accounting ch. 5&6 test

which inventory costing method results in the highest inventory balance during a period of falling purchase prices? a. weighted average cost b. FIFO c. LIFO d. both FIFO and LIFO result in the same inventory balance

c.

which of the following accounts would most likely not appear on the income statement of a service company, but would appear on the income statement of a merchandise company? a. depreciation expense b. selling expense c. cost of goods sold d. bad debt expense

c.

which of the following statements is true regarding the two allowance procedures used to estimate bad debts? a. the percentage of net credit sales method takes into account the existing balance in the allowance for doubtful accounts account b. the direct write off method takes into an account the existing balance in the allowance for doubtful account account. c. the aging of accounts receivable method takes into account the existing balance in the allowance for doubtful accounts account d. the direct write off method does a better job of matching revenues and expenses

c.

the maturity value of a 2 month, 9 percent, $2,000 note receivable is: a. $1970 b. $1820 c. $2030 d. $2180

c. (principal x rate x time) = interest + principal = maturity value 2000 x .09 x 2/12 = 30 (interest) 30+2000 = 2030

bills fruit wholesalers issued an invoice on july 1, for 20,000 with terms of 1/15 n/30. when the accounts receivable payment was received on july 13, the bookkeeper would record a sales discount of: a. 400 b. 0 c. 200 d. 3,000

c. 20,000 x .01 = 200

when inventories are written down because of the lower of cost or market (LCM) rule, which of the following is increased? a. sales returns and allowances b. accumulated depreciation c. cost of goods sold d. inventory

c. DR cost of goods sold CR inventory

during a period of increasing purchase prices, which inventory costing method will yield the highest ending inventory? a. any method in which the company uses a periodic system b. FIFO c. LIFO d. weighted average cost

B.

bills fruit wholesale makes $10,000 in sales on dec. 1 with the terms 2/10 n/30. the customer pays on Dec. 9. what is the journal entry to record the receipt of the payments? a. DR cash 10,000 CR accounts receivable 10,000 b. DR cash 9800 CR accounts receivable 9800 c. DR cash 9800 DR sales discount 200 CR accounts receivable 10,000 d. DR cash 10,000 CR sales discount 200 CR accounts receivable 9800

C.

at the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of: a. the seller b. the buyer c. he shipping company d. both the seller and buyer

a.

the receivable turnover is expresses in terms of a. times b. days c. percentage d. dollars

a.

using the percentage of net credit sales method, bad debt expense for the year is estimated to be $54,000. if the balance of the allowance for doubtful accounts is an $18,000 credit before adjustment, what is the balance after adjustment? a. 72,000 b. 38,000 c. 54,000 d. 18,000

a. 18,000+54,000 = 72,000

average inventory equals $100,000, and cost of goods sold equals $221,000. The number of days in inventory equals: a. 165.2 days b. 156.2 days c. 154.3 days d. 188.7 days

a. 221,000 (CGS) / 100,000 (AVG INV.) = 2.21 365/2.21 = 165.2

net accounts receivable 80,000 (2016) 90,000 (2015) net sales 533,000 (2016) 410,500 (2015) the accounts receivable turnover (round to 2 decimals) for 2016 is: a. 6.27 b. 6.66 c. 5.92 d. 5.55

a. 533,000/ [(80,000+90,000)/2] = 6.27

under the allowance method of accounting for bad debts, when a year-end adjustment is made for estimated uncollectible accounts a. total assets decrease b. liabilities increase c. total assets are unchanged d. net income is unchanged

a. DR bad debt expense CR allowance for doubtful accounts

using the allowance method, when a specific account is written of a. total assets will be unchanged b. total assets will decrease c. net income will decrease d. total assets will increase

a. DR. allowance for doubtful accounts CR. accounts receivable

the balance of accounts receivable, net of the allowance of account, is 35,000 before the write-off of a 2,800 account. what is the account receivable balance, net of the allowance account, after the write-off? a. 35,000 b. 32,2000 c. 2,800 c. 37,800

a. when using (NET) the accounts offset each other

bills fruit imports, inc., which uses a periodic inventory system, purchased merchandise from the central america fruit company on august 5, for 21,000. the credit terms were 1/15 n/45. the goods were shipped FOB shipping point of august 7. bills fruit imports inc received the merchandise on august 10 and paid the amount due on august 19. when did title to the merchandise transfer from the seller to the buyer? a. aug 5 b. aug 7 c. aug 10 d. cannot be determined

b.

if the smith company understates its ending inventory, what are the effects of cost of goods sold and net income for the current year? a. cost of goods sold will be understated and net income will be overstated b. cost of goods sold will be overstated and net income will be understated c. both cost of goods sold and net income will be understated d. both cost of goods sold and net income will be overstated

b.

a company received a $1,000, 3 month, 8 percent note on november 30. the fiscal year ended on december 31. the adjusting entry necessary to record the interest receivable is (round to nearest dollar) a. DR cash 7 CR interest revenue 7 b. DR interest receivable 7 CR interest revenue 7 c. DR interest receivable 20 CR interest revenue 20 d. DR cash 20 CR interest income 20

b. 1000 x .08 x 1/12 = 6.67 (rounded to 7)

carrollton vegetable marketers uses the aging method to account for bad debt expense. based on an aging of accounts receivable, $2500 of accounts receivable are estimated to be uncollectible. on january 1, 2017, the balance in the allowance for doubtful accounts account was $3800. during the year, $4000 of accounts receivable were written off as uncollectible. what is the bad debt expense of the company for 2017? a. 2300 b. 2700 c. 2500 d. 6500

b. 3800-4000=200 2500+200=2700

carrollton vegetable wholesalers had beginning accounts receivable of 225,000. all sales were on account and totaled 650,000. cash collected from customers totaled 750,000. 6500 in accounts receivable were written off as uncollectible. what is the ending accounts receivable balance? a. 318,500 b. 118,500 c. 131,500 d. 218,500

b. A/R DR 225,000 650,000 CR 750,000 6,500

if a company uses the allowance method to account for bad debts, when will the company's equity decrease? a. when the allowance for doubtful accounts is debited for the write-offs b. when an adjusting entry for bad debts is recorded at the end of the accounting period c. the date a customers account is determined to be past due d. the date a customers account receivable is written off

b. DR bad debt exp CR allowance DA

if bills fruit distributors, inc. uses the allowance method for doubtful accounts, when it the net income affected? a. when the accounts receivable amount becomes past due b. when an adjusting entry for estimated bad debts is recorded c. when a customers account is determined to be uncollectible and is written off d. when the account is turned over to a collection agency

b. DR bad debt exp CR allowance DA

the general ledger account for accounts receivable shows a debit balance of $25,000. allowance for doubtful accounts has a credit balance of $1500. net sales for the year were $250,000. in the past, 3 % of sales have proved uncollectible, and an aging of accounts receivable resulted in an estimate of 10,000 of uncollectible accounts receivable. using the accounts receivable aging method, the allowance for doubtful accounts balance (after adjustment) would be: a. 11,500 b. 10,000 c. 8,500 d. 10,750

b. allowance for doubtful accounts balance = aging estimate

carrollton vegetable marketers received a 9 month promissory note from a customer on july 1. 2017. the face amount of the note is 65,000; with a 7% per annum interest rate. how much interest revenue will the company recognize fort he year ended dec. 31 2017? a. 4550,00 b. 2275.00 c. 3033.33 d. 3412.50

b. principal x rate x time 65000 x .07 x 6/12 - 2275

carrollton manufacturing, inc, which uses a periodic inventory system, ordered merchandise form the valdosta company on april 15, 2017, for $25,000. the credit terms were 2/10, n/30. the goods were invoiced and shipped FOB shipping point on april 16, 2017. carrollton manufacturing, inc. received the merchandise on april 20 and paid the amount due on april 25. when did the title to the merchandise transfer from the seller to the buyer? a. april 20 b. april 25 c. april 16 d. cannot be determined

c.

during a period of falling purchase prices, which inventory costing method will yield the lowest cost of goods sold? a. any method in which the company uses a periodic system b. FIFO c. LIFO d. weighted average cost

c.

what is the difference between notes receivable and accounts receivable? a. accounts receivable are current assets while notes receivable are always long term b. accounts receivable specify the payment of interest while notes receivable only require payment of interest when they become overdue. c. notes receivable generally specify an interest rate and a maturity date at which any interest and principal must be repaid d. notes receivable result from credit sale transactions, while accounts receivable can result from either credit sal transactions or cash sales.

c.

the brown company purchases merchandise from the green company with terms 2/10 n/30, FOB shipping point. who pays the transportation costs, and in whose inventory is the merchandise counted while it is in transit? a. (tran) green (inventory) brown b. (tran) brown (inventory) green c. (tran) brown (inventory) brown d. (tran) green (inventory) green

c. FOB shipping point - buyer pays transportation - buyers inventory FOB destination - seller pays transportation - sellers inventory

an example of a transposition error is a. debiting the wrong account b. crediting an account for the wrong amount c. recording $584 as $548 d. recording $313 as $131

c. switched digits (transposed)

bills fruit stand makes 1000 in sales by accepting the american express card from it customers. american express charges a 3% fee for their service. what is the journal entry to record that sale to customers and the recipe of cash from american express? a. DR cash 1000 CR sales 1000 b. DR cash 970 CR sales 970 c. DR credit card expense 30 CR sales 30 d. DR cash 970 DR credit card expense 30 CR sales 1000

d.

which one of the following is an accurate description of the allowance for doubtful accounts a. expense account b. liability account c. equity account d. contra-account

d.

bills fruit and accepts american express for payments of purchases made by customers. american express charges a 2.5% fee to the merchant. credit card sales totaling $25,000 are made during the month. these credit sales will result in an increase in: a. cash for $25,000 b. sales for $24,375 c. accounts receivable for $25,625 d. service charge expense for $625

d. DR Accounts receivable 24,375 DR servie charge fee 625 CR sales 25000

if there is a debit balance in allowance for doubtful accounts, what has happened? a. a posting error has been made b. bad debt expense has been overestimated c. the accounts receivable aging method is being used d. more accounts receivable have been written off than had been estimated

d. DR allowance for doubtful accounts CR accounts receivable

the amount shown on the balance sheet as inventory will ultimately be recognized on the income statement as: a. gross margin b. sales returns and allowances c. operating expenses d. cost of goods sold

d. because ending inventory becomes next years beginning inventory