ACCT 225 Exam 2

Use the information below to calculate net revenues. Service Revenue $ 100,000 Sales Discounts $ 2,000 Accts Receivable $ 15,000 Sales Allowances $ 7,000 Cash $ 18,000 A. $91,000. B. $85,000. C. $68,000. D. $98,000.

A. $91,000.

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net realizable value of accounts receivable is: A. $96,000. B. $96,200. C. $100,000. D. $104,000.

A. $96,000.

Net income is defined as: A. All revenues minus all expenses. B. Sales Revenue minus Cost of Goods Sold. C. Gross Profit minus Operating Expenses. D. Income before Income Tax Expense.

A. All revenues minus all expenses.

Which of the following adjusts the company's balance of cash in a bank reconciliation? A. Interest on bank deposit. B. Checks outstanding. C. An error by the bank. D. Deposits outstanding.

A. Interest on bank deposit.

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting? A. LIFO. B. FIFO. C. Weighted-average. D. Income will be the same under each assumption.

A. LIFO.

Who is ultimately responsible for the establishment and success of a company's internal control system? A. The company's top executives. B. The company's stockholders. C. The company's external auditors. D. The company's board of director.

A. The company's top executives.

The receivables turnover ratio is a measure of: A. The number of times during a year that the average accounts receivable balance is collected. B. The likelihood that customers will not pay the full amount due at the end of the year. C. The profitability of transactions related to providing goods and services to customers on account during the year. D. The proportion of credit sales to total sales for the year.

A. The number of times during a year that the average accounts receivable balance is collected.

The primary reason the balance of cash in the company's records will differ from the balance of cash in the bank's records includes: A. Timing differences of recording cash transactions by the company and by the bank. B. Cash theft by the company's employees. C. Accounting errors made by the company. D. Accounting errors made by the bank.

A. Timing differences of recording cash transactions by the company and by the bank.

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). On December 31, 20X1, Nelsen will accrue interest revenue of: A. $8,000. B. $6,000. C. $2,000. D. $0.

B. $6,000.

Use the information below to calculate the receivables turnover ratio: Net Credit Sales $ 200,000 Beg. Accts Rec. $ 40,000 End Accts Rec. $ 10,000 Cash $ 20,000 A. 5. B. 8. C. 10. D. 20.

B. 8.

The amount of cash owed to the company by its customers from the sale of products or services on account is known as: A. Retained Earnings. B. Accounts Receivable. C. Accounts Payable. D. Service Revenue.

B. Accounts Receivable.

Operating cash flows include which of the following? A. Cash received from a bank loan. B. Cash paid for supplies. C. Cash received from the sale of a used company truck. D. Cash received from the issuance of common stock.

B. Cash paid for supplies.

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs? A. LIFO. B. FIFO. C. Weighted-average. D. Income will be the same under each assumption.

B. FIFO.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to: A. Accounts Payable. B. Inventory. C. Cost of Goods Sold. D. Purchases.

B. Inventory.

Gross profit is defined as: A. All revenues minus all expenses. B. Sales Revenue minus Cost of Goods Sold. C. Sales Revenue minus Operating Expenses. D. Income before Income Tax Expense.

B. Sales Revenue minus Cost of Goods Sold.

A company's inventory turnover ratio measures: A. The profitability on sales of inventory during the year. B. The number of times the company sells its average inventory balance during the year. C. The average cost at which inventory was purchased during the year. D. The quantity of inventory remaining at the end of the year.

B. The number of times the company sells its average inventory balance during the year.

When a company provides services on account, which of the following accounts is debited? A. Service Revenue. B. Accounts Payable. C. Accounts Receivable. D. Cash.

C. Accounts Receivable.

Investing cash flows include which of the following? A. Cash received from a customer. B. Cash paid for supplies. C. Cash received from the sale of a used company truck. D. Cash received from the issuance of common stock.

C. Cash received from the sale of a used company truck.

A sales discount is recorded by the seller as a(n): A. Expense. B. Contra asset. C. Contra revenue. D. Liability.

C. Contra revenue.

The entry to write down inventory from cost to net realizable value at the end of the year includes a: A. Debit to Inventory. B. Credit to Sales Revenue. C. Debit to Cost of Goods Sold. D. Credit to Accounts Payable.

C. Debit to Cost of Goods Sold.

Which of the following adjusts the bank's balance of cash in a bank reconciliation? A. Interest on bank deposit. B. NSF check. C. Deposits outstanding. D. Bank service fees.

C. Deposits outstanding.

Operating income is defined as: A. All revenues minus all expenses. B. Sales Revenue minus Cost of Goods Sold. C. Gross Profit minus Operating Expenses. D. Income before Income Tax Expense.

C. Gross Profit minus Operating Expenses.

In response to widespread fraudulent reporting in the late 1990's and early 2000's, Congress: A. Enacted the Securities and Exchange Commission. B. Established the Financial Accounting Standards Board. C. Passed the Sarbanes-Oxley Act. D. Organized the Internal Revenue Service.

C. Passed the Sarbanes-Oxley Act.

The entry to record the estimate for uncollectible accounts includes: A. A debit to Allowance for Uncollectible Accounts. B. A credit to Accounts Receivable. C. A debit to Sales Revenue. D. A debit to Bad Debt Expense.

D. A debit to Bad Debt Expense.

Which of the following is considered cash for financial reporting purposes? A. Coins and currency. B. Debit card sales. C. Checks received from customers. D. All of the above.

D. All of the above.

Fan Company sells inventory on account. The entry to record this sale using a perpetual inventory system would include a: A. Debit to Accounts Receivable. B. Credit to Sales Revenue C. Debit to Cost of Goods Sold. D. All of the these are included to record the sale.

D. All of the these are included to record the sale.

Financing cash flows include which of the following? A. Cash received from a customer. B. Cash paid for supplies. C. Cash received from the sale of a used company truck. D. Cash received from the issuance of common stock.

D. Cash received from the issuance of common stock.

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits payment on January 25? A. Debit Cash for $500. B. Credit Accounts Receivable for $490. C. Credit Service Revenue for $500. D. Debit Sales Discount for $10.

D. Debit Sales Discount for $10.

A company's gross profit ratio measures: A. The average amount of sales revenue per unit of inventory sold during the year. B. The number of times the company sells its average inventory balance during the year. C. The number of days the average inventory is held. D. The amount by which the sale of inventory exceeds its cost per dollar of sales.

D. The amount by which the sale of inventory exceeds its cost per dollar of sales.

Which of the following represents the balance of Cost of Goods Sold at the end of the year? A. The cost of inventory not yet sold by the end of the year. B. The cost of inventory purchased during the year. C. The cost of inventory at the beginning of the year. D. The cost of inventory sold during the year.

D. The cost of inventory sold during the year.