Test 2

The buyer

At the year end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of

Net amount of adjustments to cash bal. after bank reconciliation

Interest - NSF Checks - Service Charges

Not allowed

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

Deposit in transit

Deposits made by a company but not yet reflected in a bank statement are called

Allowance

estimated amount of uncollectible accounts based on an aging analysis

NRV of A/R after write off

(A/R - uncollectible acct. write off) - (bal. in AFDA - uncollectible acct. write off)

Adjustment

(Sale on credit*BD% of net sale) -(Sale return*BD% of net sale)

debit Cash; credit Accounts Payable

A check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. What entry is required in the company's accounts?

an overstatement of cost of goods sold for the current year

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

More than 50% of the equity securities of a second company

A company is referred to as a parent if it owns

Accounts Receivable

A customer returned damaged goods for credit. Which of the seller's accounts decreases?

Deduct from the book balance

A debit memorandum appeared on Cinco Inc.'s May bank statement. How will Cinco treat this amount on its May bank reconciliation?

NRV of A/R after adjust for BDE

A/R @ Dec. 31 - Allowance

Bal. of A/R @ Dec. 31

A/R Jan. 1 +Credit Sales -Cash Collections -Accounts Written off

Not affect total assets or total equity

Assuming a company uses the allowance method, the entry to recognize the write-off of the specific uncollectible accounts will act to:

AFDA after Adjustment

AFDA before adjustment + Adjustment

Net Realizable Value

Accounts Receivable - Allowance for Doubtful Accounts

Book Bal. -NSF Check -Service check

Adjusted Cash Balance (No error)

Book bal. -Transposition error +Interest -NSF Check

Adjusted Cash Balance (On Books)

Bank Statement bal. +Deposit in Transit -Outstanding Checks

Adjusted Cash Balance (On bank statement)

Postage stamps

Cash account includes all of the following except:

Canceled checks

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

Amount of inventory purchased during the year

Cost of goods sold + Ending Inventory - Beginning Inventory

merchandise in transit sold to customers FOB destination.

Ending inventory is equal to the cost of items on hand plus

Bad Debt Expense

Estimated Amount of uncollectible accounts - Allowance Prior to adjustment

Cost of goods sold

Expired costs during a period and is reported on the income statement

Assets and owners' equity decrease.

Fenchurch Corp. uses the direct write-off method to account for bad debts. What are the effects on the accounting equation of the entry to record the write-off of a customer's account balance?

Have no effect on Total Assets

Flake Company accepted a check from Ramos Company as payment for services rendered by Flake Company. Later Flake's bank statement revealed that Ramos' check was an NSF check. Recognizing the NSF check on Flake's books would act to:

$180

Genuine Parts received a promissory note from a customer on March 1, 2015. The face amount of the note is $8,000; the terms are 90 days and 9% interest. What is the total amount of interest that Genuine Parts will receive when the note is paid?

Outstanding Check

Has been written by the account holder but has not been presented to the bank for payment

Liabilities decrease and stockholders' equity increases.

Herndon Corp. purchased merchandise on account from Likert Corp. on November 18, 2014. On November 21, 2014, Herndon returned damaged merchandise to Likert and was granted an adjustment on its account. Herndon uses the periodic inventory system. What effect does the merchandise return have on Herndon's accounting equation?

Effect on 2015 Net Income: Overstated by $5,000 Effect on 2014 Net Income: Overstated by $5,000

If a company overstates its ending inventory balance for 2015 by $10,000, and overstates its ending inventory balance for 2014 by $5,000 what are the effects on its net income for 2015 and 2014?

Effect on Cost of Goods Sold: understated Effect on Net Income: overstated

If a company overstates its ending inventory for the current year, what are the effects on cost of goods sold and net income for the current year?

It will record bad debt expense only when an account is determined to be uncollectible.

If a company uses the direct write-off method of accounting for bad debts,

there has been a note receivable for the company that was collected by the bank.

If a credit memo appears on a bank reconciliation, this could be an indication that:

There will be items reconciling the difference.

If the balance on the bank statement does not equal the balance in the cash account, then it can be assumed that:

an integral part of the calculation of cost of goods sold.

In a periodic inventory system, the cost of purchases is recognized as

$650 gain

Meta Inc. pays $18,000 to buy stock in another company and an additional $350 in commissions. Three months later, Meta sells the stock for $19,000. At the time of sale, Meta will recognize a

Management

Most annual reports now include a report of management to the stockholders. In this report, which group has the primary responsibility for the preparation and integrity of the financial statements?

No effect on net income; no effect on total assets

On November 2, 2014, Quaint General Store concluded that a customer's $400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on Quaint's 2014 net income and balance sheet totals assuming the allowance method is used to account for bad debts?

An increase in Collection Fee Expense for $240

Textbooks.com accepts VISA for payments of purchases made by students. The credit card drafts are deposited directly in a bank account. VISA charges a 2% collection fee. Credit card drafts totaling $12,000 are deposited during September. The effect on the accounting equation to record the sales and deposits will include