Accounting test 2

The method of recording bad debts that results in a bad debt expense before the actual default is the

allowance

Checks presented for payment and paid by the bank are known as

canceled checks

What are those investments and deposits with financial institutions that are readily convertible into known amount of cash and that have original maturities of three months or less?

cash equivelance

Cash collected and recorded by company but not yet reflected in a bank statement are known as

deposits in transit

under which act are management of publicly-traded corporations has increased responsibility for a system of internal controls that ensures reliability of financial statements?

sarbeans oxley

Shipping terms of FOB Destination means that the shipping costs are paid by the _____

seller

Cost of goods sold is equal to the beginning inventory plus the net cost of purchases minus_____

ending inventory

A _________ is the buyer of receivables, who acquires the right to collect the receivables and assumes the risk of ucollectibility

factor

(t/f) Under the FIFO method of inventory costing, the units in the ending inventory represented the oldest purchases

false

(t/f) sales discounts decrease the cost of inventory acquired

false

The best response to an employee caught stealing from the company is to say "Don't ever let me catch you doing that again!"

false

Check written on the company's account in May and paid by the bank is returned with the bank statement=

not included on the reconciliation

The understatement of ending inventories in one period leads to an _______ of cost of goods sold in the same period

over

requires updating of the inventory account at the time of each purchase and each sale

perpetual inventory system

Cost of ingredients used to make a product

raw materials

Used to induce the customer to keep damaged goods

sales allowance

To encourage prompt payment, sellers offer a_____

sales discount

used to encourage prompt payment

sales discount

reduction of price granted by the seller for a particular class of customers

trade discount

shipping costs paid to acquire merchandise

transportation-in

(t/f) Accounts receivable are shown on the balance sheet at their net realizable value

true

(t/f) For a merchandising company, the cost of goods sold is subtracted from net sales to arrive at gross profit

true

(t/f) The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place

true

Check written on the company's account in May that does not appear on the bank statement=

Subtraction from bank balance

Customer's check was deposited on May 31 but is not included on the bank statement

Subtraction from company balance

cost of completed unsold items

finished goods

Petty cash is not considered to be a cash equivalent

true