exam 2 accounting

Given the following account balances, determine gross profit: Net sales 150,000 Cost of Goods Sold 30,000 Total assets 400,000 Total liabilities 200,000

$ 120,000

Given the following account balances, determine net sales: Sales150,000 Cost of Goods Sold30,000 Net income50,000 Sales Returns & Allowances10,000

$ 140,000

Given the following account balances, determine the amount of inventory on the balance sheet of a manufacturing company: Finished goods 15,000 Merchandise Inventory 30,000 Raw materials 40,000 Work in process 20,000

$ 75,000

An asset was purchased ten years ago for $10,000. It's worth $15,000 today and its book value is $4,000. At what amount will the asset be recorded on the balance sheet?

$10,000 (Assets are recorded at their historical cost; $10,000.)

What amount will the discount be assuming a $1,000 sale with credit terms of 1/10, n30?

$10.00

ABC Co. valued its inventory using LIFO at $100,000. The replacement cost of this inventory was valued at $150,000. Inventory should be valued at

$100,000.

Jacob Co. had the following available items at December 31, 2014. What would be the total cash and cash equivalents (combined) should Jacob report on the balance sheet at December 31, 2014? Cash$100,000 CD maturing in 9 months$200,000 Checks from customers$50,000 Money market account$30,000

$180,000

Tracks Bikes uses the perpetual moving-average inventory method to account for inventory costs. On August 1, the company's records showed beginning Inventory of 100 bikes on hand with a total cost of $18,000. On August 5, 52 additional bikes were purchased at $200 each. The average cost per unit after the March 5 purchase is

$186.84.

Dawson uses a periodic inventory system. At the end of April, Dawson had 20 units on hand. April 1/19 - On hand, 10 units @ $2 each$20 -Purchased 90 units @ $3 each270 -Goods available for sale$290 If Dawson, Inc. uses FIFO inventory costing, how much is cost of goods sold for April?

$230 (cost of goods sold: Beginning inventory; 10 units x $2 = $20 + 70 units x $3 = 210; $210 + $20 = $230.)

Inventory, January 1$20,000 Inventory, December 3130,000 Inventory purchases50,000 Given the accounts above, cost of goods sold is:

$40,000.

A company that uses LIFO had the following inventory information available: Beginning inventory 100 units @ $20 = $2,000 Purchases50 units @ $30 = $1,500 Cost of goods sold in units75 units What amount of cost of goods sold represents LIFO liquidation?

$500

Jones Co. was rewarded a contract to build a new factory of $500,000 for a client. The client paid the $500,000 immediately. At the end of the first year, half of the factory was complete. If Jones follows the cash basis, how much revenue will Jones recognize?

$500,000 (Since $500,000 was received by Jones, the entire amount would be recognized as revenue.)

XYZ Co. had the following amounts available at year-end: Net sales$1,000,000 Cost of Goods Sold$400,000 Net income$150,000 What is the gross profit for XYZ?

$600,000

On October 2, McLeod Company purchased $1,000 of inventory with terms 1/15, n/45. If McLeod pays the invoice on October 15, the cash paid would be:

$990.

American Nuts and Bolts Co. has the following layers of inventory: Beginning inventory: 500 @ $1 = $500 Jan. purchase: 200 @ $2 = $400 Mar. purchase: 200 @ $3 = $600 On April 1, the company sold 425 units. How many units remain in the January layer assuming perpetual LIFO?

0

Jonas Co. had a merchandise inventory turnover ratio of 15.2. Jonas desires its inventory to move at an average of 12 days. The average number of days to sell inventory for Jonas would be

24 days.

A company began the year with $50,000 in inventory and ended the year with $70,000 in inventory. Cost of goods sold for the year amounted to $720,000. Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory?

30 days

XYZ Co. had the following amounts available at year-end: Net sales$1,000,000 Cost of Goods Sold$400,000 Net income$150,000 What is the gross profit ratio for XYZ?

60%

The Cost of Goods Sold for Dalton Company for the year was $1,750,000. Merchandise inventory at the beginning of the year was $250,000 and merchandise inventory at the end of the year was $150,000. The merchandise inventory turnover for the year was

8.75. $1,750,000 / ($250,000 + $150,000)/2) = 8.75.

The lower-of-cost-or-market rule should be applied to: the entire inventory. individual items. groups of items. All of these answers are correct.

All of these answers are correct.

Under the perpetual LIFO inventory method when merchandise inventory is purchased, a new inventory layer is formed. when merchandise inventory is sold, we assume the units were sold out of the most recent layer. as inventory units are sold, additional sales are taken from the next most recently purchased layer. All of these choices are correct.

All of these choices are correct.

____________________ is an investment that is readily convertible to a known amount of cash and has an original maturity to the investor of three months or less. Accounts receivable

Cash equivalents

Which of the following items should not be included in cash on the balance sheet?

Coin and currency on hand Money market account Customer's undeposited check

Which one of the following is a good internal control procedure for cash disbursements? Using pre-signed checks to facilitate payment within the cash discount period. Comparing purchase requisitions, purchase orders, receiving reports, and invoices before making a cash disbursement. Making copies of purchase orders for the receiving department so they know how many items to be expected upon delivery. Requiring the signature of the purchasing department supervisor on checks to be disbursed.

Comparing purchase requisitions, purchase orders, receiving reports, and invoices before making a cash disbursement.

Which of the following is not an addition to the balance per the books on a bank reconciliation that adjusts both the bank statement and balance per the books to the adjusted balance?

Deposits in transit

For which inventory method does the dollar amount of inventory on hand at the end of the period not differ regardless of whether a company uses a periodic or a perpetual inventory system?

FIFO

Which inventory method assigns the most recent costs to ending inventory?

FIFO

Which type of inventory costing system is going to have a higher ending inventory when costs are rising?

FIFO

A company that sells perishable goods would use

FIFO.

Which type of inventory will be shipped to retailers?

Finished goods

______________________ is the amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets.

Historical cost

_______________________is/are the party responsible for monitoring and evaluating the internal control system

Internal auditing department

Federal income tax rules allow businesses to use different inventory costing methods for tax reporting and financial reporting with one exception. Which of the following situations is not allowed by federal income tax rules?

Inventory Method for Tax Reporting: LIFO Inventory Method for Financial Reporting: FIFO

ABC Co. has an inventory turnover ratio of 8. Industry and competitor standards have an inventory turnover ratio of 10. What would be the course of action that management should take?

Investigate how to increase ratio.

Which of the following is not part of the statement of cash flows?

Investigating activities

Which inventory method results in the least amount of income before taxes, assuming a period of rising prices?

LIFO

A landscaping business signs a contract with a new customer on April 1. New trees are planted for the customer on May 1, and the bill for the services is paid on June 1. Under the accrual basis, the business should recognize revenue on:

May 1 (Revenue is earned on this date. It can be recognized.)

Cost of goods available for sale is equal to: cost of goods sold less beginning inventory. beginning inventory less ending inventory. beginning inventory less cost of goods sold. None of these choices are correct.

None of these choices are correct.

Internal control: is only important in corporations. is foolproof. guarantees a perfect system. None of these choices are correct.

None of these choices are correct.

Which of the following is the correct entry when a petty cash fund is established?

Petty Cash Fund is debited, and Cash is credited.

Which of the following should not be included in the cost of inventory?

Repair costs incurred because of buyer mishandling of the inventory.

Which of the following departments in an organization is responsible for preparing the invoice approval form to document all of the information about a particular purchase?

The accounting department

During the month of December, the following payments were made from the petty cash fund that contained a balance of $100 cash already established: Postage $9.25 Supplies $15 Delivery $8.50 The journal entry to record the replenishment of the petty cash fund would include

a credit to cash for $32.75

The journal entry to record cost of goods sold under a perpetual inventory system would include

a debit to cost of goods sold.

The type of inventory system in which the Inventory account is updated at the time of each sale is called:

a perpetual system.

An allowance accounts for

a reduction in the price of merchandise for a customer as an alternative to returning the merchandise.

Controls that a company establishes to safeguard assets and ensure the reliability of the financial statements are called:

accounting controls.

The purpose of internal control is

achieving reliable financial reporting. achieving compliance with laws and regulations. achieving effective and efficient operations.

On a statement of cash flows prepared using the indirect method, a decrease in inventory is:

added to net income.

Moving average is the name given to the use of:

an average cost method used with a perpetual inventory system.

A cash equivalent is

an investment that is readily convertible to a known amount of cash and that has an original maturity to the investor of three months or less.

The form sent from the seller to the buyer as evidence of a sale is called:

an invoice.

Payment for the acquisition of inventories is shown on the statement of cash flows as:

an operating activity.

A company erroneously omits one section of its warehouse in the year-end inventory. The error will result in:

an overstatement of cost of goods sold for the current year.

For which of the following products is a company most likely to use the specific identification method?

automobiles at a car dealer

Under the cash basis, revenue is recognized when

cash is received.

All assets, including inventory, are initially recorded at

cost

The amount of cash that could be received by selling an asset currently is called:

current value (Current value is like fair market value; what the asset is worth at date of sale)

The inventory of a retailer is limited to a single type of cost, the purchase price of the inventory it sells. The three distinct types of cost to a manufacturer are:

direct materials, direct labor, and manufacturing overhead.

The three forms or states in the development of inventory for a manufacturer are

direct materials, work in process, and finished goods.

The gross profit ratio is computed by

dividing gross profit by net sales.

The LCM rule is applied is an exception to

historical cost.

What best describes historical cost and current cost measurement methods?

historical: reliable current cost: relevant

Costs that should be included in inventory are any costs associated with getting the inventory

in its salable condition and location for sale.

The journal entry to write down inventory to its market value results in a(n)

loss on the income statement.

All of the following were provisions included in the Sarbanes-Oxley Act except: prohibited external auditors from providing bookkeeping services for clients they audit. made independent auditors responsible for adequate internal control. required management to assess the effectiveness of its internal control structure and procedures. required an annual report to include an internal control report.

made independent auditors responsible for adequate internal control.

The __________ measures the relationship between sales and inventory and provides a measure of how long it takes to sell inventory.

merchandise inventory turnover ratio

The composition of a company's audit committee:

must consist entirely of directors who are outsiders.

Gross profit equals:

net sales less cost of goods sold

A $50,000 overstatement of retained earnings in 2012 will

overstate retained earnings by $50,000 in 2013.

The process of recording an item in the financial statements is called:

recognition

A LIFO inventory liquidation occurs when a company that uses the LIFO inventory method

sells more merchandise during the accounting period than it has purchased

In a bank reconciliation, bank charges are:

subtracted from the book balance.

To evaluate a company's gross profit ratio:

the ratio should be compared with those of both prior years and competitors.

An overstatement of net income in the current year will cause an

understatement of net income in the following year.

The LIFO conformity rule requires that if a company

uses LIFO on its tax return, it also must use LIFO in reporting income to stockholders.

Under the accrual method, expenses are recognized:

when they are incurred.

Errors in current year inventory

will affect inventory the following year.