Accounting Test 2

Under a periodic inventory system

a physical inventory is taken at the end of the period

Which of the following would be subtracted from the balance per books on a bank reconciliation?

error by the company in recording a check for $732 as $723

The term "receivables" includes all

money claims against other entities

In credit terms of 3/15, n/45, the "3" represents the

percent of the cash discount

The inventory system employing accounting records that continuously disclose the amount of inventory is called

perpetual

FIFO reports higher gross profit and net income than the LIFO method when

prices are increasing

Which one of the following is not a factor that influences a business's control environment?

proofs and security measures

To encourage a buyer to pay before the end of the credit period, the seller may offer a

purchases discount

The portion of an invoice that is returned with payment is a

remittance advice

The method of estimating inventory that uses records of the selling prices of the merchandise is called

retail method

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles

does not affect net income in the period it is collected

Selling receivables is called

factoring

Cost flow is in the order in which costs were incurred when using

first-in, first-out

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

management estimates the amount of uncollectibles

Which of the following accounts has a normal debit balance?

Inventory

The entry to record the return of merchandise from a customer would include a

debit to Customer Refunds Payable

A voucher is usually supported by

a supplier's invoice a purchase order a receiving report

The amount of deposits in transit is included on the bank reconciliation as a(n)

addition to the balance per bank statement

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n)

addition to the balance per company's records

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. This item would be included on the bank reconciliation as a(n)

addition to the balance per the company's records

President's salaries, depreciation of office furniture, and office supplies are

administrative expenses

A bank reconciliation should be prepared periodically because

any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected

The cash account in the company's ledger is a(n)

asset with a normal debit balance

If merchandise sold on account is returned to the seller, the seller acknowledges the return by issuing a

credit memo

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

credit terms

When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include a

credit to Allowance for Doubtful Accounts

A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. What entry is required in the company's accounts?

debit Accounts Payable; credit Cash

A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is

debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120

Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts?

debit Accounts Receivable; credit Cash

An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period will require a

debit to Bad Debt Expense for $7,700

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a

debit to Inventory

When a firm uses internal auditors, it is adhering to which of the following internal control elements?

monitoring

If collection of an other receivable is expected beyond one year, it is classified as a

noncurrent asset and reported under Investments

The receivable that is usually evidenced by a formal, written instrument of credit is a(n)

note receivable

Cash equivalents

will be converted to cash within three months

The retained earnings statement shows

beginning and ending balance of retained earnings and all the changes in retained earnings as a result of net income (loss) and dividends

The direct write-off method:

is used by businesses whose receivables are a small part of their current assets.

The following lots of Commodity D were available for sale during the year. Use this information to answer the questions that follow. Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year rounded to the nearest dollar using the average cost method?

$1,685

Inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

stockholders' equity is overstated

A company uses the allowance method to account for uncollectible accounts receivable. When the firm writes off a specific customer's account receivable

there is no effect on total current assets or total expenses

When does an account become uncollectible?

there is no general rule for when an account becomes uncollectible

The debit recorded in the journal to reimburse the petty cash fund is to

various accounts for which the petty cash was disbursed

A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n)

voucher

What type of company would normally offer trade discounts to its customers?

wholesalers

The inventory method that assigns the most recent costs to cost of goods sold is

LIFO

The inventory costing method that reports the most current prices in ending inventory is

FIFO

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

FOB destination

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory. Which of the following would not be included in the year-end inventory?

Kristin has in its warehouse merchandise on consignment from Abby Co.

The inventory costing method that reports the earliest costs in ending inventory is

LIFO

During times of rising prices, which of the following is not an accurate statement?

LIFO will result in higher income taxes than FIFO.

Under the periodic inventory system, the journal entry to record the purchase of inventory will include a debit to

Purchases

The following lots of Commodity D were available for sale during the year. Use this information to answer the questions that follow. Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the FIFO method?

$1,805

Based on the following data, what is the estimated cost of the inventory on May 31 using the retail method? Cost Retail May 1 Inventory $125,000 $166,667 May 1-31 Purchases 235,000 313,333 May 1-31 Sales 230,000

$187,500

Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Inventory account?

$20,580

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000. Based on this estimate, which of the following adjusting entries should be made?

debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200

The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?

debit Bad Debt Expense; credit Accounts Receivable

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer. What entry is required in the company's accounts?

debit Cash; credit Notes Receivable and Interest Revenue

When using a perpetual inventory system, the journal entry to record the cost of goods sold is:

debit Cost of Goods Sold; credit Inventory

An aging of a company's accounts receivable indicates that the estimate of the uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt expense for the period will require a

debit to Bad Debt Expense for $3,200

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

debit to Cash and a credit to Sales

Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of credit sales will be uncollectible. On January 1, the Allowance for Doubtful Accounts had a credit balance of $2,400. During the year, Abbott wrote off accounts receivable totaling $1,800 and made credit sales of $100,000. After the adjusting entry, the December 31 balance in Bad Debt Expense will be

$3,000

If the estimated rate of gross profit is 30%, what is the estimated cost of the inventory on September 30, based on the following data? Sep. 1 Inventory (at cost) $125,000 Sep. 1-30 Purchases, net (at cost) 300,000 Sep. 1-30 Sales 150,000

$320,000

Assuming that the company uses the perpetual inventory system, determine the gross profit for the month of May using the LIFO cost method.

$444

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)

$525,000

A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is

$7,000

Addison, Inc. uses a perpetual inventory system. Below is information about one inventory item for the month of September. Use this information to answer the questions that follow. Sep. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $25 17 Sold 20 units 30 Purchased 10 units at $30 If Addison uses FIFO, the cost of the ending inventory on September 30 is

$800

What is the major difference between a periodic and perpetual inventory system?

-Under the periodic inventory system, the purchase of inventory will be debited to the Purchases account. -Under the periodic inventory system, no journal entry is recorded at the time of the sale of inventory for the cost of the inventory. -Under the periodic inventory system, all adjustments such as purchases returns and allowances and discounts are reconciled at the end of the accounting period.

For the year ended December 31, Depot Max's cost of goods sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

8.3

When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit

Accounts Payable

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

Accounts Receivable

Which is the better choice for evaluating across companies: Days' Cash on Hand or the amount in the company's Cash account?

Days' Cash on Hand, because it is calculated as a ratio, which expresses cash relative to the cash requirements of the business.

Merchandise is sold for cash. The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include a credit to

Sales Tax Payable for $420

Which of the following items that appeared on the bank reconciliation did not require a journal entry?

The portion of an invoice that is returned with payment is a