AC LearnSmart Chapters 5-8
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using periodic weighted average cost, its Cost of Goods Sold is
$560
If the Allowance for Doubtful Accounts on January 1 equals $10,000 and during the year $11,000 of specific customers' accounts were written off, then its Allowance for Doubtful Accounts will have an unadjusted balance of ______.
$1,000 debit
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500; 2 purchased July 9 for $550 each; and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using LIFO periodic, its Cost of Goods Sold is
$600
Chicken Little started the month with 5 eggs in its inventory that cost $2 each. During the month, Chicken Little bought 30 more eggs that cost $2.50 each. At the end of the month, Chicken Little counted its inventory and found that 8 eggs remained unsold. If Chicken Little uses FIFO periodic, its Cost of Goods Sold for the month is
$65
The benefits of internal control procedures are that they ______.
- Improve the efficiency and effectiveness of operations - Enhance the reliability of accounting information - Protect against theft of assets
Which of the following income statement line items are affected by the inventory method chosen?
- Income Tax Expense - Income before Income Tax Expense - Income from Operations - Gross Profit - Net Income
Some managers commit fraud because they are under great pressure to report a high net income to meet ______.
- Loan covenant requirements - Financial analysts' earnings forecasts - Shareholders' expectations
Which of the following items are netted against Sales Revenue to arrive at Net Sales (Sales Revenue to net sales)?
- Sales allowances - Sales returns - Sales discounts
The days to collect ratio provides what kind of information?
- The average number of days from sale on account to collection - That a higher number of days means a longer (worse) time for collection
What information is provided by the receivables turnover ratio?
- The number of times the average receivables balance is collected during the period - That a higher ratio means faster (better) turnover
What is the entry a company records at the time it issues a $1,000, 6% note to one of its employees that the employee needs to repay in 6 months?
- credit cash - debit notes receivable
Which of the following poses a high risk of theft because of its high volume and ease of portability?
Cash
_____________ is one of the 3 fraud triangle components where the fraudsters perceive the misdeed is unavoidable or justified.
Rationalization
When will a bankrupt customer's accounts receivable be eliminated? When the company records ______.
A write off
An increase in a company's inventory balance from a prior year is
good if the inventory turnover ratio is higher
FIFO, an inventory costing method, actually describes how to calculate the cost of _________.
goods sold
What effect does the collection of a note receivable, excluding interest, have on the accounting equation?
total assets remain the same
In which of these situations would a merchandiser record revenue?
- Goods were sent FOB Shipping Point but have not yet arrived at the buyer's place of business. - The obligation has been fulfilled and control of the goods has been transferred to the customer.
Boopsie Agin, the company's bookkeeper, recorded the purchase of merchandise on account with a debit to Cost of Goods Sold and a credit to Cash. As a result, ______.
- Liabilities are understated - Stockholders' equity is understated - Assets are understated
Which part of the Sarbanes- oxley (SOX) act may encourage employees to be honest:
- Providing legal protection to whistleblowers - Requiring a code of ethics - Requiring anonymous tip lines
The assumption that a company makes about its inventory cost flow has ______.
- an effect on the company's income statement - an effect on the company's balance sheet
Which of the following is recorded at the end of an accounting period when accounting for receivables using the allowance method?
An estimate is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Account in the same period as the related sale.
The adjusting entry to record the estimated amount of bad credit sales is a debit to Bad Debt Expense and a credit to
allowance for doubtful accounts
Under a perpetual inventory system, the entry to record the return of goods you had previously purchased on account was recorded with a debit to Accounts Payable and a credit to Inventory. This entry is _________.
correct
When using the specific identification inventory method, cost of goods sold equals the:
cost of the actual item sold
Inventory account consists of all ___________.
costs needed to get the inventory ready for sale
Assigning sequential numbers to cash sales, so that the accounting staff can ensure that every sale has been recorded is required by the internal control principle of
documenting procedures
Notes Receivable differ from Accounts Receivable in that Notes Receivable ______.
generally charge the borrowers interest from the day they are signed to the day they are collected
As inventory quality increases, its cost usually __________
increases
The ____________________ system consists of actions taken to promote efficient and effective operations, protect assets, enhance accounting information and adhere to laws and regulations
internal control
Any costs incurred to get the merchandise into a condition and location ready for sale should be debited to
inventory
The purchase of merchandise on account is recorded with a debit to ___________ and a credit to ______________.
inventory; accounts payable
The Inventory account may be credited for
purchase returns and allowances
To find a description of the inventory accounting method used by a company, you need to look at the
notes to the financial statements
The inventory turnover measures the ______.
number of times the average inventory balance is bought and sold
If a seller sells its merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is
received by the customer
FOB destination means that goods are owned by the buyer as soon as
they arrive at the buyer's place of business
The entry that includes a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable is a(n) ______.
write-off of a specific customer's account
Which of the following are reported on the income statement?
- Gross Profit - Sales Revenue - Cost of Goods Sold
Internal control for cash is important because ______.
- Of the large volume of cash transactions - Of the high risk of theft - Cash is portable and is "owned" by whomever possesses it - The risk of cash-handling errors is significant
Which of the following should be debited to Inventory?
- Purchases of merchandise on account - Freight-in of shipped FOB shipping point
Fraudulent reporting by management includes ______.
- Recording fictious revenues from a phantom customer - Mismatching revenues and expenses - Improper asset valuation
Which of the following may occur with a higher inventory turnover ratio?
- Reduction in obsolescence - Reduction in inventory storage costs
Which of the following are found on the income statement of a merchandiser?
- Sales Revenue - Cost of Goods Sold - Gross Profit
The advantage of extending credit to customers is that it helps customers to buy products and services, thereby increasing the seller's revenue. The disadvantages of extending credit are costs related to ______.
Bad debt expense
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using periodic weighted average cost, its inventory after the December 24 sale is
$2,240
Delta Diamonds had 5 one-carat diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold one of the diamonds that was purchased on July 9. Using a periodic specific identification, its Inventory after the December 24 sale is _______
$2,250
Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO, its Inventory at December 31 is
$2,300
Lux Company started the month with 20 lamps in its beginning inventory that cost $30 each. During the month, Lux purchased 80 additional lamps for $31 each. At the end of the month, Lux counted its inventory and found that 25 lamps remained unsold. If Lux uses periodic weighted average cost, its Cost of Goods Sold for the month is
$2,310
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using last-in, first-out, Cost of Goods Sold equals
$33
Boron Company has Net Sales of $60,000; Beginning Inventory of $7,000; Purchases of $35,000 and Ending Inventory of $5,000. The Cost of Goods Sold is _________.
$37,000
XYZ Company sold merchandise for $5,000, with payment terms of 2/10,n/30. If the customer pays within the discount period and takes the discount, XYZ will receive
$4,900
In its first year of business, ABC, Inc. had Accounts Receivable of $8,000 and Credit sales of $38,000. Management estimates 2% of the total credit sales will be uncollectible. Bad Debt Expense equals
$760
To ensure the accuracy of inventory accounted for using a perpetual system, physical counts ______.
- Detect bookkeeping errors - Detect theft - Detect shrinkage
The 3 categories of employee fraud are ______.
- asset misappropriation - corruption - financial statement fraud
Accepting only cash and canceling a credit card program that previously allowed customers to purchase merchandise on credit may cause ______.
- sales to decrease - bad debt expense to decrease
Ace Electronics had Cost of Goods Sold of $20,000. If purchases of inventory were $23,000 and Ending Inventory was $6,000, Ace's Beginning Inventory must have been ________.
3,000
Barrry Bees, Inc.'s Cost of Goods Sold equals $10,000. Its beginning inventory was $800, and its ending inventory was $1,200. Barry Bee's days to sell equals _____ days.
36.5
Using a perpetual inventory system, what is recorded when a customer returns a product that was purchased on account, and the product is put back on the store shelf to be resold?
A debit to Sales Returns & Allowances and a credit to Accounts Receivable; and a debit to Inventory and a credit to Cost of Goods Sold
Gotit Inc. paid an invoice for $1,000 of merchandise plus shipping of $100. If the terms were 2/10, n/30, and the bill was paid within one week of receipt, how much cash was paid?
$1,080
ABC Corp. sells a product for $1,000 cash that cost $600. The journal entry(ies) for this transaction using a perpetual inventory system include a debit to
Cash of $1,000 and a credit to Sales Revenue of $1,000; a debit to Cost of Goods Sold of $600 and a credit to Inventory of $600
Which company will have the higher number of days to sell? Company A whose cost of goods sold equals $1,000 and whose average inventory is $100. Company B whose cost of goods sold equals $2,000 and whose average inventory is $100.
Company A
The weighted average cost method uses the weighted average cost to calculate the value of ______.
Cost of goods sold Inventory
ABC Corp. wants to avoid lengthy cash collection periods and, therefore, allows customers to pay with a national credit card, rather than extend credit to its customers directly. What is the downside to such a strategy?
Credit card companies charge fees that reduce profits.
Of the 4 companies listed below, which company is more likely to use specific identification to value its inventory and cost of goods sold?
Custom home builder
The seller of inventory pays for shipping if the shipping terms are FOB ___________.
Destination
EFT stands for
Electronic Funds Transfer
When costs are rising, _________ produces a larger Inventory balance (making the balance sheet appear to be stronger) and smaller Cost of Goods Sold (resulting in a larger Gross Profit) which makes the company look more profitable.
FIFO
Which inventory costing method assumes that the inventory's cost flow out in the same order the goods are received?
FIFO
Which inventory costing method uses the oldest cost for Cost of Goods Sold on the income statement and the newest cost for Inventory on the balance sheet?
FIFO
Which of the following is merchandise inventory?
Goods held for sale in the normal course of business
Which of the following are advantages to extending credit to customers?
Increased sales Increased demand
The procedure of bank reconciliation is an example of which principle of internal control?
Independent verification
Why would a company debit Interest Receivable?
It generated interest on its notes receivable which will be collected in a later accounting period.
Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased?
LIFO
Which inventory costing method uses the newest cost for Cost of Goods Sold on the income statement and the oldest cost for Inventory on the balance sheet?
LIFO
On May 1, Doormart received an order from a customer. The goods were shipped FOB shipping point on May 3. The customer received the goods on May 5 and paid for the merchandise on June 1. When should Doormart record the sale?
May 3
____________ inventory consists of products acquired in a finished condition, ready for sale without further processing.
Merchandising
How is the lower-of-cost-or-market rule applied when there are more than 2 types of inventory?
Only the items that have market values lower than the costs will be written down.
Which component of the fraud triangle is exemplified best by an employee being able to steal because no documentation is required for amounts taken from the petty cash?
Opportunity
Which method requires estimating the amount of the Bad Debt Expense and then determining the balance in the Allowance for Doubtful Accounts which will differ from the expense if there is an unadjusted balance?
Percentage of credit sales method
_____________ of duties is essential for safeguarding assets. The person who has custody of an asset should not also account for the asset. A person who performs both duties can steal the asset and hide the theft by making a bogus entry in the accounting records.
Sehregation
FOB ___________ is the term used when ownership of the goods transfers to a buyer as soon as the goods leave the seller's place of business. Shipping point
Shipping Point
Which of the following is not an internal control for checks received through the mail?
The accounting department counts the cash, prepares the deposit slip and deposits the cash in the bank
Which of the following is recorded with a debit to Interest Receivable and a credit to Interest Revenue?
The adjusting entry to record interest earned but not yet received
What are the two stages of accounting for a purchase discount using the gross method?
The purchase is first recorded at full cost The Inventory account is later reduced if payment is made within the discount period.
Which of the following is recorded with a debit to Cash and a credit to Notes Receivable?
The receipt of the principal payment
An advantage of direct deposits is they ______________.
are convenient and efficient
A common principle of internal control is to _______________.
assign each task to only one employee
The weighted average cost method uses the ____________ cost for Cost of Goods Sold on the income statement and the ___________ cost for Inventory on the balance sheet.
average; average
Inventory is reported on the ________________. Later, when the inventory is sold, it becomes ________________.
balance sheet as a current asset; cost of goods sold on the income statement
Berkley Company had beginning inventory of $4,000 and purchases of $20,000. If half of its inventory is sold, Berkley's total goods available for sale for the period will ___________.
be split between cost of goods sold and ending inventory
Which of the following is not a significant objective of the Sarbanes-Oxley (SOX) Act?
conceal fraud
A weak system of internal _____________ provides the ______________ to commit fraud.
controls; opportunity
Using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a(n)
decrease in assets and liabilities
Assuming sales remain unchanged, if Cost of Goods Sold increases then Gross Profit
decreases
A _________ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts.
direct
An example of an EFT is _______________.
direct deposit of employee paychecks
Which principle of internal control enhances assurance that all transactions, checks and other business activities have been accounted for?
document procedures
Each cash drawer is assigned to only one employee in a supermarket. This is an example of the internal control principle of ____________.
establishing responsibility
Among the new requirements of SOX is those who willfully misrepresent financial results ____________.
face stiff lines and possible jail sentence.
A ___________ inventory turnover ratio may result in a reduction in storage and obsolescence costs as well as reduced borrowing.
higher
A company had beginning inventory of 5 units that cost $10 each. During the month, 15 units were purchased for $11 each. The company sold 12 units during the month and had 8 remaining in ending inventory. If the company uses FIFO to calculate cost of goods sold, then its gross profit will be $5 _________ than if it had used LIFO.
higher
Applying the lower of cost or market rule results in inventory being reported at the
market value if lower than cost
Net Sales on an income statement equals Sales Revenue
minus Sales Returns, Allowances and Discounts
The receivables turnover ratio is computed as ______.
net sales revenue divided by average net accounts receivable
Inventory shrinkage as a result of theft, damage or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to Inventory ___________.
only in a perpetual system
The journal entry to record the payment for merchandise previously purchased on account will cause stockholders' equity to __________.
remain unchanged
Sales Revenue reports the _____________.
sales price times the quantity of goods sold
Ace Electronics, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable, along with a debit to Inventory and a credit to Cost of Goods Sold. What business event must have taken place?
the customer received a damaged product and returned it
An objective of the expense recognition (matching) principle is to have bad debt expense debited in ______.
the same period the related credit sales are recorded
The inventory turnover ratio directly measures ______.
the times per period the average inventory balance is sold
If sales returns and allowances are a large dollar amount relative to initial sales revenue, it may mean
there are product quality issues
The adjusting entry to record the estimated amount of bad credit sales is a debit to __________________ and a credit to Allowance for Doubtful Accounts.
Bad Debt Expense
Breyer Company bought inventory FOB shipping point from Cellar Company for $4,000 cash, including shipping charges. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier Company, and not expected to arrive until January 3. Which company should include these goods in its December 31 inventory?
Breyer Company should include the $4,000 in its inventory
Using the aging approach, management estimates that 10% of the $10,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. After the bad debt adjusting entry is recorded, Bad Debt Expense on the income statement will be ____________ the Allowance for Doubtful Accounts on the balance sheet.
$100 less than
Banks provide important controls surrounding a company's cash. These include which of the following?
- Banks provide documentation - Banks restrict access - Banks provide statements that are used for independent verification
Which of the following are limitations in internal control systems?
- Collusion can exist making it impossible to completely prevent fraud - A control may not be implemented because the cost of control may exceed the benefit of reducing the fraud or potential errors
What are reasons internal controls can never completely prevent and detect errors and fraud?
- Costs exceed benefits - Human error - Collusion
In a perpetual system, the entry to record the sale of merchandise to a customer on account would include a ______.
- Debit to Cost of Goods Sold - Debit to Accounts Receivable - Credit Sales Revenue - Credit to Inventory
On March 1, Scents, Inc. lent $1,000 to an employee at a rate of 6% for 3 months. Scents' entry to record the loan of $1,000 to its employee includes a ______.
- credit to Cash of $1,000 - debit to Notes Receivable of $1,000
The journal entry to record $5.6 million in sales on account includes a ______.
- credit to Sales Revenue of $5.6 million - debit to Accounts Receivable of $5.6 million
The costs of carrying inventory include the costs of ______.
- spoilage - storage - theft - Obsolescence
The adjusting entry to record the allowance for doubtful accounts causes total ______.
- stockholders' equity to decrease - assets to decrease
Net sales revenue is $730,000. Beginning and ending net accounts receivable are $62,000 and $58,000, respectively. Calculate the days to collect.
30 days
Bijoux Company has sales of $40,000, beginning inventory of $5,000, purchases of $25,000, and ending inventory of $7,000. The goods available for sale for the period equals _____.
30,000
Using the allowance method, Bad Debt Expense is recorded _____.
as an estimate in the period of the related credit sales
A company's Bad Debt Expense reports the ______.
estimated amount of this period's credit sales that customers will fail to pay
If a company hires an auditor to check that the work done by others within the company is supported by documentation, this is part of the internal control procedure of _______________.
independent verification
The procedure of bank reconciliation is an example of which principle of internal control?
independent verification
Fraudulent reporting by management includes
misreporting revenues and expenses
Companies generally report their accounting method for inventory in the
notes to the financial statements
If Accounts Payable is debited and Cash is credited, then the company is recording a ____________.
payments of amounts owed for purchases made on account
To be in accordance with GAAP, companies are required to estimate the amount of uncollectible receivables and make an adjusting entry. The effect of the adjusting entry is to ______.
reduce Net Income by debiting Bad Debt Expense and reduce net accounts receivable by crediting Allowance for Doubtful Accounts
A receivable write-off removes a non-paying customer's account receivable and ______.
removes the same amount from Allowance for Doubtful Accounts
The services provided by a bank help business control cash by _________________.
restricting access and providing documentation and independent verification
Physically locking up assets and electronically securing access to other assets and information is required by the internal control principle of ____________.
restricting acess
A multistep income statement is useful to financial statement users because it ______.
separates income statement items into meaningful components separates cost of goods sold from other operating expenses, which allows the calculation of gross profit
Which of the following accounts are temporary accounts closed (zeroed out) at the end of the accounting period into Retained Earnings?
- Depreciation Expense - Bad Debt Expense - Sales Revenue
The principles underlying the internal control system include ______.
- Documenting procedures - Segregate duties - Restrict access - Independent verify - Establish responsibility
SOX reduces the opportunities for fraud by requiring publicly-traded companies to ______.
- Evaluate and report on its internal controls - Have external auditors evaluate the companies' internal controls - Establish an audit committee of independent directors
The quality of financial reporting for publicly traded companies is improved through ______.
- Evaluating and reporting on the effectiveness of internal controls - Obtaining an external audit
Incentives for committing fraud in order to satisfy personal greed include
- Getting a bigger paycheck - Increasing personal wealth
Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes a(n) ______.
- Increase in assets - Increase in liabilities
Which of these might cause the value of inventory to fall below its original cost?
- Obsolescence from going out of style - Increased competition - Damage
The quality of financial reporting for publicly traded companies is improved through ______.
- Obtaining an external audit - Evaluating and reporting on the effectiveness of internal controls
In financial statements, Sales on account will cause an increase in ______.
- Sales Revenue on the income statement - Accounts Receivable on the balance sheet
In a perpetual inventory system, which of the following statements are true?
- The seller should record freight-out as a selling expense - The purchaser should record freight-in as an asset, inventory
Fraudsters may rationalize their actions ______.
- Through a feeling of personal entitlement - By convincing themselves their actions are justified - Are legitimate since they are underpaid
Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______.
- credit to Allowance for Doubtful Accounts of $900 - debit to Bad Debt Expense of $900
Sales returns and allowances ______.
- reduce the amount the seller expects to receive from customers - are adjusted for at the end of the accounting period for estimated returns and allowance expected to occur in the following months - are typically recorded after the initial sale when the actual return or allowance occurs
Using a perpetual inventory system, what is recorded when a customer returns a product and gets the cash back and the product is put back on the store shelf to be resold?
A debit to Sales Returns & Allowances and a credit to Cash; and a debit to Inventory and a credit to Cost of Goods Sold
The journal entry to record taking a discount when paying for goods previously purchased on account and recorded using the gross method includes a ______.
Debit to a liability account Credit to two asset discounts
Which statement are true?
Specific identification, weighted average cost, LIFO and FIFO are generally accepted costing methods. The inventory costing methods determine the amount of the debit to Cost of Goods Sold and credit to Inventory. The inventory methods apply to both perpetual and periodic inventory systems.
Tresses, Inc., which has a December 31 year end, lent $1,000 on December 1 to an employee at 6% due in 6 months. When will Tresses record Interest Revenue? It will record ______.
an adjusting entry on December 31 with a debit to Interest Receivable and credit to Interest Revenue for the interest generated in December
Walmart sells a bike that cost $100 to a customer for $250 cash. Using a perpetual inventory system, the entry to record the sale includes a debit to _________ and credit to ___________ for $250. The entry to record the cost of the sale includes a debit to Cost of Goods Sold and a credit to ___________ for $100.
cash; sales revenue; inventory
Allowance for Doubtful Accounts is a(n) _________-asset account and has a normal _________ balance.
contra; credit
Inventory is reported as a(n) _____________
current asset on the balance sheet
Inventory is reported as a(n) ______ on the _____________.
current asset; balance sheet only
The entry to record the issuance of a note receivable is ______.
debit Notes Receivable and credit Cash
Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using last-in, first-out, the 3 goods sold are
from the purchases made during the month
Using its aging of accounts receivable, Age Old, Inc. estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible. Prior to making its adjusting entry, the unadjusted Allowance for Doubtful Accounts has a debit balance of $1,000. After the adjustment, Bad Debt Expense on the income statement will be ______________ the Allowance for Doubtful Accounts on the balance sheet.
greater than
Using the aging of receivables method, an unadjusted Allowance for Doubtful Accounts will have a debit balance when the amount of write offs recorded during the period is _____________ the amount estimated to uncollectible in the prior accounting period.
greater than
Firing employees if they are not meeting a certain performance target ___________ the risk that others will commit fraud in the future.
increases
Which of the following is not a significant objective of the Sarbanes-Oxley (SOX) Act?
increases rationalization
Using its aging of accounts receivable, Age Old, Inc. estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible. Prior to making its adjusting entry, the unadjusted Allowance for Doubtful Accounts has a credit balance of $1,000. After the adjustment, Bad Debt Expense on the income statement will be __________ the Allowance for Doubtful Accounts on the balance sheet.
less than
When costs to purchase inventory are rising, using LIFO leads to reporting a ____________________ than FIFO.
lower value for inventory on the balance sheet
A ____________ income statement shows how much profit is earned from product sales without being clouded by other operating expenses and separates other items that are not core to the operations of the company.
multistep
Cost of goods sold equals beginning inventory plus _____________ minus ending inventory.
purchases
The fees charged by major credit card companies are included in ______.
selling expenses on the income statement
If a seller sells its merchandise with the shipping terms FOB shipping point, it credits Revenue when the merchandise is __________________.
shipped from the seller's place of business
At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. Market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. CurlZ should report its inventory at
$1,000
At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. Market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. CurlZ should report its inventory at ______.
$1,000
Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______.
- debit to Bad Debt Expense of $1,000 - credit to Allowance for Doubtful Accounts of $1,000
Notes receivable are used for ______.
- extending payment periods - selling large dollar-value items - lending money to individuals or businesses
Bad Debt Expense ___________.
- is an estimate - is a cost of extending credit to customers
__________ is classified as a ___________ asset and reports the amount of merchandise available to sell.
Inventory; current
Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10 each. It purchased 3 more at $12 each. What is the weighted average cost per unit?
$11.20
Beta Company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each. It sold 90 units for $25 each. Beta's weighted average cost is
$12.10
Beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory. At the end of the month, ending inventory was $10,000. Cost of Goods sold equals ________.
$20,000
Which of the following are contra-asset accounts?
- Allowance for Doubtful Accounts - Accumulated Depreciation
Which of the following statements are true?
- An increased inventory balance is desirable if management is building up stock in anticipation of higher sales. - An increased inventory balance is undesirable if it is a result of an accumulation of unsaleable inventory.
The Sarbanes-Oxley (SOX) Act provides increased regulations for _______.
- Corporate executives - Internal controls - Auditors
When accounting for accounts receivable and bad debts, the objectives are to ______.
- report accounts receivable at the net realizable value which equals accounts receivable less the amount the company does not expect to collect. - match the cost of bad debts to the accounting period in which the related credit sales are made
Why is Bad Debt Expense an estimate?
GAAP require the expense to be debited in the same period as the credit sale, which is before knowing who specifically will not pay.
A sales discount with terms of 1/10,n/30 means the buyer receives a ____ % discount if paid within ____ days.
1; 10
If a company assumes that its inventory costs flow out in the opposite order from which the goods were purchased, it uses _______ to value its inventory.
LIFO
_____________ companies sell goods that they have produced.
Manufacturing
Which statement is true?
Specific identification, weighted average cost, LIFO and FIFO are acceptable GAAP costing methods.
Days to sell measures the average number of ______.
days from the time inventory is purchased to the time it is sold
The ______________ principle of internal control requires the use of firewalls and passwords.
restrict access
Which element is NOT part of the fraud triangle?
sustainability
Bad Debt Expense is a ______.
temporary account so its balance is closed (zeroed out) at the end of the accounting period
If Barry Bees, Inc.'s days to sell equals 73 days based on a 365-day year, then its inventory turnover ratio equals ___ times.
5
Which of the following are advantages of using national credit cards?
avoid lengthy cash collection periods reduction of bad debts expense
Which financial statements are needed to calculate the inventory turnover ratio?
Balance sheet Income statement
What does FOB shipping point mean?
Goods are owned by the buyer when they leave the seller's place of business.
Why is Allowance for Doubtful Accounts credited, instead of Accounts Receivable, when recording the adjusting entry for bad debts?
Accounts Receivable consists of many customer accounts and thus cannot be credited unless it is known which specific customer is not going to pay.
Which method of allowing for estimated uncollectible accounts is generally more accurate?
Aging of accounts receivable method
