Exam #1 Questions

January 1 Beginning inventory 200 $4.00 April 20 Purchase 800 4.25 September 8 Purchase 400 4.50 Assuming Snow sells 1,000 units, calculate ending inventory under FIFO.

$1,800

On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What is the amount of net revenues (sales minus sales discounts) as of March 23?

$11,760

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of:

$2,000

Item A 20 $20 $35 Item B 50 30 25 Item C 40 10 15 Using the lower of cost and net realizable value method, for what amount would Maxwell report ending inventory?

$2,050

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold?

$22,200

January 1 Beginning inventory 10 $200 $2,000 March 14 Purchase 15 300 4,500 $6,500 January 1 to December 31 Total sales to customers 12 What amount would Madison report for ending inventory using weighted-average cost?

$3,380

January 1 Beginning inventory 10 $200 $2,000 March 14 Purchase 15 300 4,500 $6,500 January 1 to December 31 Total sales to customers 12 What amount would Madison report for ending inventory using FIFO?

$3,900

January 1 Beginning inventory 200 $4.00 April 20 Purchase 800 4.25 September 8 Purchase 400 4.50 Assuming Snow sells 1,000 units, calculate cost of goods sold under LIFO.

$4,350

A company's own cash records show a balance of $3,200. After examining the bank statement, the following information is revealed: Bank's balance for cash= $4,000 Deposits outstanding= $2,300 NSF check= $600 Checks outstanding= $1,800 Note collected by the bank= $2,000 Service fee charged by the bank= $100 After reconciliation, the correct balance of cash is:

$4,500

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What amount would Sanders record as revenue on August 4?

$5,000

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:

$5,100

At the end of the previous year, a company's balance sheet reports cash of $30,000. For the current year, the company's statement of cash flows reports operating cash inflows of $90,000; investing outflows of $110,000; and financing inflows of $40,000. What amount of cash will be reported in the current year's balance sheet?

$50,000

Use the information below to calculate net revenues. Service Revenue$ 100,000 Sales Discounts$ 2,000 Accounts Receivable$ 15,000 Sales Allowances$ 7,000 Cash$ 18,000

$91,000

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is:

$96,000

At the beginning of the year, Dawnetta Fashions has total accounts receivable of $300,000. By the end of the year, Dawnetta reports total credit sales of $1,500,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Dawnetta Fashions?

6.0

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy's inventory turnover ratio?

8.0

Which of the following best describes a merchandising company?

A company that purchases products that are primarily in finished form for resale to customers.

Using the allowance method, the entry to record a write-off of accounts receivable will include

A debit to allowance for Uncollectible accounts

The entry to record the estimate for uncollectible accounts includes:

A debit to bed debt expense

The effect of writing off a specific account receivable is:

A reduction in the allowance for uncollectible accounts

A debit is used decrease which of the following accounts?

Accounts payable

When a company provides services on account, which of the following accounts is debited?

Accounts receivable

Financial statements are prepared from which of the following trial balances?

Adjusting trial balance

To ensure that management has in fact appropriately applied GAAP, the SEC requires independent outside verification of the financial statements of public traded companies by an

Auditor

Financing cash flows include which of the following?

Cash received from the issuance of common stock

Which of the following describes the information reported in the statement of stockholders' equity?

Change in stockholders' equity through changes in common stock and retained earnings.

What is considered cash for financial reporting purposes?

Coins and currency, Debit card sales, and checks received from customers

Which business form has the advantage of limited liability?

Corporation

Using a periodic inventory system, recording the sale of inventory on account would include:

Debit Accounts Receivable; credit Sales Revenue

A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible: Not yet due$ 175,000 4% 0 to 60 days past due$ 40,000 10% 61 to 120 days past due$ 10,000 30% More than 120 days past due$ 5,000 60% Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the following would be recorded in the year-end adjusting entry?

Debit Bad Debt Expense for $14,000

On November 1, a company receives cash of $6,000 from a customer for services to be provided evenly over the next six months. Deferred revenues is recorded at the time. What adjusting entire is needed on December 31 (two months later)

Debit Deferred Revenues for $2,000; Credit Service Revenue for $2,000

The purchase of equipment with cash would be recorded as

Debit Equipment; Credit Cash

Using a periodic inventory system, the purchase of inventory on account would be recorded as

Debit Purchases; credit Accounts Payable

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits payment on January 25?

Debit Sales Discount for $10

Using a perpetual inventory system, the purchase of inventory on account would be recorded as

Debit inventory; credit accounts payable

Fan Company sells inventory on account. The entry or entries to record this sale using a perpetual inventory system would include a:

Debit to accounts receivable, credit to sales revenue, and debit to cost of goods sold

The entry to write down inventory from cost to net realizable value at the end of the year includes a:

Debit to cost of goods sold

On December 10, a company pays $500 for advertising to appear on December 20. On which date should the expense be recorded under accrual-basis accounting?

December 20

At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjusting entry to write down inventory to net realizable value?

Decrease in net income

Section 404 of the Sarbanes-Oxley Act requires companies to:

Document and assess internal controls

What is the concept behind separation of duties in establishing internal control?

Employee fraud is less likely to occur when access to assets and access to accounting records are separated

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

FIFO

Which cost flow assumption generally results in the highest reported amount of the net income in periods of rising inventory costs?

FIFO

What a major sections in the statement of cash flows?

Financing cash flows, operating cash flows, and investing cash flows

Which of the following levels of profitability in a multiple-step income statement best represents profitability directly related to the sale of inventory?

Gross profit

Which of the following is the correct order for preparing the financial statement listed?

Income statement, statement of stockholders' equity, and balance sheet

Which of the following adjusts the company's balance of cash in a bank reconciliation?

Interest on bank deposit

The primary focus for financial accounting information is to provide information useful for:

Investing decisions and credit decisions

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?

LIFO

What is the primary purpose of financial accounting?

Measure business activities and communicate those measures to external users to make decisions

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account:

Net accounts receivable do not change

Which of the following describes the information reported in the statement of cash flows?

Net cash flows from operating, investing, and financing activities

Purchasing land with cash would have what effect on the accounting equation?

No effect

Which of the following levels of profitability in a multiple-step income statement best represents profitability from primary activities of the company?

Operating income

In response to widespread fraudulent reporting in the late 1990's and early 2000's, Congress:

Passed the Sarbanes-Oxley Act

What transaction decreases stockholders' equity?

Pay salaries for the current period

Operating cash flows would include.

Payment for prepaid insurance

What transaction increases total assets?

Provide services to customers on account

Which of the following transactions cause an increase in stockholders' equity?

Provide services to customers on account

Which of the following is an example of an accrued revenue?

Providing services to a customer without having yet collected the cash

What transactions are operating activities?

Purchasing supplies, provide services to customers and pay utility bill.

Which of the following accounts is listed in a post-closing trial balance?

Salaries Payable

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities

Which of the following accounts normally has a credit balance?

Service Revenue

Which of the following generally would be considered good internal control of cash disbursements?

Set maximum purchase limits on debit cards and credit cards

Generally Accepted Accounting Principles (GAAP) are best defined as

Standards for presenting financial accounting information

When preparing a bank reconciliation, outstanding checks would be:

Subtracted from the bank's cash balance

Who is ultimately responsible for the establishment and success of a company's internal control system?

The company's top executives

Which of the following represents the balance of Cost of Goods Sold at the end of the year?

The cost of inventory sold during the year

At any given time, the amount of cash in the petty cash fund should equal:

The established balance of the fund less all vouchers written during the accounting period

Effective internal control over cash includes the requirement that:

The person who makes deposits should NOT record the deposits

The primary reason the balance of cash in the company's records will differ from the balance of cash in the bank's records includes:

Timing differences of recording cash transactions by the company and by the bank

What is a direct purpose of internal controls?

To improve the accuracy and reliability of accounting information

Suppose Windell Corporation understates its ending inventory amount. What effect will this have on the reported amount of net income in the year of the error?

Understate net income

Employee purchases of supplies with a company-issued credit card are typically recorded with a credit to

accounts payable

Proving services to customers on account for $100 is recorded as

accounts receivable: debit, and service revenue: credit

Recording salaries owed to employees that will not be paid by the company until the folloeing accounting period is an example of an

accrued expense

A trial balance can best be explained as a list of

all accounts and their balances at a particular date

Liabilities are best defined as

amounts owed to creditors

Accounts receivable are best described as

assets of the company representing the amount owed by customers

A sales discount is recorded by the seller as a

contra revenue

Providing services to customers for cash would be recorded with a

credit to service revenue

The adjusting entry to record supplies used during the period includes a

debit to supplies expense

A credit to Cash will

decrease assets

The balance of retained earnings in the adjusted trial balance:

equals the balance of retained earnings at the beginning of the accounting period

The cost of providing goods and services to customers are referred to as

expenses

Under cash-basis accounting, companies typically record revenue:

in the period in which the company receives cash from customers for goods and services

The revenue recognition principle states that companies typically record revenue is

in the period on which we provide goods and services to customers

Under the direct write-off method, uncollectible accounts are recorded:

in the period the account is determined actually uncollectible

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

inventory

In the language of accounting, the term "debit" always means

left-hand side

Closing entries are

made to transfer the balances of temporary accounts to retained earnings

What are some assets of a company?

nd owned by the company, supplies held by the company, and equipment owned and used for operations

Which of the following best explains the meaning of total stockholders' equity?

owners' claims to resources, which arise primarily from contributions by the owners and company operations

The process of transferring debit and credit information from the general journal to the general ledger is known as

posting

The purpose of a petty cash fund is to

provide cash on hand for minor expenditures

Investing cash flows in the statement of cash flows would include which of the following?

purchase of land

What appears on an income statement?

salaries expense, advertising expense, and service revenue

Owners' claims

stockholders equity

Purchasing office supplies on account for $100 is recorded as

supplies: debit, and accounts payable: credit

In a classified balance sheet, liabilities are separated into two categories based on

the length of time until the obligation is expected to be satisfied-less than one year versus more than one year

A company's inventory turnover ratio measures:

the number of times the company sells its average inventory balance during the year

What is true about a trial balance?

total debit amounts should always equal total credit amounts