ACC 212- Final
14. Consider the following journal entry: Software 18,000 Cash 7,200 Note Payable 10,800 Which of the following explanations best describes this journal entry? A) The company buys $18,000 of software, pays cash of $7,200, and signs a note for $10,800. B) The company receives $7,200 in cash and $10,800 in notes payable in exchange for selling $18,000 of software. C) The company buys $18,000 of software, pays $7,200 cash, and promises to cancel a debt owed to the company in the amount of $10,800. D) The company sells $18,000 of software, receives $7,200 in cash, and pays off $10,800 it owes on the software.
A
Alpha sold $2,000 of services to Beta on credit. Beta promised to pay for it next month. Alpha will report a $2,000: A. Accounts Receivable B. Accounts Payable C. increase in Cash, since Beta is sure to pay next month. D. Net Loss
A
If revenues are less than expenses, the company's Retained Earnings: A. Decrease B. Increase C. Must be replenished by stockholders D. Are paid to stockholders
A
The book value of a long-lived tangible asset is equal to: A) its acquisition cost less the accumulated depreciation from the acquisition date to the balance sheet date. B) its acquisition cost plus accumulated depreciation from the acquisition date to the balance sheet date. C) the amount that could be obtained for the asset on the balance sheet date if it were sold. D) the annual cost of carrying the asset in inventory.
A
The closing entry for dividends involves a debit to ________ and a credit to______. A) Retained Earnings; Dividends B) Dividends; Retained Earnings C) Dividends; Dividends Payable D) Dividends Payable; Dividends
A
Urban Bloom, Inc.'s books show an ending cash balance of $18,000 before preparing the bank reconciliaon. Given the bank reconciliaon shows outstanding checks of $5,400, deposits in transit of $3,600, NSF check of $180, and interest earned on the bank account of $18, the company's up-to-date ending cash balance equals: A. $17,838 B. $12,438 C. $16,038 D. $18,198
A
Using the allowance method, which is the correct adjusting journal entry to record bad debt expense? A. Debit Bad Debt Expense and credit Allowance for Doubtful Accounts. B. Debit Allowance for Bad Debt Expense and credit Bad Debt Expense. C.Debit Bad Debt Expense and credit Sales Revenue. D. Debit Bad Debt Expense and credit Accounts Receivable.
A
Which element is part of the Fraud Triangle? A. Incentive B.. Misappropriation C. Corruption D .Sustainabilitiy
A
Which of the following groups of accounts contains only those that normally have credit balances? A) Accounts Payable, Service Revenue, and Retained Earnings B) Cash, Equipment, and Common Stock C) Notes Payable, Salaries and Wages Payable, and Rent Expense D) Cash, Accounts Receivable, and Retained Earnings
A
While preparing the bank reconciliaon for March, the accountant for Bertran Industries discovered that a $649 check in payment of an account payable had been entered incorrectly in the journal as $694. Which of the following is true? A. An adjusting entry must be made to debit Cash and credit Accounts Payable for $45. B. An adjusng entry must be made to debit Accounts Payable and credit Cash for $45. C. The bank should be notied, and the bank should correct its records by adding $45 to the company's account. D. No entry is needed for the reconciling item because it appears on the bank's side of the reconciliaon.
A
Merle Industries had been selling its product for $40 per unit, but recently lowered the selling price to $30 per unit. The company's current inventory consists of 200 units purchased at $32 per unit. The market value of this inventory is currently $26 per unit. At what amount should the company's inventory be reported on the balance sheet? A) $5,200 B) $6,400 C) $6,000 D) $8,000
Answer: A Explanation: Total lower of cost or market = Lower of cost or market per unit × Number of units in inventory = $26 × 200 units = $5,200
Generally, which inventory costing method approximates most closely the current cost for each of the following? Ending Inventory Cost of Goods Sold A) FIFO LIFO B) LIFO LIFO C) FIFO FIFO D) LIFO FIFO A) Option A B) Option B C) Option C D) Option D
Answer: A Explanation: When FIFO is used, the costs of the newer goods are included in the cost of the ending inventory. When LIFO is used, the costs of the last goods purchased (last in) are the costs of the first goods sold (first out).
Hardware Inc. has a periodic inventory system and uses the weighted average method. The company began the year with 150 large brass switch plates on hand at a cost of $4.00 each. Purchases of switch plates during the year were as follows: Date of Transaction Quantity Received Unit Cost May 7 200 $ 4.20 June 11 200 $ 4.40 November 22 250 $ 4.80 The switch plates sell for $7.00 each. If Hardware sells 570 switch plates during the year, what is the company's cost of goods sold? A) $3,990 B) $2,508 C) $2,480 D) $2,560
Answer: B Explanation: Weighted Average − Periodic Beginning inventory 150 units × $4.00 $ 600 May 7 purchase 200 units × $4.20 840 June 11 purchase 200 units × $4.40 880 November 22 purchase 250 units × $4.80 1,200 Goods available for sale 800 Units $ 3,520 Weighted average cost = Cost of goods available for sale ÷ Number of units available for sale = $3,520 ÷ 800 units = $4.40 per unit Cost of goods sold = Units sold × Weighted average cost per unit = 570 units × $4.40 = $2,508
Buckeye Industries purchased a truck and trailer for $81,000. The appraised values of the truck and trailer are $57,000 and $28,500, respectively. What is the amount of the cost that should be assigned to the trailer? A) $28,500 B) $27,000 C) $24,000 D) $40,500
Answer: B Explanation: Cost assigned to trailer = $81,000 × [$28,500 ÷ ($57,000 + $28,500)] = $27,000
Seasons has sales of $42,000, beginning inventory of $4,900, purchases of $24,500, and ending inventory of $3,500. The cost of goods sold is: A) $29,400. B) $25,900. C) $16,100. D) $23,100.
Answer: B Explanation: Cost of goods sold = Beginning inventory + Purchases − Ending inventory = $4,900 + $24,500 − $3,500 = $25,900
Constable Co. reported the following information at December 31, Year 1: Accounts Payable $ 6,750 Accounts Receivable 14,025 Cash 35,235 Common Stock 135,000 Equipment 74,250 Inventory 46,800 Notes Payable due December 31, Year 3 3,750 Retained Earnings, December 31, Year 1 21,135 Wages Payable 3,675 What is the amount of current assets on the classified balance sheet? A) $170,310 B) $96,060 C) $49,260 D) $123,255
Answer: B Explanation: Current assets = Cash + Accounts Receivable + Inventory = $35,235 + $14,025 + $46,800 = $96,060
Constable Co. reported the following information at December 31, Year 1: Accounts Payable $ 6,750 Accounts Receivable 14,025 Cash 35,235 Common Stock 135,000 Equipment 74,250 Inventory 46,800 Notes Payable due December 31, Year 3 3,750 Retained Earnings, December 31, Year 1 21,135 Wages Payable 3,675 What is the amount of current liabilities on the classified balance sheet? A) $14,175 B) $10,425 C) $170,310 D) $6,750
Answer: B Explanation: Current liabilities = Accounts Payable + Wages Payable = $6,750 + $3,675 = $10,425
Sparks Furniture Company carries three lines of sofas. Information about the sofa inventory as of the end of its most recent fiscal year follows. If LCM/NRV is applied to each separate product line, what is the amount of the adjustment that must be made to the company's inventory? Product Line Cost per Unit Market Value per Unit Quantity Rustic $ 700 $ 725 190 Mediterranean 600 605 300 Contemporary 950 820 275 A) $6,250 B) ($35,750) C) ($25,500) D) ($29,500)
Answer: B Explanation: The LCM/NRV write-down is calculated as follows: In Notes Ch 7
The perpetual inventory method of tracking inventory is considered superior to the periodic method because the perpetual method: A) makes calculations easier and less technology can be deployed. B) tells what inventory a company should have on hand at any point in time. C) saves a company from ever having to count the goods in inventory. D) is more consistent with how companies calculated inventory in the past.
Answer: B Explanation: The perpetual inventory method is considered superior to the periodic method because it provides an updated inventory account balance after every purchase, sale and return of inventory during the period.
A company uses a periodic inventory system. The company had beginning inventory of 3 units that cost $5 each. During the month, 17 units were purchased for $6 each. The company sold 15 units during the month and had 5 remaining in ending inventory. If the company uses FIFO instead of LIFO to calculate cost of goods sold, then cost of goods sold will be: A) higher using FIFO, leading to higher gross profit and higher income taxes. B) lower using FIFO, leading to higher gross profit and higher income taxes. C) lower using FIFO, leading to lower gross profit and lower income taxes. D) higher using FIFO, leading to lower gross profit and lower income taxes.
Answer: B Explanation: When costs are rising, as they are here, FIFO produces a higher inventory value and a lower cost of goods sold (resulting in a higher gross profit and higher income taxes).
On July 1, Darin Company sold inventory costing $5,000 to Dee Company for $6,000, terms 3/10, n/30. Both companies use the perpetual inventory system. Dee Company pays the invoice on July 8 and takes the appropriate discount. What journal entry will be recorded by Dee Company on July 8? A) Debit Accounts Payable and credit Cash for $6,000 B) Debit Accounts Payable for $5,820, credit Inventory for $180, and credit Cash for $6,000 C) Debit Accounts Payable for $6,000, credit Cash for $5,820, and credit Inventory for $180 D) Debit Cost of Goods Sold and credit Cash for $5,000
Answer: C Explanation: Debit Accounts Payable for $6,000, credit Inventory for $180 (or $6,000 × 0.03), and credit Cash for $5,820 (or $6,000 − $180).
Polk Company uses a perpetual inventory system and had the following transactions during November: November 6—Purchased $8,700 of inventory on account, terms 2/10, n/30. November 8—Returned $1,200 of defective units and received full credit. November 15—Paid the amount due. What journal entry will be recorded by Polk Company on November 15? A) Debit Accounts Payable and credit Cash for $7,350 B) Debit Accounts Payable for $7,500, credit Purchase Discount for $150, and credit Cash for $7,350 C) Debit Accounts Payable for $7,500, credit Inventory for $150, and credit Cash for $7,350 D) Debit Accounts Payable for $7,350, credit Inventory for $150, and credit Cash for $7,200
Answer: C Explanation: Debit Accounts Payable for $7,500, credit Inventory for $150 (or $7,500 × 0.02), and credit Cash for $7,350 (or $7,500 − $150).
Barron Industries has the following information: Sales Revenue $ 300,000 Ending inventory 30,000 Cost of Goods Sold 200,000 Beginning inventory 25,000 What is Barron's number of days to sell? A) 33.5 days B) 36.5 days C) 50.2 days D) 54.8 days
Answer: C Explanation: Inventory turnover ratio = Cost of goods sold ÷ Average inventory = $200,000 ÷ [($25,000 + $30,000) ÷ 2] = 7.27 times Days to sell = 365 ÷ Inventory turnover ratio = 365 ÷ 7.27 = 50.2 days
The journal entry to record the payment within the discount period for goods previously purchased on account causes: A) equity to decrease. B) total stockholders' equity to increase. C) total assets to decrease. D) total assets to increase.
Answer: C Explanation: The journal entry includes a debit to Accounts Payable for the original cost (to decrease this liability account) and a credit to Cash for the discounted amount (to decrease this asset account) and Inventory for the amount of the discount (to decrease this asset account).
Mitchell uses a perpetual inventory system. Mitchell sells a computer from inventory for $1,198 on credit. Mitchell originally bought the computer from IBM for $790. What journal entry (entries) will Mitchell prepare to record the sale? A) Debit Cash and credit Sales Revenue for $1,198; debit Cost of Goods Sold and credit Inventory for $790. B) Debit Accounts Receivable for $1,198, credit Inventory for $790, and credit Gross Profit for $408. C) Debit Accounts Receivable and credit Sales Revenue for $1,198; debit Cost of Goods Sold and credit Inventory for $790. D) Debit Inventory for $790, debit Cost of Goods Sold for $408, and credit Accounts Receivable for $1,198.
Answer: C Explanation: Two entries are required to record a sale when a perpetual inventory system is in use. The first entry includes a debit to Accounts Receivable and a credit to Sales Revenue for $1,198, the selling price of the goods sold. The second entry includes a debit to Cost of Goods Sold and a credit to Inventory for $790, the cost of the goods that were sold.
Which of the following statements is correct? A) FIFO results in a lower net income than LIFO when costs are rising. B) LIFO results in a higher net income than FIFO when costs are rising. C) LIFO results in a higher net income than FIFO when costs are falling. D) LIFO results in the same net income as FIFO when costs are rising.
Answer: C Explanation: When unit costs are falling, FIFO produces a higher cost of goods sold (resulting in a lower gross profit and a lower net income) when compared to LIFO. On the other hand, when unit costs are rising, FIFO produces a lower cost of goods sold (resulting in a higher gross profit and a higher net income) when compared to LIFO.
A company acquired property that included land, building and equipment for a total cost of $163,000. The land was appraised at $87,500, the building at $35,000, and the equipment at $52,500. What should be the allocation of the total cost in the accounting records? A) Land $75,000; Building $30,000; Equipment $45,000 B) Land $75,000; Building $30,800; Equipment $46,200 C) Land $87,500; Building $35,000; Equipment $52,500 D) Land $81,500; Building $32,600; Equipment $48,900
Answer: D Explanation: Calculation Cost Land $ 87,500 ($87,500÷ $175,000)×$163,000 = $ 81,500 Building 35,000 ($35,000÷ $175,000)×$163,000 = 32,600 Equipment 52,500 ($52,500÷ $175,000)×$163,000 = 48,900 $175,000 $163,000
Buckeye Co. had beginning inventory of $18,000, cost of goods sold of $42,000, and ending inventory of $24,000. Purchases were: A) $36,000. B) $30,000. C) $27,000. D) $48,000.
Answer: D Explanation: Cost of goods sold = Beginning inventory + Purchases − Ending inventory Purchases = Cost of goods sold − Beginning inventory + Ending inventory = $42,000 − $18,000 + $24,000 = $48,000
Durango, Inc. purchased a parcel of land for $450,000. It paid attorney fees of $3,000 to verify title to the land. In addition, it paid a broker's fee of $7,500 to help find a suitable parcel of land. This parcel of land should be recorded in the accounting records for: A) $450,000. B) $453,000. C) $457,500. D) $460,500.
Answer: D Explanation: Long-lived assets are recorded for all of the costs that are reasonable and necessary to place them in service for their intended use. In this case, the attorney fees and brokerage fees are reasonable and necessary costs incurred in order to acquire the land and place it in service for its intended use.
In a perpetual inventory system, paying transportation charges on goods purchased FOB shipping point would have which of the following effects? A) Decrease Operating Expenses B) Increase Selling, General, and Administrative Expenses C) Decrease Cost of Goods Sold D) Increase Inventory
Answer: D Explanation: Payment of the transportation charges would be debited to Inventory (assets increase) and credited to Cash (assets decrease).
11. The Accounts Receivable account: A) has a normal credit balance. B) is increased by a debit. C) is a liability. D) is increased when a company receives cash from its customers.
B
Assigning responsibilities so that related activities are assigned to two or more people is the goal of: A. Restricting Access B. Segregating Duties C. Independently verifying D.. Documenting Procedures
B
Broadway, Inc.'s trial balance was in balance at the end of the period and showed the following accounts: Account Balance Accounts Payable $ 30,600 Cash 62,100 Common Stock 30,000 Equipment 13,500 Land 45,000 Notes Payable 60,000 What is the balance of the credit column on Broadway's trial balance? A) $241,200 B) $120,600 C) $90,600 D) $90,000
B
Cachet Co. has the following information: Adjusted balance in Allowance for Doubtful Accounts $ Bad debts estimated for the current year Unadjusted credit balance in Allowance for Doubtful Accounts No recoveries were recorded during the year. What was the amount of accounts written o during the year? A. $15,000 B. $9,000 C. $8,000 D .$4,000
B
Cash flows from (used in) investing activities include amounts: A. received from a company's stockholders for the sale of stock. B. received from the sale of the company's office building. C. paid for dividends to the company's stockholders. D. paid for salaries of employees.
B
Inventory levels increase by 10% at your company during the fourth quarter. Based on this increase, which of the following statements must be correct? A) This must be good news because inventories are an asset to the company. B) This could be good news if the company is ordering more goods because sales appear to be rising. C) This could be bad news if the company is ordering more goods because unit costs are falling. D) This must be bad news because higher inventories mean higher costs.
B
McKeel Publishing had outstanding checks totaling $7,560 on its June bank reconciliaon. In July, McKeel issued checks totaling $54,460. The July bank statement shows that $36,820 in checks cleared the bank in July. The amount of outstanding checks on McKeel's July bank reconciliaon should be: A. $17,640 B. $25,200 C. $7,560 D. $10,080
B
Ordinary repairs and maintenance: A) are part of the asset cost of equipment and facilities. B) are recorded as expenses. C) are always recorded as liabilities. D) improve the asset beyond the current accounting period.
B
Which is the first financial statement that should be prepared after the adjusted trial balance has been prepared? A) Balance Sheet B) Income Statement C) Statement of Cash Flows D) Statement of Retained Earnings
B
Which one of the statements appearing below is incorrect regarding bank reconciliations? A.bank reconciliation is an internal report prepared to report the cash balance to investors and creditors. B.If a company's records show a different cash balance from that shown on the company's bank statement, either the company or the bank has made an error. C After preparing a bank reconciliation, no journal entries need to be made for outstanding checks or deposits in transit. D The up-to-date ending cash balance on the bank statement side will generally not equal the up-to-date ending cash balance on the book side.
B
8. Which of the following is an asset? A) Common Stock B) Retained Earnings C) Notes Receivable D) Notes Payable
C
Baldwin Company purchased equipment for $420,000 and planned to use it when the company expanded one of its product lines. However, six months later, the company changed its plans and sold the equipment to Stick, Inc. for $420,000. Stick signed a note for $420,000 that is due in 60 days. The journal entry prepared by Baldwin Company to record the sale of the equipment would include which of the following? A) Credit to Note Receivable B) Debit to Cash C) Credit to Equipment D) Debit to Accounts Payable
C
Best, Inc. loaned $100,000 for three months on November 1 to one of its customers at the rate of 6%. The principal amount of the loan plus interest is due on the following February 1. Which of the following is the adjusting journal entry that will be recorded on December 31? A. Debit Cash and credit Interest Revenue for $4,000. B.Debit Interest Receivable and credit Interest Revenue for $4,000. C. Debit Interest Receivable and credit Interest Revenue for $1,000. D. Debit Interest Receivable and credit Interest Revenue for $500.
C
Cost of goods sold reports the: A) cost of merchandise available to sell. B) cost of merchandise purchased. C) cost times the quantity of goods sold. D) selling price times the quantity of goods sold.
C
Crystal Lodging recorded $330,000 in revenues, $247,500 in expenses, and $45,000 of dividends for the year. The company began the year with total assets of $285,000 and stockholder's equity of $130,500. A. $37,500 B. $94,500 C. $82,500 D. $49,500
C
IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5% interest. IBM would record this loan as: A.Notes Payable B. Accounts Receivable. C.Notes Receivable. D. Unearned Revenue.
C
If a company expenses costs that should be capitalized, how is its income statement for the current period impacted? A) Net income is overstated. B) Revenues are understated. C) Expenses are overstated. D) Assets are overstated.
C
If the company's accountant mistakenly recorded an $85 deposit as $58, the error would be shown on the bank reconciliaon as a(n): A. $27 deduction from the book balance B. $85 deduction from the book balance C. $27 addition to the book balance D. $85 addition to the book balance
C
Which of the following is a merchandising company? A) General Motors B) H&R Block C) The Gap D) Proctor & Gamble
C
Which of the following situaons would cause the balance per bank to be more than the balance per books? A. Deposits in transit B. Service Charges C. Outstanding Checks D. Checks from customers returned as NSF
C
Which of the following statements about financial accounting is correct? A. Financial accounng reports are used primarily by employees to make business decisions related to producon. B. Financial accounng reports are used primarily by management to understand whether a product line should be disconnued. C. Financial accounng reports are primarily prepared to provide informaon for external decision makers. D. Financial accounng reports primarily contain detailed internal records of the company.
C
Which of the following statements about revenue and expense accounts is correct? A) Revenue accounts are a subset of assets, and expense accounts are subcategories of liabilities. B) Both revenue accounts and expense accounts are subcategories of assets. C) Both revenue accounts and expense accounts are subcategories of Retained Earnings. D) Revenue accounts are a subcategory of Cash and expense accounts are a subcategory of Accounts Payable.
C
AAA Co. uses a periodic inventory system and has the following information in regard to its inventory: Beginning inventory 200 units @ $15 $ 3,000 Purchase on January 25 300 units @ $16 4,800 Purchase on March 15 200 units @ $17 3,400 Purchase on October 2 400 units @ $18 7,200 Goods available for sale $ 18,400 There are 500 units in ending inventory. What is the amount of the ending inventory using the FIFO method? A) $3,000 B) $7,200 C) $7,800 D) $8,900
D
Cash Beginning Balance 371,700 (a) 44,100 (c) 18,000 (b) 114,900 (d) 17,400 (e) 22,200 (f) 36,000 (g) 33,600 What is the ending balance of the Cash account? A) $657,900 B) $339,900 C) $85,500 D) $403,500
D
Crest Co. receives and immediately pays a $5,250 utility bill from the Public Service Utility Company. Public Service Utility Company will record the receipt of this payment with a journal entry that includes a: A) credit to Accounts Payable. B) debit to Utilities Expense. C) debit to Utilities Revenue. D) debit to Cash.
D
Establishing a note receivable by loaning cash to another company will have which of the following net effects on the accounting equation? A. Increase assets; No effect on liabilities; Increase stockholders' equity B. Increase assets; No eect on liabilities; No eect on stockholders' equity C.. No effect on assets; No effect on liabilies; Decrease stockholders' equity D. No effect on assets; No effect on liabilies; No effect on stockholders' equity
D
If a company pays back money borrowed from a bank, which of the following would be included in the journal entry to record this transaction? A) Credit Notes Payable and debit Common Stock B) Debit Cash and credit Notes Payable C) Debit Cash and credit Common Stock D) Credit Cash and debit Notes Payable
D
Phantom Inc. has an unadjusted debit balance of $5,250 in its Allowance for Doubtful Accounts. The company has experienced bad debt losses of 2% of credit sales in prior periods. Phantom reported net credit sales of $2,250,000 for the current period. To record the potential bad debts, Phantom would debit: A. Allowance for Doubtful Accounts for $45,000. B.Allowance for Doubtful Accounts for $50,250. C. Bad Debt Expense for $50,250. D. Bad Debt Expense for $45,000.
D
Specialty Inc. converts an existing account receivable to a note receivable to allow an extended payment period. Specialty receives a $2,000, 3-month, 12% promissory note from its customer. What entry will Specialty make upon receipt of the note? A.Debit Notes Receivable and credit Accounts Receivable for $2,060. B.Debit Accounts Receivable and credit Notes Receivable for $2,000. C..Debit Notes Receivable for $2,000, debit Interest Receivable for $60, credit Accounts Receivable for $2,000, and credit Interest Revenue for $60. D. Debit Notes Receivable and credit Accounts Receivable for $2,000.
D
The Smith Corp. began business this year and entered into the following transactions during the year. The company issued common stock in exchange for cash of $80,000 from stockholders, borrowed $40,000 from a bank, bought $12,000 of inventory on account, and purchased $32,000 of equipment by paying $12,000 in cash and issuing a note for the remainder. What is the amount of total assets to be reported on the balance sheet at the end of the year? A) $104,000 B) $120,000 C) $128,000 D) $152,000
D
The main purpose of internal controls include all of the following except: A. prevention of error, theft, fraud B.. promotion of operational efficiency C. ensuring compliance with laws and regulations D. providing more favorable financial information
D
Which of the following expressions of the accounting equationon is correct? A. Liabilies + Assets = Stockholders' Equity B. Stockholders' Equity + Assets = Liabilities C. Assets = Liabilies - Stockholders' Equity D. Stockholders' Equity = Assets - Liabilies
D
Which of the following is typically considered a disadvantage of sole proprietorships? A. Income taxes are paid by both the business and its owner. B..The business is considered a separate legal enty from its owner. C. Establishing the business usually requires legal assistance. D. Owner is personally liable for all debts of the business.
D
Which of the following statements about the tradeoffs of extending credit is not correct? A. Extending credit to at least some customers is necessary in a compeve market to avoid losing sales to competors. B. Even if a company were to collect in full from customers, there would be other addional costs introduced by extending credit to customers. C. Even though addional costs are incurred if credit is extended, a company expects that the addional revenue will be more than sufficient to offset the addional costs. D. Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase addional costs beyond the increased revenue from the credit sales.
D
Which of these accounts would normally be affected by an adjustment? A) Notes Payable. B) Equipment. C) Cash. D) Deferred Revenue.
D
Willow Company had no beginning inventory. The company purchases 900 units of inventory in January at $5 each, 1,500 units at $4 each in August, and 600 units at $6 each in November. The company sells 450 units during the year. Willow uses a periodic inventory system and the LIFO inventory costing method. What is the cost of goods sold? A) $1,800 B) $2,802 C) $2,250 D) $2,700
D
With a classified balance sheet, current assets are usually listed: A) in alphabetical order. B) in the order of when the assets were acquired. C) from the largest to smallest dollar amount. D) in the order of liquidity.
D
A company does not need to record the receipt of a bill for utilities used during this year if the company will not pay the bill until next year. (T/F)
False
A retailer is a company that buys products from manufacturers and sells them to wholesalers. (T/F)
False
All corporations acquire financing ONLY by issuing stock for sale on public stock exchanges (T/F)
False
An overstatement of ending inventory will cause an overstatement of assets and an understatement of stockholders' equity on the balance sheet. (T/F)
False
Cash equivalents are short-term, highly liquid investments purchases within one year of maturity (T/F)
False
Eagle Company used $50,000,000 of its cash to pay off debt, as a result, Eagle's stockholders' equity will decrease $50,000,000. (T/F)
False
Every transaction increases at least one account and decreases at least one account. (T/F)
False
If inventory is sold with terms of FOB shipping point, the goods belong to the seller while in transit.(T/F)
False
Revenue received before it is recognized and expenses paid before being used or consumed are both initially recorded as liabilities (T/F)
False
The adjusting entry for accrued salaries requires a debit to Salaries and Wages Payable (T/F)
False
The gross profit percentage is computed by dividing operating income by net sales. (T/F)
False
The useful life of an asset is always measured in units of time, such as years or months.
False
You paid $10,000 to buy 1% of the stock in a corporaon that is now bankrupt. The company owes $10 million dollars to its creditors. As a result of the bankruptcy, you are responsible for paying $100,000 (or $10 million × 1%) of the amount owed to the creditors. (T/F)
False
A debit may increase or decrease an account, depending on the type of account. (T/F)
True
A merchandising company's operating cycle begins with the acquisition of inventory and ends with the cash collection from sales.(T/F)
True
Asset prepayments become expenses when they expire (T/F)
True
FOB shipping point means that ownership of goods passes to the buyer when the goods leave the seller's place of business. (T/F)
True
Generally, a physical count of inventory is performed annually in both a perpetual inventory system and a periodic inventory system. (T/F)
True
Goodrich, Inc. signed an agreement to rent a warehouse from Ellie Co. This is an example of a transaction that should not be recorded. (T/F)
True
If a company produces the same number of units per period over an asset's useful life, each period's depreciation expense using the straight-line method will be the same as that recorded using the units-of-production method.
True
If a merchandiser offers a sales discount of 2/10, net/30 on a sale of $2,000, the amount due in 10 days is the net amount of $1,960. (T/F)
True
If total assets decrease, then either total liabilities or total stockholders' equity must also decrease. (T/F)
True
In general, the higher a company's net profit margin, the better the performance of the company. (T/F)
True
Interest on a two-month, 7%, $1,000 note would be calculated as $1,000 × 0.07 × 2/12.
True
Long-lived assets found on a company's balance sheet may include some assets that have no physical substance.
True
Stockholders are owners of a corporation (T/F)
True
The aging of accounts receivable method focuses on estimating the ending balance to be reported in the Allowance for Doubtful Accounts, whereas the percentage of credit sales method focuses on estimating Bad Debt Expense for the period.
True
The current ratio can be used to evaluate a company's ability to pay liabilities in the short term, and in general, a higher ratio means better ability to pay. (T/F)
True
The primary goals of inventory managers are to maintain a sufficient quantity of inventory to meet customers' needs, ensure inventory quality meets customers' expectations and company standards, and minimize the cost of acquiring and carrying inventory. (T/F)
True
When a company prepares a classified balance sheet, liability accounts must be shown in subcategories of current and noncurrent. (T/F)
True
When a company sells goods, it removes their cost from the Inventory account and reports the cost on the income statement as Cost of Goods Sold. (T/F)
True
When assets are purchased as a group, the total cost must be divided up and allocated to each asset in proportion to the market value of the assets as a whole.
True
When costs per unit are increasing, the inventory costing method that results in the lower income tax expense is the LIFO method. (T/F)
True
