chapters 5-7 accounting
A credit sale of $750 is made on June 13, terms 2/10, n/30. A return of $50 is granted on June 16. The amount received as payment in full on June 23 is
$750 ($50)-returned = $700 x .02% =$14 ($700-$14)= $686
Trendy Toy Company purchased 1,000 toys at a cost of $50 each. Trendy Toys has 200 toys in inventory at year-end with a replacement cost of $45 each. The ending inventory at lower-of-cost-or-market is
9000
A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $55; Second purchase $67; Third purchase $64. If the company sold two units for a total of $221 and used FIFO costing, the gross profit for the period would be
99
Cecil gives goods on consignment to Jerry who agrees to try to sell them for a 20% commission. At the end of the accounting period, which of the following parties includes the consigned goods in its inventory?
Cecil
Cost of goods available for sale consists of two elements: beginning inventory and
Cost of goods purchased
Which of the following is not part of the journal entries made when merchandise is sold on credit?
Credit the Cost of Goods Sold account
Which of the following accounts is not closed to Income Summary?
Inventory
The first costs assigned to ending inventory are the costs of the beginning inventory under the
LIFO method
gross profit is
Sales - COGS
The contra revenue account that normally has a debit balance is A) Sales Returns and Allowances. B) Purchase Discounts. C) Purchase Returns and Allowances. D) Freight-Out
Sales Returns and Allowances
Which of the following is not an element of the fraud triangle? Segregation of duties. opportunity rationalization financial pressure
Segregation of duties.
If a check written and paid by the bank for $638 is incorrectly recorded on the company's books at $683, the appropriate treatment on the bank reconciliation would be to
add $45 to the book's balance
The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is
bank service charges
Cost of goods sold is computed from the following equation:
beginning inventory + cost of goods purchased - ending inventory
A company writes a check to replenish a $100 petty cash fund when the fund contains receipts of $94 and $3 in cash. In recording the check, the company should
debit Cash Over and Short for $3.
On a bank reconciliation, outstanding checks are
deducted from the bank balance.
Physical controls do not include
independent bank reconciliations.
Cash equivalents include each of the following except
petty cash
Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?
$1000 ($200)-returned = $800 x .02% =$16 ($800-$16)= $784
Company A purchases $1200 of merchandise from company B on July 1 with credit terms 2/10, n/30. Company A returns $200 of the merchandise on July 5. On July 11, Company B received full payment from Company A. The amount of the payment in July is
$1200 ($200)-returned = $1000 x .02% =$20 ($1000-$20)= $980
Waterway Company purchased merchandise inventory with an invoice price of $7800 and credit terms of 5/10, n/30. What is the net cost of the goods if Waterway Company pays within the discount period?
$7800 x .05% =$390 ($7800-390)= $7410
The following information is available for Crane Company at December 31, 2018: beginning inventory $137000; ending inventory $123000; cost of goods sold $1560000; and sales $1780000. Crane's inventory turnover in 2018 is
12.0 times
Rickety Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower-of-cost-or-market is
1600
As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.
180000 +350000 =215000
As a result of a thorough physical inventory, Waterway Company determined that it had inventory worth $321500 at December 31, 2018. This count did not take into consideration the following facts: Herschel Consignment currently has goods worth $46900 on its sales floor that belong to Waterway but are being sold on consignment by Herschel. The selling price of these goods is $74100. Waterway purchased $21200 of goods that were shipped on December 27, FOB destination, that will be received by Waterway on January 3. Determine the correct amount of inventory that Waterway should report.
368400
Hudson Company started its year with 600 units of beginning inventory at a cost of $4 per unit. During the year, the company made the following purchases: May, 900 units at $5 per unit and July, 500 units at $6 per unit. A physical count of inventory at year-end indicates that there are 700 units in ending inventory. What is the cost of the ending inventory if Hudson Company uses the FIFO method for valuing inventory?
4000 [Cost of goods sold using the FIFO method instead of ending inventory ($9,900 - $4,000). Under the FIFO method of inventory valuation, the correct ending inventory is: (500 units x $6) + (200 units x $5) =$4,000.]
Sheldon's Jewelers uses the specific identification method of inventory costing. During May, Sheldon purchased 3 gemstones for $4,000, $5,000, and $6,000 respectively. During May, Sheldon sold two of the gemstones for $6,500 each. At the end of May, Sheldon determined that the $6,000 gemstone was still in his inventory. What is Sheldon's gross profit for the month of May?
4000 Gross profit = sales (2 x $6,500) - cost of goods sold ($4,000 + $5,000) = $4,000.
Dewitt Company gathered the following information in preparing its bank reconciliation on May 31: Cash balance per books, May 31, $3,500; deposits in transit, $1,150; note and interest collected by the bank, $850; bank service charge, $20; outstanding checks, $2,500; NSF check, $170. The adjusted cash balance per books at May 31 is
4160
Vaughn Company has sales revenue of $59900, cost of goods sold of $36100 and operating expenses of $13400 for the year ended December 31. Vaughn's gross profit is
Equation--> Net sales (cost of goods sold) =Gross Profit (operations expenses) $59900 ($36100) =$23800 ($13400)
During 2018, Marigold Enterprises generated revenues of $96000. The company's expenses were as follows: cost of goods sold of $49000, operating expenses of $17000 and a loss on the sale of equipment of $2500. Marigold's income from operations is
Equation--> Net sales (cost of goods sold) =Gross Profit (operations expenses) =income from operations $96000 ($49000) =$47000 ($17000) =$30000
During 2018, Vaughn Enterprises generated revenues of $103000. The company's expenses were as follows: cost of goods sold of $50000, operating expenses of $21000 and a loss on the sale of equipment of $3000. Vaughn's net income is
Equation--> Net sales (cost of goods sold) =Gross Profit (operations expenses) =income from operations other revenues and gains (other expenses and losses) =net income $103000 ($50000) =$53000 ($21000) =$32000 ($3000) = $29000
ABC Company reported the following balances at June 30, 2018: Sales Revenue = $16,900; Sales Returns and Allowances = $560; Sales Discounts = $290; Cost of Goods Sold = $7,600. Net Sales for the month is
Equation--> Sales (Sales R& A) (Sales Disc.) = Net sales $16900 ($560) ($290) =16050
Which of the following should not be included in the physical inventory of a company? A)Goods held on consignment from another company B)Goods shipped on consignment to another company C)Goods in transit from another company shipped FOB shipping point D)None of these answer choices are correct
Goods held on consignment from another company
When the physical count of Concord Company inventory had a cost of $4410 at year end and the unadjusted balance in Inventory was $4650, Concord will have to make an entry that includes
a credit to inventory
Waterway Company made a purchase of merchandise on credit from Carla Vista Company on August 8, for $9200, terms 3/10, n/30. On August 17, Waterway makes the appropriate payment to Carla Vista. The entry on August 17 for Waterway Company would include:
a debit on accounts payable
Sheridan Company sells merchandise on account for $4800 to Pharoah Company with credit terms of 1/10, n/30. Pharoah Company returns $700 of merchandise that was damaged, along with a check to settle the account within the discount period. When Sheridan Company receives of the check, their journal entry will include
a debit to cash
On a bank reconciliation, deposits in transit are
added to the bank balance.
On a bank reconciliation, collection of a note receivable by the bank is
added to the book balance
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales A)discount. B)allowance. C)return. D)contra asset
allowance
From an internal control standpoint, the asset most susceptible to improper diversion and use is
cash
The following information is available for Tye Company at December 31: Beginning inventory $80,000; Ending inventory $120,000; Cost of goods sold $1,200,000; and Sales revenue $1,600,000. Tye's inventory turnover is
cogs/avg inv=inv turnover cogs/[(BI+EI/2)]=inv turnover $1,200,000/100000= 12 times
Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales revenue of $475,000. Carlos's days in inventory is
cogs/avg inv=inv turnover cogs/[(BI+EI/2)]=inv turnover days in inv= 365/inv turnover 1217. days
When two or more people get together for the purpose of circumventing prescribed controls, it is called
collusion
The principles of internal control include all of the following except
combining of duties
The Sales Discount account is a(n)
contra revenue account
The Sales Returns and Allowances account is classified as a(n)
contra revenue account
Understating beginning inventory will understate
cost of goods sold
Understating ending inventory will overstate
cost of goods sold
In a bank reconciliation, a bank service charge is
deducted from the book balance.
A voucher system is a series of prescribed control procedures
designed to assure that disbursements by check are proper.
A check returned by the bank marked "NSF" means
not sufficient funds
A petty cash fund is generally established in order to
pay relatively small expenditures.
When the terms of sale are FOB destination, ownership of the goods remains with the seller until the goods
reach the buyer
All of the following are classified as cash except A)money on hand. B)restricted cash C)checks. D)money orders.
restricted cash
All of the following items would be reported as other revenues and gains for a merchandiser except A) gain on disposal of plant assets. B) interest revenue. C) rent revenue. D) sales revenue.
sales revenue
gross profit will result if
sales revenues are greater then cost of goods sold.
Having different individuals receive cash, record cash receipts, and hold the cash is an example of
segregation of duties.
A bank statement
shows the activity that increased or decreased the depositor's account balance
Goods in transit should be included in the inventory of the buyer when the
terms of sale are FOB shipping point
Inventory is reported in the financial statements at
the lower-of-cost-or-net realizable value.
