Chapter 5 & 6 Quiz ACCT 2300

A company's sales are $520,000 and cost of goods sold is $360,0000. Beginning and ending inventories are $28,000 and $32,000, respectively. How many times did the company turn its inventory over during this period?

(Beginning Inventory + Ending Inventory) / 2 = Average Inventory Cost of Goods Sold / Average Inventory = Inventory Turnover (12 Times)

Gross Profit Percentage, when given: -Net Sales -Cost of Goods Sold

(Net Sales - Cost of Good Sold) / Net Sales

Gross Profit Percentage

(Net Sales - Cost of Goods Sold = Gross Profit) Gross Profit / Net Sales

If the Frame Shop uses the FIFO method, the cost of ending inventory will be June 1st. Beginning Inventory: 2,000 Units, $17, $34,000 Total Cost 4th. Purchase: 1,000 Units, $17, $24,780 Total Cost 9th. Sale of 1,500 Units

Balance of Beginning Inventory after Jun 9 sale: 500 units x $17 = $8,500 Balance of purchases inventory after Jun 9 sale: 1,400 units x $17 = 24,780 Ending Inventory: 1,900 units, $33,280 total cost

A corporation began 2018 with a balance in Accounts Receivable of $550,000. Service revenue, all on account, for the year totaled $2,400,000. The company ended the year with a balance in Accounts Receivable of $600,000. The company's bad-debt write-offs are nonexistent. How much cash did the company collect from customers in 2018?

Beginning Accounts Receivable + Service Revenue - Ending Accounts Receivable = 2018 Cash Collections 550,000 + 2,400,000 - 600,000 = $2,350,000

Ace Corporation had a beginning inventory of $24,000 and ending inventory of $25,000. Its net sales were $200,000 and net purchases were $83,000. Ace's cost of goods sold for the period is

Beginning Inventory + Net Purchases - Ending Inventory = Cost of Goods Sold (24,000+83,000) - 25,000 = $82,000

Two financial ratios that clearly distinguish a discount chain such as Walmart from a high-end retailer such as Gucci are the gross profit percentage and the rate of inventory turnover. Which set of relationships is most likely for Gucci?

Gross Profit Percentage, High Inventory Turnover, Low

Net Realizable Value aka

Net Receivables

Gross Profit

Net Sales - Cost of Goods Sold

A company's beginning inventory is $100,000, its net purchases are $260,000, and its net sales total $500,000. Its normal gross profit percentage is 30% of sales. Using the gross profit method, how much is ending inventory?

Sales Revenue (NST) - Estimated Gross Profit of ___% of Sales = Estimated Cost of Goods Sold Beginning Inventory + Purchases = Cost of Goods Available Cost of Goods Available - Estimated Cost of Goods Sold = Estimated Cost of Ending Inventory ($10,000)

A company uses the percent-of-sales method to estimate uncollectibles. The amount of expense to report on the income statement was $3,300. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $1,000. The balance of Allowance for Uncollectible Accounts, after adjustment, will be

Unadjusted Allowance for Uncollectible Account + Uncollectible-Account Expense = Adjusted Allowance for Uncollectible Accounts 1,000 + 3,300 = $4,300

Washington Products offers credit terms of 3/10, n/45. Which of the following statements is correct?

a discount of 3% cane taken if the invoice is paid within 10 days of the invoice date

In a period of rising prices,

gross profit under FIFO will be higher than under LIFO

An error understated Golden Flash Company's December 31, 2018, ending inventory by $27,000. What effect will this error have on net income for 2019?

overstate it

An error understated Golden Flash Company's December 31, 2018, ending inventory by $27,000. What effect will this error have on the net income for 2019?

overstate it

Fairmont Company has shipped goods to Willowbook Recreation FOB shipping point. Fairmont will recognize sales revenue when:

the goods leave Fairmont's shipping dock

When does the cost of inventory become an expense?

when inventory is delivered to a customer

Which inventory system maintains a running record of inventory on hand, purchased, and sold?

Perpetual

Which of the following statements are true?

Write-offs of accounts decrease receivables Credit Sales increase receivables Collections on account decrees receivables

How is cost of goods sold classified in the financial statements?

an expense

An understatement of ending inventory by $2 million in one period results in

an overstatement of gross profit by $2 million in the next period

The sum of ending inventory and cost of goods sold is

costs of goods available (or cost go goods available for sale)

Accounts Receivable has a debit balance of $3,000, and the Allowance for Uncollectible Accounts has a credit balance of $500. A $70 account receivable is written off. What is the amount of net receivables (net realizable value) after the write-off?

Accounts Receivable: (3,000-70= $2,930) Allowance for Uncollectible Accounts: (500-70= $430) Accounts Receivable - Allowance for Uncollectible Accounts = Net Realizable Value (net receivables) 2,930 - 430 = $2,500

Cost of Goods Sold using the Average-cost Method

Cost of Goods Available (TC) / Number of Units Available = Average Cost per unit --> Number of Unit Sold x Average Cost per unit = COGS

A Company had the following information in 2018: Accounts Receivable 12/31/18: $13,000 Allowance for uncollectible-accounts credit balance 12/31/18 (before adjustment): $650 Credit service revenue during 2018: $45,000 Cash service revenue during 2018: $10,000 Collections from customers on account during 2018: $42,000 Uncollectible accounts are determined by the percent-of-sales method to be 4% of credit sales. How much is uncollectible-account expense for 2018?

Credit Sales x Percent of Sales Uncollectible = Uncollectible-Account Expense 45,000 x 0.04 = $1,800

On April 3, a customer returned $750 of merchandise that had been purchased with cash to Beltran Supplies. Beltran's cost of the goods returned was $300. Which journal entry or entries should Beltran prepare? (no sales discount was offered for early payment.)

Debit: Sales Refunds Payable, $750 Credit: Cash, $750 Debit: Inventory, $300 Credit: Inventory Returns Estimated, $300

On August 1, 2018, Avonette, Inc., sold equipment and accepted a six-month, 9%, $50,000 note receivable. Avonette's year-end is December 31. Which of the following accounts will Avonette credit in the journal entry at maturity on February 1, 2019, assuming collection in full?

Interest Receivable

Which U.S. GAAP principle or rule would apply if the net realizable value of a company's inventory is below its original cost?

Lower-of-cost-or-market rule

The word market as used in "the lower of cost or market" generally means

Net Realizable Value

Gross Profit Percentage when given: -Freight In -Purchases -Beginning Inventory -Purchases Discounts -Dividends -Purchase Returns -Sales Revenue -Ending Inventory

Purchases - (Purchase Discounts & Purchase Returns) = Net purchases Beginning Inventory + Net Purchases + Freight In = Cost of Goods Available Cost of Goods Available - Ending Inventory = Cost of Goods Sold (Net Sales - Cost of Goods Sold) / Net Sales = Gross Profit Percentage

By using the gross profit method, the ending inventory should be

Sales Revenue - Estimated Gross Profit of ___% = Estimated Cost of Goods Sold Beginning Inventory + Purchases = Cost of Goods Available Cost of Goods Available - Cost of Goods Sold = Ending Inventory

If the adjusting entry to accrue interest on a note receivable is omitted, then

assets, net income and stock holders' equity are Understated