Financial Accounting Exam 2

John Den Bear Company had a $176,000 beginning balance in Accounts Receivable on 1/1/2018. During the year, credit sales were $700,000 and customers' accounts collected were $690,000. Also, $6,000 in worthless accounts were written off during 2018. The firm's policy is to provide 5% of outstanding accounts receivable as bad debt allowance. The beginning balance in the allowance for doubtful debt on 1/1/2018 was $4,000 How much will be the bad debt expenses recorded in the income statement for the year ended 12/31/2018

$11,000

John Den Bear Company had a $176,000 beginning balance in Accounts Receivable on 1/1/2018. During the year, credit sales were $700,000 and customers' accounts collected were $690,000. Also, $6,000 in worthless accounts were written off during 2018. The firm's policy is to provide 5% of outstanding accounts receivable as bad debt allowance. The beginning balance in the allowance for doubtful debt on 1/1/2018 was $4,000 What was the net amount of receivables (i.e. Accounts receivable less Allowance for Doubtful Debt) included in the current assets at the end of the year.

$171,000

John Den Bear Company had a $176,000 beginning balance in Accounts Receivable on 1/1/2018. During the year, credit sales were $700,000 and customers' accounts collected were $690,000. Also, $6,000 in worthless accounts were written off during 2018. The firm's policy is to provide 5% of outstanding accounts receivable as bad debt allowance. The beginning balance in the allowance for doubtful debt on 1/1/2018 was $4,000. How much will be the balance in the accounts receivable account at the end of the period (after all transactions and adjusting entries have been recorded)?

$180,000

The following hammers were available for sale during the year for Wilkins Tools: Beginning inventory ................... 10 units at $40 First purchase ......................... 15 units at $50 Second purchase ..................... 30 units at $60 Third purchase ........................ 25 units at $65 Wilkins has 30 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method?

$2,650

During 2013, a company's credit sales were $131,000, and its cash collections from credit customers were $125,000. Also, $1,800 in uncollectible accounts receivable were written off (using the allowance method) during the year. On December 31, 2013, the company's Accounts Receivable balance was $25,000. What must have been the balance of accounts receivables on January 1, 2013? A. $32,800 B. $20,800 C. $29,200 D. $17,200

$20,800

DigDug Corporation had outstanding checks totaling $15,000 on its June bank reconciliation. In July, DigDug issued checks totaling $40,000. The July bank statement shows that $30,000 in checks cleared the bank in July. The amount of outstanding checks on DigDug's July bank reconciliation should be:

$25,000

Sysco Company purchased $4,000 worth of merchandise, FOB shipping point, under the periodic method. Transportation costs were an additional $350. The company later returned $750 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is

$3,535

In March, BetterBuy purchases six plasma TVs from Toshiba for $2,000 each (serial numbers 11534892 through 11534897). In April, the company purchases four more identical TVs from Toshiba for $1,800 each (serial numbers 11542631 through 11542634). In May, the company purchases five more identical TVs for $2,400 each (serial numbers 11550964 through 11550968). In June, BetterBuy sells two of these TVs (serial numbers 11534894 and 11542631). Use the information above to answer the following question. If BetterBuy uses the weighted average method, its cost of goods sold will be:

$4,160

Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000. Beginning of the period inventory was $3,000. What is the company's inventory balance to be reported on its balance sheet at year end?

$45,000

The Tuck Shop began the current month with inventory costing $25,000, then purchased inventory at a cost of $65,000. The perpetual inventory system indicates that inventory costing $60,000 was sold during the month for $100,000. If an inventory count shows that inventory costing $25,000 is actually on hand at month-end, what amount of shrinkage occurred during the month?

$5,000

On June 15, Oakley Inc. sells merchandise on account to Sunglass Hut (SH) for $10,000, terms 3/10, n/30. On June 20, SH returns to Oakley merchandise that SH had purchased for $4000. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley?

$5,820

On September 30, the books of McDonald Company indicates a balance in the Cash account of $3,675. Determine the adjusted balance on the basis of the following reconciling items: (a) Deposits of cash sales of $342 had been erroneously recorded in the cash receipts journal as $324. (b) Deposits in transit not recorded by bank, $500.00. (c) Bank debit memorandum for service charges, $25.00. (d) Bank credit memorandum for note collected by bank, $2,850, including $50 interest. (e) Bank debit memorandum for $218.00 NSF (not sufficient funds) check from Alice Bell, a customer. (f) Checks outstanding, $2,200.00. A. $6,264 B. $4,600 C. $6,300 D. $6,800

$6,300

The weighted-average cost method is used by Mendez, Inc. Sales are $80,000, the number of units available for sale is 100, the number of units sold during the period is 75, and the weighted-average cost of the goods available for sale is $200 each. How much is gross profit for the company?

$65,000

The following information was used in reconciling the bank account for Mendez Company on October: Balance per bank, October 31 $8,320 Insufficient funds check 350 Outstanding checks 400 Utility bill paid by bank 310 Check printing charge 20 Deposits in transit 600 Balance per books, October 31 10,000 Calculate the Adjusted Book Balance on October 31. A. $9,320 B. $8,360 C. $9,420 D. $9,020

$9,320

Benson Company uses the periodic inventory system. Sales for 2013 were $470,000 while operating expenses were $175,000. Beginning and ending inventories for 2013 were $70,000 and $60,000, respectively. Net purchases were $180,000 while freight in was $15,000. The net income or loss for 2013 was:

$90,000 net income

On January 1, 2014, a company has assets of $19 billion and stockholders' equity of $12 billion. On January 1, 2015, the same company has assets of $25 billion and stockholders' equity of $15 billion. During 2014, the company had total sales revenue of $22 billion and total expenses of $15 billion. The company's debt-to-assets ratio on January 1, 2015 is:

0.40

On January 1, 2014, a company has assets of $19 billion and stockholders' equity of $12 billion. On January 1, 2015, the same company has assets of $25 billion and stockholders' equity of $15 billion. During 2014, the company had total sales revenue of $22 billion and total expenses of $15 billion. The company's asset turnover ratio for 2014 is:

1.0

At the end of the first year, the Treadwell Tire Company had net accounts receivable of $80,000 and at the end of the second year the company had net accounts receivable of $100,000. If the company's net sales revenue during the second year was $900,000, the receivables turnover ratio for the second year was:

10

Martinez Company records purchases at invoice price, using the periodic inventory system. On July 5, Martinez returned $6,000 of goods purchased on account to the seller. How would Martinez record this transfer? A. Accounts Payable 6,000 Purchases Returns and Allowances 6,000 B. Accounts Receivable 6,000 Purchases Returns and Allowances 6,000 C. Accounts Payable 6,000 Purchases 6,000 D. Cash 6,000 Purchases Returns and Allowances 6,000 E. None of the above

A

Miller records purchases at invoice price and uses the perpetual inventory system. On July 5, Miller returned $3,000 of goods purchased on account to the seller. How would Miller record this transfer? A. Accounts Payable 3,000 Inventory 3,000 B. Accounts Receivable 3,000 Inventory 3,000 C. Accounts Payable 3,000 Purchases 3,000 D. Cash 3,000 Purchases 3,000 E. None of the above

A

Notification by the bank that a customer's deposited check was returned NSF requires that the company make the following adjusting journal entry: A. Dr Accounts Receivable Cr Cash B. Dr Cash Cr Accounts receivable C. Dr Bank Charges Cr Accounts receivable D. No adjusting entry necessary

A

Which of the following statements are true? I. The use of internal controls guarantees protection against losses due to fraud, errors, and inefficiencies. II. A highly effective internal control should not be implemented if the cost is greater than the benefit. III. Internal controls include the policies and procedures a company implements to protect against theft of assets, to promote efficiency, and to ensure compliance with laws and regulations.

A highly effective internal control should not be implemented if the cost is greater than the benefit; Internal controls include the policies and procedures a company implements to protect against theft of assets, to promote efficiency and to ensure compliance with laws and regulations

An adjustment to ending inventory under the lower of cost or market (LCM) rule would be least likely to be recorded by a company that sells: i. A household staple like laundry detergent. ii. Kitchen items like paper towels. iii. Seasonal items like snow blowers.

A household staple like laundry detergent; Kitchen items like paper towels

In reconciling the July bank statement, the vice president discovered that the bookkeeper had recorded a check written for $353 as $533 in the cash disbursements journal. For the bank reconciliation, the $180 error should be: A. Added to balance per bank statement B. Added to balance per general ledger C. Deducted from balance per bank statement D. Deducted from balance per general ledger E. None of the above

Added to balance per general ledger

In establishing an effective internal control structure, management should: A. Establish a good control environment. B. Provide an effective accounting system. C. Integrate control procedures into the control environment and accounting system. D. All of the above. E. None of the above

All of the above

If a company fails to make an adjusting entry to accrue interest on a note receivable, then this error: A. Overstates expenses B. Understates income C. Understates assets D. Understates owners' equity E. All of these except A

All of these except A

If inventory at the end of the year is understated by $35,000, what will this error cause? A. An understatement of net income for the year by $35,000 B. An overstatement of gross profit for the year by $35,000 C. An overstatement of inventory for the year by $35,000 D. An understatement of cost of goods sold for the year by $35,000

An understatement of net income for the year by $35,000

Which of the following is desirable in a good system of internal accounting control? A. Responsibility and authority for a given function should be shared among several employees B. Appropriate forms, such as checks and sales invoices, should have preprinted control numbers C. All accounting personnel in a firm should be bonded D. To obtain the benefit of specialization, employees should not be rotated among similar jobs E. None of the above

Appropriate forms, such as checks and sales invoices, should have preprinted control numbers

Procedures requiring that the recording of asset transactions be separated from the custody of those assets: A. Will uncover collusion among employees B. Are important only in very large businesses C. Are especially important in handling cash D. Make it easy for an employee to cover up the theft of an asset E. None of the above

Are especially important in handling cash

A firm that uses the allowance method of recording credit losses wrote off the $900 account of Beta Company in November, 2013. In January 2014, Beta paid the $900. The entry or entries to record the payment is/are: A. Cash 900 Recoveries of Accounts Written Off 900 B. Accounts Receivable--Beta 900 Allowance for Uncollectible Accounts 900 Cash 900 Accounts Receivable--Beta 900 C. Allowance for Uncollectible Accounts 900 Accounts Receivable--Beta 900 D. Accounts Receivable--Beta 900 Bad Debts Expense 900 Cash 900 Accounts Receivable--Beta 900

B

Assume the following unadjusted account balances at the end of the accounting period: Accounts Receivable, $40,000; Allowance for Uncollectible Accounts, $800 (debit balance); Sales revenue, $450,000. If the company ages the accounts and determines that $2,000 of the receivables may be uncollectible, the adjusting entry should be A. Bad Debts Expense 2,000 Allowance for Uncollectible Accounts 2,000 B. Bad Debts Expense 2,800 Allowance for Uncollectible Accounts 2,800 C. Bad Debts Expense 1,200 Allowance for Uncollectible Accounts 1,200 D. Bad Debts Expense 2,000 Accounts Receivable 2,000 E. None of the above

B

Dry Corporation cannot pay off its account with Bone Corporation on a timely basis. Bone Corporation issues a $10,000, 3-month, 12% promissory note to Dry Corporation in settlement of an open accounts receivable. What entry will Bone Corporation make upon issuance? A. Notes receivable 10,400 Accounts Receivable 10,400 B. Notes Receivable 10,000 Accounts Receivable 10,000 C. Accounts Receivable 10,000 Notes Receivable 10,000 D. Accounts Receivable 10,000 Interest Receivable 400 Notes Receivable 10,400

B

Assuming sales hold steady, which of the following actions would result in lowering income taxes for a company that uses the LIFO inventory method? A. Increasing sales prices B. Buying extra inventory near the end of the year in an inflationary environment C. Allowing the inventory quantity at year end to fall below beginning year levels D. None of these. All would cause increasing taxes

Buying extra inventory near the end of the year in an inflationary enviornment

During its first and second years of operations, Forrester Company, a corporation using a periodic inventory system, made undiscovered errors in taking its year-end inventories that understated Year 1 ending inventory by $40,000 and overstated Year 2 ending inventory by $55,000. The combined effect of these errors on reported income is: Year 1 Year 2 Year 3 A.Understated Overstated Not affected $40,000 $55,000 --- B.Understated Overstated Not affected $40,000 $15,000 --- C.Understated Overstated Understated $40,000 $95,000 $55,000 D.Overstated Understated Overstated $40,000 $55,000 $15,000 E. None of the above

C

Net accounts receivable before write-offs is $845,000. What is the balance in net accounts receivable if $19,800 in uncollectible accounts are written off? A. $825,200 B. $867,000 C. $845,000

C

On August 1, Thomas & Sons bought goods with a list price of $4,800, terms 2/10, n/30. The firm records purchases at invoice price, using the periodic inventory system. On August 5, Thomas returned goods with a list price of $600 for credit. If Thomas paid the supplier the amount due on August 9, the appropriate entry would be: A. Accounts Payable 4,800 Purchases Discounts 96 Cash 4,704 B. Accounts Payable 4,116 Cash 4,116 C. Accounts Payable 4,200 Purchases Discounts 84 Cash 4,116 D. Accounts Payable 4,200 Cash 4,200 E. None of the above

C

Rodriguez, Inc. received an $8,000 30-day, 9% note dated December 21. On December 31, Rodriguez made the necessary adjusting entry to accrue interest income on the note. Rodriguez's entry to record payment of the note on January 20 was A. Cash 8,060 Interest income 60 Notes receivable 8,000 B. Cash 8,020 Interest income 20 Notes receivable 8,000 C. Cash 8,060 Interest receivable 20 Interest income 40 Notes receivable 8,000 D. Cash 8,040 Interest income 40 Notes receivable 8,000 E. None of the above

C

Which of the following would you add to the balance per general ledger to arrive at the reconciled cash balance in a bank reconciliation? A. Bank service charge B. Collection of a note by bank C. "NSF" checks D. Deposits in transit E. None of the above

Collection of a note by bank

On June 15, a food wholesaler, using the perpetual inventory system, sold 100 cases of canned soup to Happy Foods for $30 per case with terms of 2/10, n/30. On June 17, Happy returned 20 cases of damaged inventory (and received full credit), along with a check for the amount due for the purchase. Given this information, the journal entry by Happy Foods on June 17 will: A. Debit Accounts Receivable for $3,000 B. Credit Cash for $2,940 C. Debit Cash for $2,352 D. Credit Inventory for $648

Credit Inventory for $648

A $15,000 overstatement of the 2014 ending inventory was discovered after the financial statements for the year were prepared. How would that inventory error impact the 2014 financial statements? A. Current assets were overstated and net income was understated. B. Current assets were understated and net income was understated. C. Current assets were overstated and net income was overstated. D. Current assets were understated and net income was overstated.

Current assets were overstated and net income was overstated

During its first and second years of operations, Rogers Company, a corporation using a periodic inventory system, made undiscovered errors in taking its year-end inventories that overstated year 1 ending inventory by $80,000 and overstated year 2 ending inventory by $60,000. The combined effect of these errors on reported income is: Year 1 Year 2 Year 3 A. Overstated Overstated Understated $80,000 $140,000 $60,000 B. Overstated Overstated Not affected $80,000 $60,000 --- C. Understated Understated Not affected $80,000 $140,000 --- D. Overstated Understated Understated $80,000 $20,000 $60,000

D

Which inventory costing method approximates most closely the current cost for each of the following, under inflationary conditions? End Inv CoGS A. LIFO FIFO B. LIFO LIFO C. FIFO FIFO D. FIFO LIFO

D

Merchandise was sold on credit for $4,000, terms 1/10, n/30. How should the seller record the cash collection?

Debit Cash, $4,000, and credit Accounts Receivable, $4,000, if collected after the discount period.

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $500 has gone bankrupt and payment will not be made. The Grass is Greener Corporation should: A. debit Bad Debt Expense and credit Accounts Receivable for $500. B. debit Bad Debt Expense and credit Cash for $500. C. debit Accounts Receivable and credit Bad Debt Expense for $500. D. debit the Allowance for Doubtful Accounts and credit Accounts Receivable for $500.

Debit the allowance for doubtful accounts and credit accounts receivable for $500

A company lends its supplier $200,000 for 3 years at a 12% annual interest rate. Interest payments are to be made twice a year. The company initially records the transaction by: A. debiting Cash for $24,000 and crediting Interest Revenue for $24,000. B. debiting Cash for $200,000 and crediting Notes Payable for $200,000. C. debiting Notes Receivable for $200,000 and crediting Cash for $200,000. D. debiting Interest Receivable for $72,000 and crediting Interest Revenue for $72,000.

Debiting notes receivable for $200,000 and crediting cash for $200,000

In reconciling the May bank statement, the vice president discovered that the bookkeeper had recorded a check received for $219 as $291 in the cash disbursements journal. For the bank reconciliation, the $72 error should be: A. Added to balance per bank statement B. Added to balance per general ledger C. Deducted from balance per bank statement D. Deducted from balance per general ledger E. None of the above

Deducted from balance per general ledger

Under the allowance method of accounting for credit losses, the entry to write off a specific account: A. Will increase total assets. B. Debits Bad Debts Expense and credits Allowance for Uncollectible Accounts. C. Is the same as the entry to write off a specific account under the direct write-off method. D. Does not affect net income or total assets. E. None of the above

Does not affect net income or total assets

Which one of the following statements regarding sales discounts is true? i. If a company offers a discount to encourage prompt payment and the discount is taken, the discount reduces the amount of Net Sales. ii. Credit terms of "2/10, n/30" mean that if payment is made within 10 days, a 2% discount may be taken; if not paid within 10 days, the full invoice price will be due in thirty days. iii. The terms "sales discounts" and "sales credits" are used interchangeably by a company.

If a company offers a discount to encourage prompt payment and the discount is taken, the discount reduces the amount of Net Sales & Credit terms of "2/10, n/30" mean that if payment is made within 10 days, a 2% discount may be taken; if not paid within 10 days, the full invoice price will be due in 30 days

Which of the following statements regarding inventory counts is not true? A. Companies need to perform a physical count of their inventory at least yearly regardless of which inventory system is being used. B. A perpetual inventory system does not require a physical count during the accounting period to determine cost of goods sold. C. In a perpetual inventory system, the inventory count is compared to the inventory account balance to reveal shrinkage. D. If a company uses a perpetual inventory system and the inventory count at the end of the accounting period is greater than the balance in the inventory ledger account, there must have been shrinkage.

If a company uses a perpetual inventory system and the inventory count at the end of the accounting period is greater than the balance in the inventory ledger account, there must have been shrinkage

A company has net income of $148,000 and a net profit margin ratio of .087. Which of the following is not a true statement? A. A net profit margin ratio of .087 means that 8.7 cents of profit or net income is made for each dollar of sales. B. The amount of sales revenue for this period is $1,700,000 (rounded to the nearest hundred thousand). C. A higher net profit margin ratio this year than last year indicates an improvement in controlling expenses. D. If income from operations is less than net income, this means that the company had no non-operating revenue

If income from operations is less than net income, this means that the company had no non-operating revenue

If a company declares and pays a dividend during the year, this will: i. decrease the company's net profit margin. ii. increase the company's debt-to-assets ratio. iii. decrease the company's inventory turnover ratio.

Increase the company's debt-to-assets ratio

Cornell Stores recorded the following events involving a recent purchase of merchandise: 1. Received goods for $20,000, terms 2/10, n/30. 2. Returned $400 of the shipment for credit. 3. Paid $100 freight on the shipment. 4. Paid the invoice within the discount period. As a combined result of these events, the company's inventory: A. Increased by $19,208 B. Increased by $19,300 C. Increased by $19,306 D. Increased by $19,308

Increased by $19,308

Assuming rising prices, which method will give the highest dollar value for cost of goods sold on the income statement? A. FIFO B. Average Cost C. LIFO D. All of these give equal values for cost of goods sold

LIFO

In March, BetterBuy purchases six plasma TVs from Toshiba for $2,000 each (serial numbers 11534892 through 11534897). In April, the company purchases four more identical TVs from Toshiba for $1,800 each (serial numbers 11542631 through 11542634). In May, the company purchases five more identical TVs for $2,400 each (serial numbers 11550964 through 11550968). In June, BetterBuy sells two of these TVs (serial numbers 11534894 and 11542631). Use the information above to answer the following question. BetterBuy records $4,800 as the cost of goods sold. BetterBuy is using the

LIFO method

If an uncollectible account, previously written off, is recovered: A. net accounts receivable stays the same. B. net accounts receivable increases. C. net accounts receivable decreases. D. total revenues increase.

Net accounts receivable stays the same

A company's sales revenue decreases. Average total assets and net income are unchanged. The company's

Net profit margin rises and its asset turnover falls

When preparing this month's bank reconciliation, you find that you failed to record a $200 deposit for a payment you received from a customer. You immediately prepare a journal entry to record the deposit. Which of the following describes the actions to be taken when preparing next month's bank reconciliation? A. You must decrease the balance per bank by $200. B. You must increase the balance per bank by $200. C. You must increase the balance per books by $200. D. No further action is necessary.

No further action is necessary

On December 1, 2013, Terps Company accepted a $12,000, 120 day, 8% note from a customer in granting an extension to a past due account. Terps Company's accounting period ends on December 31, and the note is collected in full on the due date. Which one of the following statements will be false for Terps Company? A. On March 31, 2014, they will credit Interest Revenue for $240 B. On December 31, 2013, they will credit Interest Receivable for $80 C. On March 31, 2014, they will credit Interest Receivable for $80 D. On March 31, 2014, they will credit Notes Receivable for $12,000

On December 31, 2013, they will credit Interest Receivable for $80

Which of the following situations would cause the balance per bank to be more than the balance per books? A. Deposits in transit. B. Service charges. C. Outstanding checks. D. Checks from customers returned as NSF.

Outstanding checks

If a company fails to make an adjusting entry to estimate uncollectible accounts, then this error: A. Understates owners' equity B. Understates assets C. Overstates net income D. Overstates expenses E. Does none of the above

Overstates net income

Phoenix Corporation uses the periodic inventory method. On March 1, it purchased $30,000 of merchandise inventory, terms 2/10, n/30. On March 3, Phoenix returned goods (not damaged) that cost $3,000. On March 9, Phoenix paid the supplier. On March 9, Phoenix should credit: A. Purchase discounts for $600 B. Inventory for $600 C. Purchase discounts for $540 D. Merchandise inventory for $540

Purchase discounts for $540

Which of the following is not a commonly used internal control? A. Mandatory vacations. B. Anonymous hotlines. C. Segregation of duties. D. Sales generation duties.

Sales generation duties

Which of the following is a true statement? i. Sales discounts is a contra-asset account. ii. Sales returns & allowances will reduce the sales revenue, that will be shown in the income statement. iii. Sales returns & allowances is a contra-revenue account.

Sales returns and allowances will reduce the sales revenue, that will be shown in the income statement; Sales returns and allowances is a contra-revenue account

Which of the following would overstate a company's net income? A. Counting shipments of customers' orders as revenue before payment has been received. B. Shipping goods to customers without receiving orders from those customers, and recording the transactions as revenue. C. Accruing liabilities for marketing expenses before they are incurred. D. Making an accrual adjusting entry for interest earned on a bond investment.

Shipping goods to customers without receiving orders from those customers and recording the transactions as revenue

Which of the following statements regarding inventory costing methods is true? A. International Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. B. In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial reporting. C. The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory. D. During a period of rising prices, LIFO results in a higher income tax expense than does FIFO.

The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory

Which of the following statements regarding inventory costing methods is true? A. The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory. B. During a period of rising prices, LIFO results in a higher income tax expense than does FIFO. C. International Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. D. In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial reporting.

The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory

Which of the following does not occur when a company receives additional information that requires it to increase its expectations of uncollectible accounts receivable? A. Accounts receivable (net) is reduced B. Bad debts expense is increased C. Net income is reduced D. The allowance account is decreased

The allowance account is decreased

In accounting for credit losses: A. The allowance method matches losses with related sales better than the direct write-off method. B. The direct write-off method involves estimating credit losses. C. The direct write-off method consistently understates assets on the balance sheet. D. Both (B) and (C).

The allowance method matches losses with related sales better than the direct write-off method

Your company has 100 units in inventory, purchased at $20 per unit, that could be replaced for $15. i. The company should credit cost of goods sold for $500. ii. The company should debit cost of goods sold for $500. iii. The company should credit inventory for $500.

The company should debit cost of goods sold for $500; The company should credit inventory for $500

Fraud investigators identify three things that must exist for accounting fraud to occur. Which of the following is/are elements of the fraud triangle? i. The incentive to commit fraud. ii. The lack of a business Code of Ethics. iii. The opportunity to commit fraud.

The incentive to commit fraud and the opportunity to commit fraud

Which of the following statements regarding methods of accounting for bad debts is true? A. The two methods of accounting for bad debts that are acceptable under GAAP are the allowance method and the direct write-off method. B. When the allowance method is used, if actual results differ from the estimates, the prior year financial statements must be corrected. C. When the allowance method is used, the journal entry to write-off an uncollectible account does not change the amount reported as net accounts receivable on the balance sheet. D. When the allowance method is used, bad debt expense is equal to the write-offs that occurred during the period.

When the allowance method is used, the journal entry to write-off an uncollectible account does not change the amount reported as net accounts receivable on the balance sheet

Which of the following statements regarding methods of accounting for bad debts is true? A. When the allowance method is used, the journal entry to write-off an uncollectible account does not change the amount reported as net accounts receivable on the balance sheet. B. The two methods of accounting for bad debts that are acceptable under GAAP are the allowance method and the direct write-off method. C. When the allowance method is used, if actual results differ from the estimates, the prior year financial statements must be corrected. D. When the allowance method is used, bad debt expense is equal to the write-offs that occurred during the period.

When the allowance method is used, the journal entry to write-off an uncollectible account does not change the amount reported as net accounts receivable on the balance sheet

Which of the following is not true for a retailer using perpetual inventory system? A. When merchandise is purchased FOB shipping point, the buyer assumes the risk of any damage in transit. B. After a physical inventory count, the retailer credits the Inventory account for any missing inventory. C. When the retailer returns defective merchandise to the manufacturer, they credit Purchase Returns. D. The Cost of Goods Sold account is closed at the end of the year with a debit to Income Summary.

When the retailer returns defective merchandise to the manufacturer, they credit purchase returns; The costs of goods sold account is closed at the end of the year with a debit to Income Summary

Which of the following statements is true? i. When unit costs are steadily rising or falling, the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO. ii. FIFO will lead to the highest net income if unit costs are falling. iii. LIFO will always yield a smaller net income than FIFO under inflationary conditions.

When unit costs are steadily rising or falling, the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO; LIFO will always yield a smaller net income than FIFO under inflationary conditions

A store holding a "50% off" sale will probably experience ______________ gross profit than usual and _______________ sales volume.

lower; higher