Accounting 2

Broad, Inc. had a beginning inventory of $50,000 and an ending inventory of $80,000. Its Cost of Goods Sold for the year was $970,000. What was the amount of purchases that it made for the year?

$1,000,000 (50,000+80,000 / 2) + 970,000

Purchases Oct. 10 - 10 units @ $100 Purchases Oct. 15 - 10 units @ $200 Sold 15 units for $300 Under the FIFO costing method, what amount should be included in ending inventory (assumed no beginning inventory)

$100

Beginnig inventory - 400 units @ $15 Purchase on January 25 - 600 units @$16 Purchase on March 15 - 400 units @ $17 Purchase on October 2 - 800 units @$18 There are 1,000 units in ending inventory. What is the amount of the ending inventory using the LIFO method?

$15,600

Orbit, Inc. has sales of $28,000, beginning inventory of $3,500, purchases of $17,500, and ending inventory $4,900. The cost of goods sold is:

$16,100 (3,500 + 17,500 - 4,900)

Madison Manufacturing's ending inventory count was $65,000, costs of goods sold was $35,100, and purchases were $72,800, its beginning inventory must have been:

$27,300 (x + 72,800) - 35,100 = 65,000

Outstanding checks have:

been recorder by the company but not yet by the bank

Beginning inventory plus purchases equals:

goods available for sale

The fraud triangle includes

incentive, opportunity, rationalization

Jackson Manufacturing Company had a beginning inventory of $30,000. During the year, the company recorded inventory purchases of $90,000 and cost of goods sold of $100,000. The ending inventory must equal:

$20,000 (30,000+90,000) - 100,000

Buckeye Co. had beginning inventory $18,000, cost of goods sold $42,000, and ending inventory of $24,000. Purchases were:

$48,000 (18,000 + x) - 42,000 = 24,000

Which of the following is NOT one of the 3 general employee fraud categories

Independent verification

Which of the following is not an accepted inventory costing method under GAAP

Indirect method

Palm Industries had cost of goods sold of $40,000. If purchases were $46,000 and ending inventory was $12,000, Ace's beginning inventory must have been:

$6,000 (x + 46,000) - 40,000 = $12,000

Sheridan's beginning inventory is $140,000, goods purchased during the period cost $480,000, and the cost of goods sold for the period is $560,000. What is the amount of its ending inventory?

$60,000 (140,000+480,000) - $560,000

Elm corporation is a merchandising company. The year began with inventory of $35,100 Purchases for the year were $67,600, and the Ending Inventory was $18,200. What is the Cost of Goods Sold that would be reported on the income statement?

$84,500 (67,100+35,000) - 18,200

What are the 4 Inventory costing methods

-FIFO -LIFO -Weighted Average -Specific Identification

The value of inventory can fall below its recored cost for what reasons?

-It's outdated -It's easily replaced by identical goods at a lower cost

The main purpose of internal controls include:

-Prevention of error, theft, and fraud -promotion of operational efficiency -Ensuring compliance with laws and regulations

What are the 3 parts of the fraud triangle?

-Rationalization -Opportunity -incentive

the inventory costing method selected by a company can affect

-The balance sheet -The income statement -The statement of retained earnings

Sales discounts with the terms 2/10, n/30 mean:

2 percent discount for payment received within 10 days or the full amount (less returns) is due within 30 days.

The Allowance for Doubtful Accounts accounts is a contra-account that offsets:

Accounts Receivable

True/False - When a company uses FOB destination the sale is recorded when the goods leave the seller's shipping department

False

Accounts receivable:

Are amounts owed to business by its customers

Which of the following compares the company's records to the bank's statement of account to determine whether they agree:

Bank Reconciliation

What is the cost of goods sold equation?

Beg. Inventory + purchases - Ending Inventory = Cost of Goods sold

If inventory is updated periodically, which of the equations is correct?

COGS = BI + P - EI

The adjusting entry used to record the estimated bad debts in the period credit sales occur decreases:

Both net income and net accounts receivable

Which of the following kinds of inventory would be the best suited for the specific identification method?

Business Jets

Which of the equations is correct?

COGS = BI + P - EI

If costs are rising, which of the following will be true?

COGS will be greatest if LIFO is used

Which of the following is the inventory turnover ratio?

COGS/Average Inventory

The volume of transactions is enormous and the risk of handling errors is significant for:

Cash

Which of the following is NOT a principle of control activities:

Collusion

Goods that a company holds for another company that are not reported on the company's balance sheet are called:

Consignment inventory

Which is NOT one the three stages in the fraud triangle?

Control Activities

Which of the following s true about internal controls?

Controls can't completely detect or prevent errors and/or frauds because the possibility of human error

A strong system of internal_______reduces the _______to commit fraud

Controls; opportunity

A weak system of internal______provides the____________to commit fraud

Controls; opportunity

______Involves misusing one's position for inappropriate personal gain

Corruption

Beginning Inventory plus purchases minus ending inventory equals:

Cost of Goods Sold

For a merchandiser, which of the following is subtracted from net sales to find gross profit?

Cost of Goods Sold

Beginning inventory - 100 units @ $5 Purchase on June 2 - 75 units @ $4 Sales on November 5 - 125 units What amounts would be reported as the cost of goods sold and ending inventory for the year? (FIFO)

Cost of Goods Sold - $600 (100 * 5) + (25 * 4) Ending Inventory - $200 (50 * 4)

Beginning Inventory - 100 units @ $5 Purchase on October 2 - 75 units @ $4 Sales on December 5 - 125 units What amounts would be reported as the costs of goods sold and ending inventory balances for the period? (LIFO)

Cost of Goods Sold = $550 (75 * $4) + (50 * 5) Ending Inventory = $250 (50 * 5)

On June 4, Marie Co. had cash sales rung up by cashier totaling $163,800. Cash in the drawer was counted and found to be $165,000. The journal entry to record the day's sales would include a:

Credit to Cash Overage for $1,200

When a company needs to write down their inventory, what journal entry is recorded?

Debit - COGS Credit - Inventory

When inventory is sold for cash, what accounts are affected and how?

Debit - Cash and Cost of Goods Credit - Sales revenue and Inventory

If you return $100 of inventory to your supplier and they reduce the balance you still owe them, Which of the following journal entries would occur?

Debit Accounts Payable

What is the journal entry to record interest received from the bank?

Debit Cash Credit Interest Rate

The accounting principle that governs the recording of bad debt expense in the same period as sales revenue is called the:

Expense recognition principle ("matching")

The __________ method assumes the inventory cost flow out in the order the goods are received

FIFO (First In, First Out)

True/False - Internal controls will always completely prevent and detect errors and fraud

False

Recording the estimate of bad debt expense

Follows the expense recognition ("matching") principle

Which of the following is NOT a name for a specific type of inventory

Goods available for sale

Which of the following is finished goods inventory?

Goods held for sale in the normal course of business

Which of the following is merchandise inventory?

Goods held for sale in the normal course of business

Which of the following accounts is NOT affected by the sale of merchandise under the perpetual inventory system?

Gross Profit

The___________measures the percentage of profit earned on each dollar of sales

Gross Profit Percentage

Which of the following measures the percentage of profit earned on each dollar of sales

Gross Profit Percentage

There are advantages and disadvantages to extending credit to customers. Which of the following statements below expresses the general reason for extending credit?

Gross profits exceed bad debt costs

Which of the following is a goal of a bank reconciliation?

Identify outstanding checks

_______consists of the actions taken by people at every level of an organization to achieve its objective relating to operations, reporting, and compliance

Internal Control

Which of the following is addressed by the sarbanes-Oxley Act (SOX)

Internal control evaluation

Which of the following would be credited if a company received some defective inventory and subsequently returned it to the supplier?

Inventory

Which of the following is true about the perpetual inventory system?

Inventory is updated every time it is bought, sold or returned

In period of rising unit costs, the _____ inventory costing method has the largest COGS

LIFO

Which of the following statements is correct?

LIFO results in a higher net income than FIFO when cost are falling

When a company has inventory which is subject to gradually increasing prices, the use of the LIFO method of valuing inventory will result in the:

Lowest amount of assets and the lowest amount of net income

Considering current laws that deal with misstatements of financial results, which of the following statements is correct?

Managers can be sentenced to maximum jail terms to 20 years for each violation

Intel makes microchips from raw materials acquired from suppliers. Intel is a:

Manufacturer

BetterBuy purchases computers from companies like Hewlett Packard and IBM and sells them to consumers. BetterBuy is a:

Merchandising company at the retail level

Which document signals that a company should record the purchase of goods on account?

Receiving report

Which of the following situations would cause the balance per bank to be more than the balance per books?

Outstanding checks

A______Inventory system updates the inventory records for merchandise purchases, sales, and returns only at the end of the accounting period

Periodic

Which inventory system updates the inventory records for merchandise purchases, sales, and returns only at the end of the accounting period.

Periodic Inventory System

A________inventory system will always give updated balances for__________--

Perpetual; Cost of Goods Sold

Which of the following statements is correct?

When unit costs are increasing, the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO

A______________is a cash discount to customers to encourage prompt payment of an account receivable (Ex. 2/30 n/60)

Sales Discount

Which of the following is the equation used to calculate Gross Profit?

Sales Revenue - COGS

Which of the following would not be affected by the choice of an inventory costing method (that is, choosing between FIFO, LIFO, weighted average, and special identification)?

Sales revenue

A company's cash receipts procedures include the following. Cashiers collect cash and issue a receipt at the point of sale. Supervisors take custody of the cash at the end of each cashier's shift and deposit it in the bank. Accounting staff then ensure the receipts from cash sales are properly recorded in the accounting system. Which internal control principle is most evident with these procedures?

Segregate duties

Assigning responsibilities so that related activities are assigned to two or more people is the goal of:

Segregating Duties

_________Involve assigning responsibilities so that one employee can't make a mistake or commit a dishonest act without someone else discovering it

Segregation of Duties

Which line item would be found on a service firm's income statement and not on a mechandiser's?

Service Revenue

Which inventory method individually identifies and records the cost of each item sold as part of cost of goods sold

Specific Idendification

If the terms of sale are FOB shipping point, ownership of goods transfers to the buyer at the ___________-

Suppliers shipping point

Which of the following is the correct term for a manufacturer's partially completed products?

Work in process

A series of activities that generates revenues and collects cash from customers is called:

The operating cycle

True/False - A higher inventory turnover ration means faster inventory turnover

True

True/False - If the terms of a deal are FOB Destination, the goods are owned by the seller until delivered by the buyer

True

True/False - The primary goal of internal controls for all cash payments is to ensure the business pays only for properly authorized transactions

True

True/False - When inventory costs are rising, the FIFO method produces a larger ending inventory value and a smaller costs of goods sold value

True

True/False - When the value of inventory falls below its recorded cost, the amount recorded for inventory is written down to its lower market value

True

Which of the following is an example of restricting access?

Using passcodes

Company A accounts receivable

are amounts owed to Company A by its customers