AC 231-60 Exam #2

A simple price tag do not provide data about the company's products. Select one: True False

False

The vendor has an ethical responsibility to ensure any manipulation, intentional or unintentional, of inventory value does not happen by detecting errors and the causes behind them. Select one: True False

False

Tyrell Company is a retailer of US furniture and has 5 major product lines. On December 31, 2022, the entity provided the following inventory data: UnitsUnit costNRV per unitSofas100$100$102Dining tables200$50$45Beds300$150$160Closets400$75$77Lounge chains500$25$20 What is the amount of inventory on December 31, 2022 using the lower of cost and net realizable value? Select one: a. $104,000 b. $107,500 c. $199,800 d. $203,300

a. $104,000

In preparing the August 31, 2022 bank reconciliation, Charm Company has made available the following information: Balance per bank statement $36,100.00 Outstanding deposits $6,500.00 Return of customer's s check for insufficient fund $1,200.00 Outstanding checks $5,500.00 Bank service charge for August $200.00 On August 31, 2022, what is adjusted cash in bank? Select one: a. $37,100 b. $35,900 c. $35,700 d. $35,100

a. $37,100

In preparing the closing entries under perpetual inventory system, which account should be credited to close? Select one: a. Purchases b. Sale revenue c. Cost of goods sold d. Purchase returns & allowances

a. Purchases

Which of the following is the best explanation of a company's inventory turnover of 12.0 for a given year? Select one: a. The company averages about one month's sales in inventory. b. The company averages about 12 days' sales in inventory. c. The company averages about 12 months' sales in inventory. d. None of the choices is correct.

a. The company averages about one month's sales in inventory.

Which of the following statements about the different valuation methods of inventory is false? Select one: a. When product cost decreases over the period, FIFO results in the highest value of ending inventory. b. FIFO reports a more accurate value of ending inventory than weighted average, as it is based on the most recent purchases. c. Weighted-average method smooths out purchase price changes and is fairly simple to administer. d. Specific identification provides the true value of ending inventory and COGS but it is costly to implement and therefore not practical for items of small value.

a. When product cost decreases over the period, FIFO results in the highest value of ending inventory.

Consigned inventory should be included in the inventory of Select one: a. consignor b. consignee c. company d. agent

a. consignor

A purchase journal is used to: Select one: a. record all purchases made on account b. record all cash purchases c. record both cash purchases and purchases made on account d. record only inventory purchases

a. record all purchases made on account

A cash receipts journal is used to: Select one: a. record all the receipts of cash b. record all the payments of cash c. record all sales made on account d. record all purchases made on account

a. record all the receipts of cash

During the audit of Exciting Company on December 31, 2022, the following data are gathered: Balance per book $80,000 Bank charges $200 Outstanding checks $19,000 Outstanding deposits $24,000 Customers note collected by bank $30,000 Interest on customer note $1,200 Customer check returned NSF $5,000 Depositor's note charged to account$20,000 What is the adjusted cash in bank on December 31, 2022? Select one: a. $86,000 b. $106,000 c. $85,000 d. $80,000

b. $106,000

The 2022 balance sheet of Jidux Company showed $503,250 cash balance. However, during the cash count, it is only $500,500. How much is the cash short or over? Select one: a. $2,750 over b. $2,750 short c. $3,250 over d. $3,250 short

b. $2,750 short

Which account will be used in preparing the bank reconciliation at the end of the period? Select one: a. Revenue b. Cash c. Accounts Receivable d. Merchandise Inventory

b. Cash

Goods were purchased on account last month. What is the correct entry to record the payment made this month for the purchase made last month? Select one: a. Debit cost of goods sold and credit cash b. Debit accounts payable and credit cash c. Debit cash and credit accounts payable d. Debit accounts payable and credit accounts receivable

b. Debit accounts payable and credit cash

Which of the following methods for valuing inventory would most likely be used for perishable items such as fruit and vegetables? Select one: a. Specific Identification b. FIFO c. None of the options d. Weighted Average

b. FIFO

In a period of declining costs, the use of which of the following inventory cost methods would result in the highest ending inventory? Select one: a. FIFO b. LIFO c. Average cost d. Weighted-average cost

b. LIFO

The periodic inventory system uses which account to record the acquisition of inventory related items? Select one: a. Accounts receivable account b. Purchases account c. Sales account d. Merchandise inventory account

b. Purchases account

A cash payments journal is used to: Select one: a. record all the receipts of cash b. record all the payments of cash c. record all sales made on account d. record all purchases made on account

b. record all the payments of cash

Butter Company took a physical inventory at the end of the year and determined that $190,000 of goods were on hand. In addition, the entity determined that $24,000 of goods purchased were in transit shipped FOB destination. The goods were actually received three days after the inventory count. The entity sold $10,000 worth of inventory FOB destination. Such inventory is in transit at year-end. What amount should be reported as inventory at year-end? Select one: a. $190,000 b. $214,000 c. $200,000 d. $224,000

c. $200,000

Bolton Company has a beginning merchandise inventory of $500 and an ending merchandise inventory of $700. It has a total sales of $6,000 and a gross profit margin of 25%. Calculate the days' sales in inventory. Select one: a. 40.56 b. 48.67 c. 42.59 d. 60.83

c. 42.59

I. All transactions must be recorded in a journal before being posted to the ledgers, regardless of whether special journals are used or not. II. Regardless of whether one is dealing with a manual or a computerized system, an effective accounting system should ensure adequate internal controls to prevent misuse of assets Which of the choices below refers to the statements above? Select one: a. I is true, II is false b. I is false, II is true c. Both I and II are true d. Both I and II are false

c. Both I and II are true

An entity that uses special journals acquired merchandise by signing notes. In which journal would the transaction be recorded? Select one: a. Invoice register b. Sales journal c. General journal d. Cash disbursements journal

c. General journal

Which of the following statements about gross and/or net income is true? Select one: a. Net income is usually larger than gross profit b. Net income is the difference between sales and cost of goods sold c. Gross profit is the difference between sales and cost of goods sold d. Gross profit and net income can be found on the balance sheet

c. Gross profit is the difference between sales and cost of goods sold

What is the purpose of subsidiary ledgers? Select one: a. Provide supporting details on groups of accounts b. Provide debit balances only c. Provide supporting details on individual accounts d. Provide credit balances only

c. Provide supporting details on individual accounts

Under the perpetual inventory system, which of the following statements is correct? Select one: a. Cost of goods sold is calculated at the end of the accounting period b. The purchase account is maintained under the perpetual system c. The perpetual inventory system immediately matches the cost of goods sold to the sale d. Inventory is updated at the end of the accounting period

c. The perpetual inventory system immediately matches the cost of goods sold to the sale

What is the purpose of preparing a bank reconciliation? Select one: a. To provide a financial analysis for the investors b. To update the balance sheet at the end of the period c. To help explain the difference between cash in the bank and cash in the ledger d. To transfer cash in the petty cash account

c. To help explain the difference between cash in the bank and cash in the ledger

One of the key purposes of internal controls is to: Select one: a. reduce salaries expense b. delete all errors c. ensure compliance with applicable laws and regulators d. guarantee the profitability of the company

c. ensure compliance with applicable laws and regulators

A common internal control for cash payments which is a set of control procedures to authorize, record and disburse cash payments. Select one: a. lockbox system b. bonding c. voucher system d. authorization and authentication

c. voucher system

The Sison Company uses the periodic inventory system. Information for 2022 is as follows: Sales $2,650,000; Beginning inventory $680,000; Purchases $1,200,000; Purchase returns $12,000; Ending inventory $740,000. Sison's cost of goods sold for 2022 is: Select one: a. $1,522,000 b. $1,188,000 c. $1,140,000 d. $1,128,000

d. $1,128,000

Which of the following are limitations of internal controls? Select one: a. Errors b. Omissions c. Intentional misuse d. All of the available choices

d. All of the available choices

Which of the following statements is true? Select one: a. A merchandiser, or merchandising business, is any business that buys and sells products, referred to as merchandise or goods, to make a profit b. A merchandiser is an intermediary between the manufacturer and the end consumer. c. The main difference between a merchandising business and a service company is that a merchandising business holds an asset called merchandise inventory for sale d. All of them are true

d. All of them are true

The gross profit margin for four companies was calculated as shown below. Select the company with the most desirable gross profit margin. Select one: a. Company A has a gross profit margin of 20% b. Company B has a gross profit margin of 25% c. Company C has a gross profit margin of 30% d. Company D has a gross profit margin of 35%

d. Company D has a gross profit margin of 35%

Which of the following is false? Select one: a. Cash must be recorded immediately when it is received so it can be tracked from receipt to deposit in the business's bank account. b. Cash should be stored in a secure place until it can be deposited to the business's bank account. c. Regular bank deposits should be made to ensure a minimal amount of cash is kept on site. d. Material discrepancies between expected cash and actual cash is recorded in the cash over and short account.

d. Material discrepancies between expected cash and actual cash is recorded in the cash over and short account.

In preparing the closing entries under periodic inventory system, which account should be debited to close? Select one: a. Purchases b. Sales discounts c. Merchandise inventory, beginning d. Purchase Returns & Allowances

d. Purchase Returns & Allowances

Computerized accounting systems offer numerous benefits, except: Select one: a. automating and simplifying the recordkeeping and posting processes b. producing timely financial statements and management reports c. providing current account balances and account activity d. all are benefits of a computerized accounting system

d. all are benefits of a computerized accounting system

Data can be stored as: Select one: a. numbers b. image c. hyperlink d. all of the available choices

d. all of the available choices

The purpose of internal controls is to provide reasonable assurance regarding the achievement of the: Select one: a. reliability of financial reporting b. effectiveness and efficiency of operations c. compliance with applicable laws and regulators d. all of the available choices

d. all of the available choices

Days' sales in inventory can be calculated by dividing 365 days with Select one: a. sales b. cost of goods sold c. inventory d. inventory turnover ratio

d. inventory turnover ratio

Net realizable value is Select one: a. fair value plus estimated costs to complete and make a sale. b. selling price. c. selling price plus estimated costs to complete and make a sale. d. selling price less estimated costs to complete and make a sale.

d. selling price less estimated costs to complete and make a sale.

This provides evidence for journal entries, which are then posted to the general ledger account: Select one: a. purchase journal b. sales journal c. subsidiary ledger d. source document

d. source document