AC Test 2

Cortez Company updates its inventory records perpetually. The company's records showed a beginning inventory of $12,000 cost of goods sold of $20,000 and ending inventory of $14,000. How much inventory was purchased during the year? 1. 22,000 2.18,000 3. 16,000 4. 12,000

1. $22,000

Which of the following would not be affected by the choice of an inventory costing method (that is, choosing between FIFO, LIFO, weighted avg) 1. Sales Revenue 2. Cost of Goods Sold 3. Net income 4.Gross Profit

1. Sales Revenue

On June 12, because management knew with near certainty that it had no chance of collection, Sheave Company wrote off a customer's account balance in the amount of $350. On November 3, the customer mailed a payment a payment for $350 to Sheave. To record the receipt of this payment from the customer, the company would debit: 1. accounts receivable and credit allowance for doubtful accounts, and then debit cash and credit accounts receivable 2.Bad debt expense and credit cash 3. cash and credit accounts receivable 4. accounts receivable and credit bad debt expense, and then debit cash and credit allowances for doubtful accounts

1. accounts receivable and credit allowance for doubtful accounts, and then debit cash and credit accounts receivable

The specific identification method would probably be most appropriate for which of the following goods? 1. Bottles of sun tan lotion in Wal-Marts central warehouse 2. Diamond necklaces at a Tiffany & Co jewelry store 3. Sets of tires at the Goodyear plant 4. Boxes of brass 4-inch drywall screws at Home Depot

2. Diamond necklaces at a Tiffany & Co jewelry store

Which one of the following statements regarding sales discounts is correct: 1. A sales discount is subtracted from Sales Revenue whereas a purchase discount is added to COGS 2. If a company offers a discount to encourage prompt payment and the discount is taken, the discount is taken, the discount reduces the amount of net sales 3. Credit terms of "2/10, n/30" means that if payment is made in two days , a 10% discount may be taken, if not paid within two days, the full invoice price will. 4. The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.

2. If a company offers a discount to encourage prompt payment and the discount is taken, the discount is taken, the discount reduces the amount of net sales

The main purposes of internal controls include all of the following except: 1. Ensuring compliance with laws and regulation 2. Providing more favorable financial information 3. promotion of operational efficiency 4. prevention of error, theft, and fraud

2. providing more favorable financial information

When goods and services are sold together for a single "bundled" price, the price is allocated to the goods and services based on their: 1. book value 2. stand-alone selling prices 3. residual value 4. bundled price divided

2. stand-alone selling prices

Assume the Hart Company uses the allowance method. When the company writes off a customer's account balance that has no chance of collection: 1.total liabilities will increases 2. total assets do not change 3. total assets will decrease 4.expenses and revenues will both increase

2. total assets do not change

At year end, CurlZ Inc.'s inventory consisted of 330 bottles of CleanZ at $2 per bottle and 230 boxes of DyeZ at $13 per box . Market value are $2.50 per bottle for CleanZ and $11 per box for DyeZ. CurlZ should report its inventory at: 1. $3650 2. $3815 3. $3190 4. $3355

3. $3190

Jackson manufacturing company had a beginning inventory of $18,500. During the year, the company recorded inventory purchases of $80,000 and cost of goods sold of $57,000. The ending inventory must equal: 1. $28,500 2. $29,500 3. $41,500 4. $30,500

3. $41,500

Quill Industries uses the aging of accounts receivable method. Its estsimate of uncollectable receivable resulting from the aging analysis equals $33,000. The unadjustable credit balance in the allowance for doubtful accounts account is $11200. What is the estimated Bad debts expense for the period? 1. 11200 2. 33000 3. 21800 4. 44200

3. 21800

Glenrosa Co bought inventory FOB shipping point from Monterosa Co for $8,200 cash, including shipping charges. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc. and not expected to arrive until January 3. Which company should include these goods in its December 31 inventory? 1. Common Carrier should include the $8200 in its inventory, since the inventory is on its truck 2. Glenrosa owns the inventory, but Common Carrier has possesion of it. Each of them should include half of the inventory, $4100 each. 3. Glenrosa should include the $8200 in its inventory 4. Glenrosa owns the inventory, but Common Carrier has possession of it. Neither of them can include the $8200 in its December 31 inventory.

3. Glenrosa should include the $8200 in its inventory

Beginning inventory plus purchases minus ending inventory equals: 1. good available for sale 2. net sales 3. cost of goods sold 4. net net purchases

3. cost of goods sold

For a manufacturer, inventory turnover refers to how many times: 1. during the period the company replaces the raw materials inventory 2. the company orders raw materials 3. the company produces its goods and deliveries the inventory to customers 4. the company purchases and sells its inventory of finished goods

3. the company produces its goods and deliveries the inventory to customers

Devonshire Inc. sold merchandise inventory on account at price of $22,000 with payment terms of 2/10, n/30. The merchandise cost Devonshire $18,000. If the customer paid for the merchandise 5 days after receiving the invoice, how much cash was collected by Devonshire. 1. $17,640 2.$18,000 3.$22,000 4.$21,560

4. $21,560

A company lends its supplier $170,000 for 3 years at a 8% annual interest rate. Interest payments are to be made twice a year. The entry to record the establishment of the loan includes a debit to: 1. Interest Receivable and a credit to Interest Revenue for $6800 2. Cash and a credit to interest revenue for $13,600 3. cash and a credit to notes payable for $170,000 4. Notes Receivable and a credit to cash for $170,000

4. Notes Receivable and a credit to cash for $170,000

Which of the following is an example of restricting access? 1. Using prenumbered checks 2. Giving a separate cash registration to each cashier 3. Comparing the company's cash balance to the balance per the bank 4. using passcodes

4. Using passcodes

A low accounts receivable turnover ratio indicates: 1. the company's sales are increasing 2. a large proportion of the company's sales are on credit 3. the company is taking longer to sell inventory 4. customers are making payment slowly

4. customers are making payment slowly

The journal entry to record taking a discount when paying for goods previously purchased on account: 1. decreases liabilities and increases in stockholders' equity 2. decreases assets and stockholders' equity 3. increases assets and stockholders' equity 4. decreases assets and liabilities

4. decreases assets and liabilities

When the lower of cost or market rule/net realization value requires an inventory adjustment, the : 1. inventory adjustment is recorded in a contra-account called inventory allowances 2. adjustments usually, but not always, reduces the book value of inventory 3. write-down does not affect any of the financial statements 4. write down is usually reported as a part of cost of goods sold

4. write down is usually reported as a part of cost of goods sold

Which of the following items will require an adjusting journal entry on a company's book? 1. EFT received from a customer 2. Error made by the bank 3. Outstanding checks 4. Deposits in transit

EFT received from a customer

Assigning responsibilities so that related activities are assigned to two or more people is the goal of: 1. segregating duties 2. documenting procedures 3. restricting access 4. independently verifying

Segregating Duties