AC 210 test bank test 2
A company has been selling its products for $20 per unit. The company's current inventory consists of 200 units purchase at $16 per unit. The current market value for this merchandise is currently $13 per unit. At what amount should the company's inventory to be recorded on the balance sheet under the lower cost or market rule after adjustments? a) $2,600 b) $3,200 c) $4,000 d) $1,400 e) $600
a
Chen's Department store is a merchandise company that uses the periodic inventory system. Selected the account balance are listed below: Sales..........................................................$175,000 Purchases.................................................$90,000 Beg Inventory...........................................$23,000 End Inventory...........................................$17,000 Purchase returns and allowances.........$3,000 Purchase Discount...................................$7,000 Transportation-in.....................................$4,000 Sales Discount..........................................$8,000 Sales Returns and Allowances................$5,000 Refer to the account information for Chen's Department store. Calculate Chen's net sales revenue. a) $162,000 b) $167,000 c) $170,000 d) $175,000 e) none of the above; some other amount is correct
a
Teeming Company uses the allowance method of accounting for bad debt. The following summary schedule was prepared from an aging of accounts receivable outstanding of December 31 of the current year. # of days % outstanding Amount uncollectible 0-30days $500,000 2% 31-60days $200,000 10% over 60days $100,000 20% The following additional information is available for the current year: Net credit sales for the year...........................$4,000,000 Allowance for doubtful accounts: balance Jan 1...............................$45,000credit Balance before adjusting, December 31.................................................$4,000credit The balance at Dec 31includes any adjustments during the year for write-offs, but before adjustment for bad debt expense. If Teeming bases its estimate of bad debts on the aging of accounts receivable, bad debt expense for the current year ending Dec 31 is... a) $46,000 b) $54,000 c) $91,000 d) $95,000
a
Use this inventory info for the month of June to answer the following question. June 1......Beg Inventory..............10units@$120 June 5......Purchase.......................60units@$112 June 14.....Sale...............................40units June 21.....Purchase.......................30units@$116 June 30.....Sale.................................28units Assuming periodic Inventory is used, what is the costs of goods sold using the FIFO basis? a)$7,696 b)$7,736 c)$3,664 d)$3,704
a
What Inventory method produces the highest gross profit? a) FIFO b) Weighted Average c) Specific Identification d) LIFO
a
Which internal control procedure is violated when the cashier at the checkout stand also records the daily receipts in the journal? a) Segregation of duties b) Independent review and appraisal c) Independent verifications d) Proper authorizations
a
Which of the following is an accurate description of the allowance for doubtful accounts? a) Contra- asset account b) Liability account c) Contra- revenue account d) Expense account e) Revenue account
a
A customer returned damaged inventory it had purchased for credit. Which of the seller's accounts decreases? a) Purchase Returns b) Accounts Receivable c) Sales Returns d) Sales Revenue
b
Baker Corp. sold merchandise to a customer on credit. The invoice was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which of the following statements are true. a) The customer can take a $10 if the invoice is paid on June 30 b) The customer should pay $1,000 if the invoice is paid on July 9 c) The customer must pay a $10 penalty if payment is made after July 9 d) The customer must pay $1,010 if payment is made after June 20
b
Ending Inventory is equal to the cost of items on hand plus... a) merchandise in transit sold to customers FOB shipping point b) merchandise in transit sold to customers FOB destination c) the cost of all inventory purchased during the period d) merchandise purchased with terms FOB destination
b
Klein's shoe store uses a perpetual inventory system. the beginning balance in its inventory account is $1,500 and the ending balance is $1,000. Costs of goods sold $6,500. What was the amount of the inventory purchases during the year? a) $500 b) $6,000 c) $7,000 d) $7,500
b
Utah Co. sold merchandise to Big Sky Corp. on December 1, 2014, for $9,000 and accepted a promissory note for payment in the same amount. The note has a term of 90 days and an annual interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on December 31, 2014 (round to nearest number)? a) $0 b) $60 c) $120 d) $180
b
What the effects on the accounting equation when a company makes the adjusting journal entry to estimate the bad debt expense using the allowance method? a) Assets and owners' equity increase b) Assets and owners' equity decrease c) Assets increase and owners' equity decrease d) Assets decrease and owners' equity increase
b
Which of these statements is true? a) Taking a physical inventory isn't necessary under a perpetual inventory system b) The inventory turnover ratio is defined as the cost of goods sold divided by average inventory c) The specific identification method is very appropriate for accounting inventory in a discount store like dollar tree or dollar general d) There is no difference is cost to implement a perpetual as compared to a periodic system e) Under the perpetual inventory system, cost of goods sold is not recorded and the inventory account is not adjusted until the end of the accounting period
b
Which of these statements is true? a) proper internal control procedures can guarantee the prevention off all theft b) When reconciling a bank account, the company doesn't have to prepare an adjusting entry for outstanding checks c) typically, the lower accounts receivable turnover ratio, the better d) at the end of each day, the cashier should be the one responsible for comparing the amount on the cash register with the day's cash additions to the cash register e) cash received through the mail should be handled by one employee to achieve efficient internal control
b
In preparing a monthly bank reconciliation, which of the following items would be added to the balance report on the bank statement to arrive at the correct cash balance? a) Outstanding Checks b) Bank Service Charge c) Deposit in Transit d) a customers' note collected by the bank on behalf of the depositer
c
On July 1, 2014 Falcon company received $20,000 promissory note for Jordyn Company. The annual interest rate is 5%. Principal and interest are paid in cash in full at the maturity date of June 30, 2015. If Falcon's accounting year ends September 30, 2014, an adjusting entry is needed on September 30 to: a) Increase interest revenue by $1,000 b) Increase notes receivable by $250 c) Increase interest receivable by $250 d) Increase notes receivable by $1,000 e) Increase interest receivable by $1,000
c
The accountant for Rogan Corp. was preparing a bank reconciliation as of February 28, 2014. The following items were identified: Rogan's book balance............................$15,000 Outstanding checks................................$2,500 Service Charge.........................................$15 Customers NSF returned by bank........$100 What amount will Rogan report as its adjusted cash balance at February 28, 2014? a) $12,385 b) $12,500 c) $14,885 d) $17,385
c
The following info is from the records of Sumter,Inc. for the year ended Dec 31, 2014. Allowance for doubtful accounts Jan1,2014 $6,000credit Sales 2014.........................................................$2,920,000 Sales return and allowance,2014...................$$32,000 If the basis for estimating bad debt is 1% of net sales, the correct amount for bad debt expense for 2014 is... a)$22,800 b)$23,200 c)$28,880 d)$34,880
c
Use this Info to answer the following question. Feb 1..........Inventory..................200units@$6.00 Feb 6..........Purchase.....................300units@$6.60 Feb 13........Purchase.....................100units@$7.20 Feb 20........Purchase...................200units@$7.80 Fe 25..........Purchase.....................40units@$8.40 Total Sales 620units A periodic Inventory system is used. Using LIFO, the cost assigned to ending inventory is... a)$1,740 b)$4,056 c)$1,332 d)$4,464
c
What Inventory method works best for high price items? a) FIFO b) Weighted Average c) Specific Identification d) LIFO
c
When a specific customer's account is written off by a company using the allowance method, the effect on net income and the net realizable value (book value) of the accounts receivable is... Net Income Net realizable value of AR a) Increase Increase b) decrease decrease c) none none d) decrease none
c
Which of the following statements is false? a) the use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place b) under the allowance method of accounting for bad debts, the company estimates the amount of bad debts before those debts actually occur c) in accounting for inventory, the assumed cost flow (LIFO,FIFO,average) must match the physical goods flow d) If a company uses LIFO for tax purposes, it must also use LIFO for financial reporting purposes
c
Aspen company provides for doubtful accounts expense at the rate of 3% of credit sales. The following data is available for last year. Allowance for doubtful accounts, Jan1.....$100,000credit Account written off as noncollectable during year.........................$60,000 Credit sales, year ended Dec 31.................$3,000,000 Please note that the allowance account is at Jan 1 before write-offs are recorded. The allowance for doubtful accounts balance at Dec 31, after adjusting entries, should be.... a) $40,000 b)$50,000 c)$90,000 d)$130,000 e)$190,000
d
Costs of Goods for Sale are highest under what Inventory method? a) FIFO b) Weighted Average c) Specific Identification d) LIFO
d
If the company uses the allowance method of accounting for bad debt, which one of the following statements is true? a) The use of the method violates the matching principles of GAAP b) The company will record bad debts only when an account is determined to be uncollectible c) The company will reduce the account receivable balance directly at the end of the accounting period for estimated uncollectible accounts d) It will report accounts receivable in the balance sheet at their net realizable value, less an estimate of uncollectible accounts
d
Profits are lowest under what Inventory method? a) FIFO b) Weighted Average c) Specific Identification d) LIFO
d
Under the GAAP, an entry should be made to bad debt expense account.... a) when an account receivable with terms 2/10, n30 is past 30 days due b) when an account receivable previously written off is determined to be a collectible c) when an account receivable is determined not to be collectible and is written off d) in the period when a sale is made
d
Use this inventory information for the month of May to answer the following question. May 1........Beg Inventory..................20units@$76 May 7........Purchase...........................70units@$80 May 18......Sale.....................................25units May 22.......Purchase............................10units@$88 May 29.......Sale.....................................40units Assuming that a periodic Inventory system is used, what is the ending inventory (rounded) under the weighted average cost meathod? a)$5,200 b)$5,288 c)$2,848 d)$2,800
d
When using the allowance method, what the effects on the accounting equation when a company writes off bad debt? a) Assets and stockholders equity increase b) Assets and stockholders equity decrease c) Assets increase and stockholders equity decrease d) No effect on overall assets and equity
d
Which method assigns the cost of the most recent items purchased to costs of goods sold? a) Specific Identification b) Weighted Average Cost c) FIFO d) LIFO
d
Which of the following rules was NOT mandated by The Sarbanes- Oxley Act of 2002 for US publically traded companies? a) Management is now held responsible for the internal controls a must issue a report on the controls b) The auditors must now audit the internal controls of the company c) The board of directors must for a committee to serve as the party in between management and the external auditors d) The company must file form 10-K with the securities exchange commissions
d
Which of the following statements regarding ratios is true? a) all other things equal, a lower debt-to-assets ratio indicates a riskier financial strategy b) a lower asset turnover ratio is a positive indicator of how well the company is generating sales revenues from its assets c) the net profit margin ratio cannot be used to indicate how well a company is controlling its expenses d) a net profit margin ration of 0.2 means that $1 of net income is generated for every $5 of sales revenues
d
Which of these statements is true? a) Sales returns and allowances are contra- assets accounts b) Freight charges associated with the purchase of inventory normally are not included in inventory costs c) When prices are rising, use of the FIFO method will result in a lower tax liability than the other methods d) Goods in transit shipped FOB shipping point should not be included in the sellers' ending inventory e) Specific identification is a very popular inventory method because it is easy to apply
d
Which one of the following procedures is NOT part of preparing a bank reconciliation of a checking account? a) Tracing deposits listed on the bank statement to the books to identify deposits in transit b) Arranging canceled checks in numerical order and tracing them to the books to identify outstanding checks c) Identifying items added on the bank statement which has not been recorded as cash receipts by the company d) Preparing adjustments to reverse the transactions recorded for checks that are still outstanding
d
Candle Company returned $2,000 of goods previously purchased on account to the seller- Beeswax Company- because the goods were not in accordance with specifications. The entry to record the RETURN on Beeswax Company's books will include: a) debit to Costs of Goods Sold $2,000 b) debit to Sales Revenue for $2,000 c) credit to Purchases Returns and Allowances for $2,000 d) credit to Accounts Payable for $2,000 e) debit to Sales Returns and Allowances for $2,000
e
Which of the following statements is false? a) The journal entry to write down inventory to its market value results in a loss on the income statement b) Many countries prohibit the use of LIFO for tax or financial reporting purposes c) Purchase discounts taken by the purchaser decreases the total cost of merchandise acquired and therefore decreasing the inventory account d) Under the perpetual inventory system, inventory losses can be identified more easily than under the periodic inventory system e) Bad debt expense is a contra account that is used to reduce accounts receivable to its net realizable value
e
