receivable balance is uncollectible.
True or False, shrinkage is usually accounted for by crediting the Cost of Goods Sold account
False, debit COGS (expenses increase)
True or False, if the net sales for the business total $150,000, Gross Profit is $65,000, and Net Income is $40,000, the Cost of Goods Sold must be 85,000.
True. 150,000 - COGS = 65,000 COGS = 85,000
can some companies get discount rate even if they don't pay on time?
Yes. Ex: Walmart has power over selling a small company's good
Which statement(s) below is(are) correct regarding the purpose of taking a physical inventory count? (Check all that apply.) a. The physical count is used to determine if there has been any theft, loss, damage or errors in inventory. b. The physical count is used to determine if customers are paying within the discount period. c. The physical count is used to adjust the Inventory account balance to the actual inventory available. d. The physical count of inventory is optional under U.S. GAAP and required under IFRS. e. The physical count is used to determine if management needs to reassign sales responsibilities.
a and c
Ben's Bananas (BB) sold bananas for $14,800 to Costco on account. Costco informed BB that 1/4 of the bananas were too ripe. BB gave Costco a sales allowance for half of the cost of the too ripe bananas. BB journal entry to record the allowance is:
a debit to sales returns and allowances for $1850
The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.) a. Reports accounts receivable balance at net realizable value b. Matches expenses with related sales c. Requires no accounting estimates
a, b
The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.) a. Installation b. Purchase price c. Taxes d. Shipping fees e. Operating costs
a, b, c, d
Bad debts are: (select all) a. accounts of customers who do not pay. b. an expense of selling on credit. c. also called collectible accounts. d. also called uncollectible accounts. e. amounts the company owes to creditors.
a, b, d
Which of the statements below explain why LCM is used? (Check all that apply.) a. LCM allows companies to recognize a loss in value of an asset in the period the loss occurs. b. LCM allows companies to recognize a gain in value of an asset in the period the gain occurs. c. Companies never want to report inventory on a balance sheet that is higher than replacement cost. d. Assets are not shown at an inflated value on the balance sheet, but rather at lower of cost or replacement cost.
a, b, d
A merchandiser has four closing journal entries at the end of an accounting cycle. Select the correct entries below. (Check all that apply.) a. Close expense accounts. b. Close the dividends account. c. Close the merchandise inventory account. d. Close the income summary account. e. Close revenue accounts. f. Close asset accounts
a, b, d, e
Assuming purchase costs are rising in a periodic inventory system, determine which of the statements below are correct regarding the cost of goods sold under FIFO, LIFO and weighted average cost flow methods. (Check all that apply.) a. Companies using FIFO will report the smallest cost of goods sold. b. Companies using FIFO will report the highest gross profit and net income. c. Companies using LIFO will report the smallest cost of goods sold. d. Companies using FIFO will pay higher taxes than companies using LIFO, assuming all else being equal. e. Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold
a, b, d, e
Companies allow customers to pay for products using third-party credit cards because: (Check all that apply.) a. a variety of payment options typically increase sales volume. b. the seller avoids the risk of customer non-payment. c. there is no cost to the seller to allow third-party credit cards. d. cash is received from the credit card company faster than from a credit customer. e. the seller does not have to evaluate customer credit
a, b, d, e
Why would the physical count of inventory be different than what is shown in perpetual inventory records? (Check all that apply.) a. Events such as loss b. Events such as damage c. Events such as sales discounts d. Events such as errors e. Events such as theft
a, b, d, e
Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? (Check all that apply.) a. Shipping charges b. Assembling c. Fines incurred for failing to get the correct permits d. Repairs necessary for damages incurred during installation e. Testing
a, b, e
Which of the following assets are amortized? (Check all that apply.) a. Copyright b. Coal mine c. Patent d. Building e. Land
a, c have to be intangible assets to be amortized
Which of the following items are plant assets? (Check all that apply.) a. Building being used for operations b. Land held for investment c. Equipment being used in operations d. Equipment with no value
a, c land is in investment category
Cost of goods sold is characterized by which of the following statements? (Check all that apply.) a. Cost of goods sold is also called cost of sales. b. Cost of goods sold is the money received from selling merchandise. c. Cost of goods sold is used to figure gross profit. d. Cost of goods sold is an asset reported on the balance sheet. e. Cost of goods sold is an expense reported on the income statement. f. Cost of goods sold includes the expenses of buying and preparing an item for sale.
a, c, e
Ion Co. purchased land for $190,000. Ion also paid $5,000 in brokerage fees, $1,000 in legal fees, and $500 in title costs. Ion should record the cost of this land to be: a. $196,500 b. $195,000 c. $196,000 d. $195,500 e. $190,000
a. $196,500
Straight-line depreciation can be calculated by taking: a. (cost minus salvage value)/useful life b. (cost plus salvage value)/productive life c. (cost plus salvage value)/useful life d. (cost minus salvage value)/productive
a. (cost minus salvage value)/useful life
Explain the inventory and cost of goods sold relationship by selecting the correct formula below. a. Beginning inventory + Net purchases - Ending inventory = Cost of goods sold. b. Beginning inventory + Cost of goods sold = Ending inventory. c. Beginning inventory + Ending inventory = Cost of goods sold. d. Beginning inventory + Net purchases = Cost of goods sold.
a. Beginning inventory + Net purchases - Ending inventory = Cost of goods sold.
Determine which of the following statements is correct regarding consigned goods. a. Consigned goods should be included in the consignor's inventory. b. Consigned goods should be included in the consignee's inventory. c. Consigned goods are owned by the consignee. d. Consigned goods are located on the premises of the consignor where customers can see the prod
a. Consigned goods should be included in the consignor's inventory. (owned by consignor)
Which of the following costs are included in merchandise inventory? (Check all that apply.) a. Costs necessary to ready the merchandise for sale b. Purchase costs c. Shipping fees d. Trade discounts given to customers e. Advertising costs
a. Costs necessary to ready the merchandise for sale b. Purchase costs c. Shipping fees
Sticky Company's merchandise inventory balance at year end is $15,050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes: a. Debit to Cost of Goods Sold for $50 b. Debit to Merchandise Inventory for $50 c. Credit to Merchandise Inventory for $50 d. Credit to Cost of Goods Sold for $50
a. Debit to Cost of Goods Sold for $50 c. Credit to Merchandise Inventory for $50
_______ are nonphysical assets (used in operations) that confer on their owners long-term rights, or competitive advantages. a. Intangible assets b. Plant assets c. Natural resource d. Current assets
a. Intangible assets
Which are the two classifications of operating expenses on a multiple-step income statement? a. Selling; general and administrative b. Selling; costs of goods sold c. Selling; managerial d. Operating; non-operating
a. Selling; general and administrative
Which of the costs below would be included in the recorded cost of merchandise inventory? (Check all that apply.) a. Storage costs b. Invoice cost c. Insurance costs d. Wages costs e. Selling costs
a. Storage costs b. Invoice cost c. Insurance costs
Assume that three identical units are purchased separately on the following three dates and at the respective costs: June 1 at $10 June 2 at $15 July 4 at $20 The company sells two units during the period. Conclude which inventory items are sold first and which unit remains in ending inventory if the company is using the LIFO perpetual cost flow assumption. a. The June 2 at $15 and the July 4 at $20 are both sold; the June 1 at $10 remains in ending inventory. b. The June 1 at $10 and the June 2 at $15 are both sold; the July 4 unit remains in ending inventory. c. The June 1 at $10 is sold; the June 2 at $15 and the July 4 at $20 remains in ending inventory.
a. The June 2 at $15 and the July 4 at $20 are both sold; the June 1 at $10 remains in ending inventory.
Explain what the credit terms of 2/10,n/30 mean. (Check all that apply.) a. The full payment is due within a 30-day credit period. b. The buyer can take a discount of 10% if the invoice is paid with 30 days of the invoice date. c. The buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date. d. The full payment is due within 10 days
a. The full payment is due within a 30-day credit period. c. The buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date.
Which of the following statements correctly explains what the inventory turnover ratio assesses. a. The inventory turnover ratio assesses how quickly a company is selling its merchandise, so that it can generate cash to pay debts. b. The inventory turnover ratio assesses what percentage of a company's assets are tied up in its inventory. c. The inventory turnover ratio assesses the company's ability to generate a profit from the sales of its inventory.
a. The inventory turnover ratio assesses how quickly a company is selling its merchandise, so that it can generate cash to pay debts.
Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of: a. amortization b. impairment c. depreciation d. depletion
a. amortization
Merchandise inventory can be described as: (Check all that apply.) a. an account appearing on a balance sheet of a merchandiser. b. an asset increased with a debit. c. products that a company owns and intends to sell. d. an account appearing on a balance sheet of a service company. e. an expense account.
a. an account appearing on a balance sheet of a merchandiser. b. an asset increased with a debit. c. products that a company owns and intends to sell.
Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n): a. betterment. b. ordinary repair. c. revenue expenditure. d. extraordinary repaid
a. betterment. improves efficiency
A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet. a. discard b. depreciate c. take a loss on
a. discard
The __________ of accounts receivable method uses several percentages to estimate the allowance.
aging
Identify the items or sub-headings below that would appear on a multiple-step income statement. (Check all that apply.) a. Cost of goods sold b. Total assets c. Income from operations d. Net sales e. Selling expenses f. General and administrative expenses g. Gross profit
all of them except b
The (allowance/direct write-off) method of accounting for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce.
allowance
Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) (asset/expense/revenue) and is reported on the (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) (asset/expense/liability) and reported on the (balance sheet/income statement).
asset, balance sheet, expense, income statement
Determine which statements below are correct regarding merchandise available for sale during a period.(Check all that apply.) a. Beginning inventory + Ending inventory = Merchandise available for sale b. Beginning inventory + Net purchases = Merchandise available for sale c. Cost of goods sold + Beginning inventory = Merchandise available for sale d. Ending inventory + Cost of goods sold = Merchandise available
b and d
Determine which of the following statements are correct regarding the difference between physical flow and the cost flow of inventory. (Check all that apply.) a. Perishable items should have an actual physical flow of LIFO. b. Perishable items should have an actual physical flow of FIFO. c. A business may adopt any cost flow assumption when accounting for perishable items. d. Cost flow is an assumption about which goods/items are sold. e. Physical flow is focused on the actual movement of goods.
b, c, d, e
The buyer and seller of merchandise must agree on who is responsible for paying freight terms. Show your understanding of freight terms by selecting all of the correct statements below. (Check all that apply.) a. When the shipping costs are the responsibility of the seller, then the Merchandise Inventory account is debited. b. When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges. c. Terms FOB shipping point means the seller of the goods is responsible for freight charges. d. Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination. e. Terms FOB destination means that the seller is responsible for shipping costs. f. Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business.
b, d, e, f
Recount the methods used to assign costs to inventory and cost of goods sold under both a perpetual and a periodic system. (Check all that apply.) a. First-in, last-out b. Specific identification c. Last-in, last-out d. Weighted average e. Last-in, first-out f. First-in, first-out
b, d, e, f,
A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated depreciation. The entry to record this transaction will include which of the following entries? select all a. Credit to Gain on Sale of Machinery for $500. b. Credit to Machinery for $7,000. c. Debit to Machinery for $7,000. d. Debit to Cash for $500. e. Credit to Cash for $500. f. Debit to Loss on Sale of Machinery for $500. g. Credit to Accumulated Depreciation - Machinery for $6,500. h. Debit to Accumulated Depreciation $6,500.
b, d, h
Your business purchases a 4K TV for $800 at the beginning of the fiscal year. They decide to depreciate the item over 8 years using the double declining balance method. There is no estimated salvage value. How much depreciation expense will the company record in the 2nd year? a. $100 b. $150 c. $200 d. $600
b. $150
A machine originally cost the company $42,000 with a useful life of 8 years and $4,000 salvage value. The company uses straight-line depreciation. The company sold the machine at the end of the 4th year and recorded a loss on the sale of $2,000. How much cash did the company receive on the sale? a. $19,000 b. $21,000 c. $23,000 d. $25,000
b. $21,000
An item of inventory has list price $3,400 but your business was offered a discount on the list price of 20 percent. Transportation was designated FOB shipping point and shipping costs were $80 (and paid by you). What amount will inventory be recorded in the accounting book after all entries have been made? a. $2,720 b. $2800 c. $3400 d. $3480
b. $2800 Dr inventory for 3480 in one transaction and credit it for 680 in the next transaction
What is a purchase return? a. A purchase return refers to merchandise a seller acquires, but then returns to the buyer. b. A purchase return refers to merchandise a buyer acquires, but then returns to the seller. c. A purchase return is designed to shorten the payment period between the buyer and the seller. d. A purchase return is the cash discount given for early payment of an invoice.
b. A purchase return refers to merchandise a buyer acquires, but then returns to the seller.
_________ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life. a. Ordinary repairs b. Betterments c. Extraordinary repairs d. Revenue expenditures
b. Betterments
Explain how to determine gross profit on an income statement by selecting the correct statement below. a. Sales is subtracted from cost of goods sold. b. Cost of goods sold is subtracted from net sales. c. Cost of goods sold is added to net sales. d. Cost of goods sold is added to sales disco
b. Cost of goods sold is subtracted from net sales
Which of the statements below are correct regarding cost of goods sold? a. Cost of goods sold can be determined by subtracting the cost of a merchandise sold from its sales price. b. Cost of goods sold is the expense of buying and preparing merchandise. c. Cost of goods sold is the price received from selling a product. d. Cost of goods sold is an asset account
b. Cost of goods sold is the expense of buying and preparing merchandise.
Guns R Us overstated its ending inventory in the current year by $5,000. The company incorrectly reported $100,000 of net income. Explain the consequences of this error on the current period's income statement. a. The correct net income amount should have been $105,000. b. Cost of goods sold will be too low by $5,000. c. Cost of goods sold will be too high by $5,000.
b. Cost of goods sold will be too low by $5,000.
X-Mart purchased $300 of merchandise on account. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used. a. Credit Merchandise Inventory $300; debit Accounts Payable $300. b. Debit Merchandise Inventory $300; credit Accounts Payable $300. c. Debit Merchandise Inventory $300; credit Sales $300. d. Debit Purchases $300; credit Accounts Payable $300.
b. Debit Merchandise Inventory $300; credit Accounts Payable $300.
Which of the following are the three main parts of a multiple-step income statement? (Check all that apply.) a. Total sales b. Net income c. Income from operations d. Gross profit
b. Net income c. Income from operations d. Gross profit
Identify the statement below that is the correct definition of "shrinkage". a. Shrinkage refers to the diminished floor space that an inventory item has in a store. b. Shrinkage refers to the loss of inventory due to theft, breakage or deterioration. c. Shrinkage is the discount received against the purchase price of merchandise.
b. Shrinkage refers to the loss of inventory due to theft, breakage or deterioration.
Which of the following is true about intangible assets? a. The cost of enhancing a trademark is capitalized (recorded as an asset). b. The cost of purchasing a patent from another company is capitalized. c. Goodwill is amortized over its useful life. d. Both b and c are true.
b. The cost of purchasing a patent from another company is capitalized.
Determine which of the following statements is correct regarding the relationship of ending inventory and beginning inventory. a. The beginning inventory of the previous period is the ending inventory of the current period. b. The ending inventory of the previous period is the beginning inventory of the current period. c. The beginning inventory of the current period is the beginning inventory of the previous period. d. The ending inventory of the previous period is the ending inventory of the current period.
b. The ending inventory of the previous period is the beginning inventory of the current period.
Sparky's incorrectly included inventory that was on consignment in its ending inventory count. Consequently, the ending inventory was overstated on the balance sheet. Explain how this error will affect this year's income statement. (Check all that apply.) a. This year's cost of goods sold will be too high. b. This year's cost of goods sold will be too low. c. This year's net income will be too low. d. This year's net income will be too high
b. This year's cost of goods sold will be too low. d. This year's net income will be too high
The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a a. goodwill b. copyright c. patent d. lease
b. copyright
The ____________ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense. a. allowance b. direct write-off c. percentage of sales d. percentage of receivables
b. direct write-off
Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as parking lots and street lights—are called: a. land additions. b. land improvements. c. land. d. land structures
b. land improvements.
The LIFO cost flow assumption assumes that the cost of items purchased ______ are the costs that will be transferred first to cost of goods sold on the ______ ______. a. earliest/balance sheet b. latest/income statement
b. latest/income statement
The purchase of multiple plant assets for one purchase price is called a ______ purchase. a. betterment b. lump-sum c. fixed-rate d. extraordinary
b. lump-sum
Accounts receivable turnover is calculated using the following formula: a. total accounts receivable/sales b. net sales/average accounts receivable c. average accounts receivable/net sales d. sales/total accounts receivable
b. net sales/average accounts receivable
(Bad/Invalid) __________ (collectible/debts) __________ are accounts of customers who do not pay what they have promised to pay. It's considered an expense of selling on credit.
bad, debts
purchase return refers to merchandise a (buyer/seller/creditor) purchased, but then returns to the (buyer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.
buyer seller
Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date. a. 3/15,eom/45 b. 3/10,n/45 c. 3/15,n/45 d. 3/45, n/15
c. 3/15,n/45
inventory was purchased on credit for January 27th for $2200. The credit terms for the purchase were 2/10, n/60. If payment is made on February 5th, which of the following would be part of the journal entry. a. DR inventory for $44 b. CR A/P for $44 c. DR A/P for $2200 d. CR cash for $2200
c. DR A/P for $2200
Which of the following lists the four methods used to assign costs to inventory and to cost of goods sold? a. FIFO, FILO, weighted average and specific identification b. FIFO, FILO, weighted average and Individual c. FIFO, LIFO, weighted average and specific Identification d. LIFO, LILO, weighted average and specific identification
c. FIFO, LIFO, weighted average and specific Identification
If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as: a. FOB factory b. FOB shipping point c. FOB destination d. FOB start
c. FOB destination
Explain what lower of cost or market means in regards to reporting merchandise inventory on the balance sheet. a. Inventory should be reported at the original cost paid for it and not what it can be sold for in the market place. b. Inventory should be reported at its original cost if the replacement market value (cost) is less. c. Inventory should be reported at the current market value of replacing it when lower than cost.
c. Inventory should be reported at the current market value of replacing it when lower than cost.
A debit to Accumulated Depreciation typically means which of the following occurred: a. The company recorded depreciation expense for the period. b. The company wrote up the value of the assets. c. The company disposed of the asset or sold the asset. d. The company closed the account to Retained Earnings.
c. The company disposed of the asset or sold the asset.
Martinez Co. sells a machine that cost $10,000 with accumulated depreciation of $8,000 for $2,000 cash. The entry to record this transaction will recognize a gain or loss of how much? a. There is a gain of $8,000. b. There is a loss of $2,000. c. There is no gain or loss. d. There is a loss of $8,000. e. There is a gain of $2,0
c. There is no gain or loss.
A sales allowance can be described as: a. the implied interest paid when not taking advantage of a sales discount b. a discount given by the seller of merchandise for early payment c. a reduction in the selling price of defective or unacceptable merchandise sold to customers d. the reduction in the sales price of an item because of the quantity purchased
c. a reduction in the selling price of defective or unacceptable merchandise sold to customers
The __________ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date. a. percentage of sales b. percentage of receivables c. aging of receivables
c. aging of receivables
Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is: a. debit Accounts Receivable $1,000 and credit Sales 1,000 b. debit Accounts Receivable $600; credit Sales $600; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400 c. debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400 d. debit Accounts Payable $1,000; and credit Sales $1,000
c. debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400
The cash operating cycle for a merchandiser begins with cash purchases of merchandise and ends with _____. . a. credit sales b. accounts payable c. receipt of cash d. accounts receivable
c. receipt of cash
The allowance for doubtful accounts is a contra asset account that equals: a. total accounts receivable b. total short-term assets c. total uncollectible accounts
c. total uncollectible accounts
The owner of consigned goods is called the ______________ and the one who sells goods for the owner is called the ____________ .
consigner, consignee
In the operating cycle for a merchandiser with credit sales, after purchasing merchandise inventory for sale to customers, the next step is to make a ___________ sale.
credit
Flash Co. uses the allowance method to account for bad debts. At the end of 2010, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of: a. $7,100 b. $795,000 c. $750,000 d. $7,500 e. $7,900
d. $7,500 0.005*1,500,000 do not take into account previous balance in allowance account because it says "of sales"
Recall the formula for figuring a company's inventory turnover ratio. a. Inventory turnover = Merchandise Inventory/Average inventory b. Inventory turnover = Merchandise Inventory/Cost of goods sold c. Inventory turnover = Cost of goods sold/Gross profit d. Inventory turnover = Cost of goods sold/Average inventory
d. Inventory turnover = Cost of goods sold/Average inventory
_______ are expenditures that keep an asset in normal, good operating condition. They are necessary if an asset is to perform to expectations over its useful life. a. Extraordinary repairs b. Capital repairs c. Betterments d. Ordinary repairs
d. Ordinary repairs
Which of the following expenses would not be considered an ordinary repair? a. Replacing small parts b. Lubricating c. Cleaning d. Replacing an engine
d. Replacing an engine
When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (_______ - revised salvage value)/revised remaining useful life. a. original cost b. accumulated depreciation c. market value d. book value
d. book value
A plant asset is (depreciated/discarded/obsolete) when it is no longer useful to the company, and it has no market value.
discarded
____________ assets are assets used in a company's operations that have a useful life of more than one accounting period.
plant
If goods are shipped FOB shipping point, then the (purchaser/seller) is responsible for paying freight charges and the (purchaser/seller) will not include the merchandise in their inventory.
purchaser, seller
When purchase costs are (rising/declining) , FIFO will report the lowest cost of goods sold yielding the highest gross profit and net income.
rising (think about it. cost goes up but they are selling older and cheaper goods)
Straight-line depreciation is calculated by taking cost minus (salvage/market) value divided by useful life.
salvage
A symbol, name, phrase or jingle identified with a company, product or service is called a ___________ .
trademark
