acct 201 exam 2

Cost of goods sold is equal to

the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returnsand allowances and purchased discounts minus ending inventory.

A company would choose one of the accelerated depreciation methods in order to:

maximize its tax expenses in the initial years of an asset's life

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

not be amortized but should be reviewed annually for impairment.

Items should be included as part of the company's inventory if they are

purchased from a creditor, although not paid for by year end.

Which internal control activity is violated when the cashier at a cash register in a retail store also records the dailyreceipts in a journal?

segregation of duties

A constant rate of decline in a fixed asset's service potential is the underlying assumption of the:

straight-line depreciation method.

A&B Foods Data for the year ended December 31 are presented below. Sales (100% on credit) $2,100,000 Sales returns 150,000 Accounts Receivable (December 31) 420,000 Allowance for Doubtful Accounts(Before adjustment at December 31) 25,000 Estimated amount of uncollected accounts based on an aging analysis 75,000 If the company uses the aging of accounts receivable method to estimate its bad debts, what amount will be reported as bad debt expense?

$ 50,000

Stallworth Corp. Stallworth Corp. uses a periodic inventory system. The following information is available for the month of November: Nov. 1 On hand, 50 units at $15 each $ 750.00 5 Purchased, 115 units at $15.10 each $1,736.50 16 Purchased, 75 units at $15.20 each $1,140.00 Total cost of goods available for sale $3,626.50 30 On hand, 100 units If the company uses the FIFO inventory costing method, the amount assigned to the November 30 inventory would be

$1,517.50

A&B Foods Data for the year ended December 31 are presented below. Sales (100% on credit) $2,100,000 Sales returns 150,000 Accounts Receivable (December 31) 420,000 Allowance for Doubtful Accounts(Before adjustment at December 31) 25,000 Estimated amount of uncollected accounts based on an aging analysis 75,000 If the company uses 4% of net credit sales to estimate its bad debts, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

$103,000

All Star Auto has an accounts receivable balance after posting net collections from customers for 2013 of $180,000. The customers took advantage of sales discounts of $15,000. Management aged the accounts receivable and estimate for uncollected account percentages as follows: $90,000 Current at 2% $50,000 1-30 days past due at 5% $30,000 31-60 days past due at 10% $10,000 60+ days past due at 25% The net realizable value of the accounts receivable is

$170,200

Fantasy Cruise LinesOn January 1, 2021, the company purchased a ship for $1,000,000. It has a 10-year useful life and a residual value of$100,000. The company uses the double-declining-balance method. Compute the amount of depreciation expense for the year ended December 31, 2021

$200,000

Abbot Safe & Lock The following information was obtained from the company's records for the year ended December 31: Credit sales during the year $3,200,000 Accounts receivable--December 31 325,000 Allowance for doubtful accounts--December 31 (After adjustment) 35,000 Bad debt expense for the year 20,000 What amount will the company show on its year-end balance sheet for the net realizable value of its accounts receivable?

$290,000

A&B Foods Data for the year ended December 31 are presented below. Sales (100% on credit) $2,100,000 Sales returns 150,000 Accounts Receivable (December 31) 420,000 Allowance for Doubtful Accounts(Before adjustment at December 31) 25,000 Estimated amount of uncollected accounts based on an aging analysis 75,000 If the company uses the aging of accounts receivable method to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

$345,000

The accountant preparing the January bank reconciliation identified the following items: Cash balance per company records $35,900 Outstanding checks 12,050 Interest earned on the checking account 75 Customer's NSF check returned by the bank 325 There was also an error in the accounting records whereby a customer's check for $101 was recorded as $110. What is the company's adjusted cash balance at January 31?

$35,641

A company bought machinery on January 1, 2021, for $200,000. On January 2, 2023, the machinery had a book valueof $100,000. It is estimated that the machine will generate future cash flows of $70,000 and its current fair value is$60,000. How much impairment loss should be recorded?

$40,000

Dollar Town Dollar Town is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $105,000 Purchases 54,000 Beginning Inventory 13,800 Ending Inventory 10,200 Purchase Returns and Allowances 1,800 Purchase Discounts 4,200 Transportation-in 2,400 Sales Discounts 4,800 Sales Returns and Allowances 3,000 Calculate the company's gross margin

$43,200

Which of the following would be correct if a company factored $2,500,000 of receivables with a 2% fee?

$50,000 debit to Factoring Fee Expense

Dollar Town is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $105,000 Purchases 54,000 Beginning Inventory 13,800 Ending Inventory 10,200 Purchase Returns and Allowances 1,800 Purchase Discounts 4,200 Transportation-in 2,400 Sales Discounts 4,800 Sales Returns and Allowances 3,000 Calculate the net cost of goods purchased

$50,400

The following costs were incurred to acquire and prepare land for a new business: purchase price of land, $900,000;cost to clear the land, $40,000; cost of fencing, $35,000; and cost of making the parking lot, $20,000. How much should be recorded in the Land Improvements account?

$55,000

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. Howmuch interest expense should be accrued?

$720

Allatoona Landing reported net credit sales of $1,250,000 and cost of goods sold of $900,000 during the current year.Its beginning balance of Accounts Receivable was $175,000. The accounts receivable balance decreased by $25,000during the year. Rounded to two decimal places, what is the company's accounts receivable turnover rate for the currentyear?

7.69

Which one of the following statements regarding changing inventory costing methods is true?

Changing inventory costing methods violates consistency

While reconciling the checking account, the accountant noticed that an error had been made in recording a checkreceived by the company. The bookkeeper had recorded the receipt as $729 but the correct amount of the check was $279.Which of the following reconciling adjustments is necessary?

Deduct $450 from the company's records

Which of the following is true of consignment arrangements?

In consignment arrangements, the sellers earn a fee when the consigned goods are sold.

Which of the following statements is false regarding the reason that inventory costs are recorded as expenses whensold rather than when incurred?

It gives the company's accounting personnel more time to record inventory transactions

Which inventory costing method might allow a company to manipulate income by making significant inventory purchases at year end?

LIFO

Magpie Creations has a fixed asset turnover of 2.30 times. The ratio indicates that

Magpie generates revenue of $2.30 for each dollar invested in fixed assets

A check returned by a bank because the issuer's account balance could not cover the check is called a(n)

NSF check.

A petty cash custodian maintains a $250 petty cash fund. At the end of each month, the custodian tallies the records ofthe petty cash transactions and presents them for reimbursement. April 4 U.S. Post Office (postage) $ 48 April 21 Callabaugh Supply (office supplies) 146 April 25 Speedy Delivery (package delivery) 35 Which of the following entries is necessary for recording the replenishment of the fund?

Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Cash 229 (credit)

Academy Grill Supply On October 1 of the current year, the company received a $50,000 promissory note from a customer. The annual interestrate is 6%. Principal and interest will be collected in cash at the maturity date of September 30 of next year. If the company's year ends on December 31 of the current year, an adjusting entry is needed to

increase interest receivable by $750

Operating assets with no physical properties are called

intangible assets.

The principal amount of a note receivable plus the interest due is referred to as the note's

maturity value.

Which of the following is a reconciling item on the bank side of a bank reconciliation?

outstanding checks only

Focal Point Engineering purchased a trademark at the beginning of the year for $200,000. Although the trademark'slegal life is 20 years, economic benefits were expected for only 10 years. Also, during the year, the company incurredresearch and development costs of $200,000. The book value of the trademark at the end of the year is

$180,000.

If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement?

The company must increase the balance per its records by $450

Which of the following statements is false?

The cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.

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

cancelled checks

The account that records differences between amounts of cash deposited and amounts from the cash register tapes is called

cash over and short.

Which internal control activity is followed when the work of one department is inspected by another department?

checks on recorded amounts

Flying High Air acquires a new aircraft. It has an estimated life of 10 years and should last for at least 20,000 hours offlight. What is the most appropriate method of depreciation to properly match revenues and expenses?

the units-of-production method

Which of the following factors is not related to the decline in the usefulness of plant and equipment assets and therefore does not need to be considered in selecting an appropriate depreciation method?

current replacement cost

Klump Co. Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $ 900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 40 unitsTotal cost of goods available for sale $4,361.75 30 On hand, 100 units If the company uses the LIFO inventory costing method, cost of goods sold for the month of June is:

$2,550.00

Klump Co. Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $ 900.00 4 Purchased 115 units at $18.20 each $2,093.005 Sold 100 units10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units If the company uses the LIFO inventory costing method, ending inventory at June 30 is

$1,811.75

Plant assets are depreciated because

the accrual basis of accounting requires matching of costs to revenues

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

the estimated life of the asset, its acquisition cost, and its estimated residual value

Gools, Inc. buys designer clothing to sell in its retail stores. Since much of the merchandise comes from Europe,Gools, Inc. must pay freight charges. Which of the following statements must be true?

Transportation-in is included in the total cost of purchases used to determine cost of goods sold in a periodic system.

Klinc Company Klinc Company uses a perpetual inventory system and had the following inventory transactions for the month of June: June 1 On hand, 50 units at $14.00 each $ 700 4 Purchased 115 units at $15 each $1,725 5 Sold 100 units 10 Purchased 75 units at $16 each $1,200 24 Sold 50 units Total cost of goods available for sale $3,625 30 On hand, 90 units The June 30 inventory included 45 units from the June 4 purchase and 45 units from the June 10 purchase. What is the cost of goods sold for June under the specific identification method?

$2,230

Tedder Co. Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additionalinformation is available for the month of January: Jan. 1 Beginning inventory: 10 units at $2 each $ 20 20 Purchased 90 units for $3 each $270 Cost of goods available for sale $290 Which of the following entries correctly records the purchase assuming the units were acquired on credit under terms of2/10, n/30?

Purchases 270.00 Accounts payable 270.00

Noland, Inc. uses the LIFO method of inventory costing and is facing the possibility of a LIFO liquidation for thecurrent year. Merchandise purchase prices have increased since the LIFO method was adopted. If the company does notpurchase additional merchandise before year end, which one of the following effects will occur as a result of a LIFOliquidation?

Reported earnings for the current year will be higher.

Effective cash management and internal control practices include all of the following except

the practice of using surplus cash for the purchase of bonds or other long-term investments