Accounting Exam 2 Review

Which of the following is an internal control for checks received through the mail?

The mail clerk gives checks and money orders to the person who makes the bank deposit.

Which amount should be reported as cash on the balance sheet?

The up to date ending cash balance per the bank reconciliation

Larkspur Co. had cost of goods sold of $3,800. If beginning inventory was $3,900 and ending inventory was $1,400, Larkspur's purchases must have been:

$1,300.

Alphabet Company, which uses the periodic inventory method, purchases different letters for resale. Alphabet had no beginning inventory. It purchased A thru G in January at $6.50 per letter. In February, it purchased H thru L at $8.50 per letter. It purchased M thru R in March at $9.50 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year. If Alphabet Company uses the FIFO method, what is the cost of its ending inventory?

$106

On October 31, 2018, the bank statement shows that your company has $13,856.73 in its checking account. You are aware of three outstanding checks that total of $3,462.19. During October, 2018, the bank rejected two deposited checks from customers totaling $ 879.19 because of insufficient funds and charged you $30.00 in service fees. You had not yet received notice about the bad checks, but you were aware of and have recorded the $30.00 of service fees. Prior to adjustment on October 31, 2018, your Cash account would have a balance of: (Round your answer to 2 decimal places.)

$11,273.73

On October 31, 2018, the bank statement shows that your company has $13,756.73 in its checking account. You are aware of three outstanding checks that total of $3,312.19. During October, 2018, the bank rejected two deposited checks from customers totaling $ 854.19 because of insufficient funds and charged you $28.00 in service fees. You had not yet received notice about the bad checks, but you were aware of and have recorded the $28.00 of service fees. Prior to adjustment on October 31, 2018, your Cash account would have a balance of: (Round your answer to 2 decimal places.)

$11,298.73

Libby Company uses the percentage of credit sales method for calculating Bad Debt Expense. The company reported $243,000 in total sales during the year; $196,000 of which were on credit. Libby has experienced bad debt losses of 6% of credit sales in prior periods. What is the estimated amount of Bad Debt Expense for the year?

$11,760.

McKeel Publishing had outstanding checks totaling $5,500 on its June bank reconciliation. In July, McKeel issued checks totaling $39,900. The July bank statement shows that $27,800 in checks cleared the bank in July. The amount of outstanding checks on McKeel's July bank reconciliation should be:

$17,600

Egrane, Inc.'s monthly bank statement showed the ending balance of cash of $19,200. The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,850, outstanding checks of $2,700, a NSF check of $1,400, bank service charges of $65 and the EFT from a customer in payment of the customer's account of $2,200.

$18,350

On January 1, Portillo, Inc. lends a corporate customer $168,000 at 6% interest. The amount of interest revenue that should be recorded for the quarter ending March 31 equals:

$2,520.

Sheridan's beginning inventory is $42,000, goods purchased during the period cost $127,000, and the cost of goods sold for the period is $147,000. What is the amount of its ending inventory?

$22,000

Wrangler Inc. uses the percentage of credit sales method to estimate Bad Debt Expense. At the end of the year, the company's unadjusted trial balance includes the following: - Accounts Receivable$362,000 - -Allowance for Doubtful Accounts (credit balance) - 1,500 Net Credit Sales 913,000 Wrangler has experienced bad debt losses of 0.4% of credit sales in prior periods. What is the Bad Debt Expense to be recorded for the year?

$3,652

The Xu Corporation uses a periodic inventory system. The company has a beginning inventory of 750 units at $10 each on January 1. Xu purchases 1,000 units at $9 each in February and 450 units at $11 each in March. There were no additional purchases or sales during the remainder of the year.Xu sells 400 units during the quarter. If Xu uses the weighted average method, what is its cost of goods sold for the quarter? (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.

$3,900

On October 31, 2018, your company's records say that the company has $21,641.13 in its checking account. A review of the bank statement shows you have three outstanding checks totaling $9,918.17, and the bank has paid you interest of $31.74 and charged you $26.00 in service charges. The bank statement dated October 31, 2018 would report a balance of: (Round your answer to 2 decimal places.)

$31,565.04.

Using the aging method of accounts receivable method, $5,200 of the company's Accounts Receivable are estimated to be uncollectible. At the end of the year, the balance of Accounts Receivable is $102,000 and the unadjusted credit balance of the Allowance for Doubtful Accounts is $540. Credit sales during the year totaled $154,000. What is the current year's Bad Debt Expense?

$4,660.

The Laurel Corporation starts the year with a beginning inventory of 470 units at $22 per unit. The company purchases 585 units at $38 each in February and 540 units at $23 each in October. Laurel sells 235 units during the year. Laurel has a periodic inventory system and uses the FIFO inventory costing method. What is the amount of cost of goods sold?

$5,170

Knoll Manufacturing lends its supplier $151,000 for 3 years at a 7% annual interest rate. Interest payments are to be made twice a year. Each interest payment will be for:

$5,285.

Jackson Manufacturing Company had a beginning inventory of $20,000. During the year, the company recorded inventory purchases of $95,000 and cost of goods sold of $60,000. The ending inventory must equal:

$55,000.

Jackson Manufacturing Company had a beginning inventory of $23,000. During the year, the company recorded inventory purchases of $125,000 and cost of goods sold of $66,000. The ending inventory must equal:

$82,000.

On July 1, 2018, Empire Inc. lends $19,200 to a customer and receives a 9% note due in two years. Interest is due in full on July 1, 2020, the due date of the note. What is the amount of Interest Revenue that will be reported on Empire's income statement for the year ended December 31, 2018?

$864

PayPal and national credit card companies charge Abbigail Company a 3% fee for their services. Abbigail Company's net sales revenue was $10,000 on the last weekend of November. How much cash will be deposited into Abbigail's bank account as a result of these sales?

$9,700

Maple Broadcasting Co. lends $20,000 to an employee who signs a 9%, 6-month promissory note. What is the total amount of interest on this note?

$900

Grandview Grinding, Inc. had net accounts receivable of $65,100 at the beginning of the year and $73,800 at the end of the year. If the company's net sales revenue during the year was $904,875, what is the receivables turnover ratio?

13.03

When goods are sold to a customer with credit terms of 2/15, n/30, the customer will receive a:

2% discount if they pay within 15 days.

A company has net sales of $612,850 and cost of goods sold of $441,252. The company's gross profit percentage is:

28%

Hayward Co. reported net sales revenues of $20.2 billion and cost of goods sold of $8.1 billion. Its gross profit percentage was:

59.9%.

The records of Alberta Inc. included the following information: Cost of goods sold$2,150,000 Beginning inventory 470,000 Ending inventory 535,000 What is the number of days to sell? (Round your intermediate calculations and final answer to 2 decimal places. Assume 365 days a year.)

85.28 days

Which of the following is not associated with a high inventory turnover ratio?

A drop in the demand for the company's products

When the petty cash fund is replenished

Appropriate expense accounts are debited.

Which of the following is an activity in the operations of a manufacturer, but not in the operations of a merchandising or service company?

Buying raw materials

What does a low receivable turnover ratio indicate?

Cash collections are sluggish, taking longer to collect.

Goods available for sale equals

Cost of Goods Sold plus ending inventory

As of December 31, Frappe Company has a balance of $9,000 in accounts receivable. Of this amount, $900 is past due and the remainder is not yet due. Frappe has a credit balance of $85 in the Allowance for Doubtful Accounts. Frappe Company estimates its bad debt losses using the aging of receivables method, with estimated bad debt loss rates equal to 1% of accounts not yet due and 10% of past due accounts. How will the Bad Debt Expense account be included in the required adjusting journal entry at year-end?

Debit of $86

An attempt to deceive others for personal gain is known as:

Fraud

Which of the following would be in the finished goods inventory of a company making ice cream?

Frozen ice cream that is waiting to be shipped to retailers.

McQueen, Inc. buys premium ice cream at a cost of $2.75 a gallon and sells it for $6.50 a gallon. Selling, general, and administrative expenses are $1.25 per gallon. Which of the following statements is correct?

Gross profit per gallon is $3.75.

There are advantages and disadvantages to extending credit to customers. Which of the following statements below expresses the general reason for extending credit?

Gross profits exceed bad debt costs.

Which of the following is a correct statement regarding the Cash Shortage account?

If the recorded cash exceeds the cash counted, a shortage exists

Sales Returns and Allowances are reported on the:

Income statement only

Which line item would be found on a merchandiser's balance sheet and not on a service firm's?

Inventory

This month's bank statement includes a check from a customer that was marked NSF. How would this item be treated on the bank reconciliation?

It would be deducted from the book balance

Which of the following would be in the raw materials inventory of a company making ice cream?

Milk and cream used to make the ice cream.

A company lends its supplier $172,000 for 3 years at a 10% annual interest rate. Interest payments are to be made twice a year. The entry to record this lending transaction includes a debit to

Notes Receivable and a credit to Cash for $172,000.

Research has found that three factors exist when fraud occurs. Which of the following is one of the three factors of the fraud triangle?

Rationalization

Which of the following situations depicts the best receivables management?

Receivables turnover ratio increases and the days to collect decreases.

Sleepy Head Coffee Shop buys coffee, mugs, and pastries from Morning Show Co. for sale to consumers. What type of company is Sleepy Head Coffee Shop?

Retail merchandiser

Which of the following is a set of regulations passed by Congress in 2002 in an attempt to improve financial reporting and restore investor confidence?

Sarbanes-Oxley Act

Which of the following is a correct statement regarding the Cash Shortage account?

The account normally has a credit balance

Assume that the custodian of a $540 petty cash fund has $75 in currency and coins plus $465 in receipts at the end of the month. The entry to replenish the petty cash fund will include a

credit to Cash for $465

Inventory is reported as a(n) ______ on the ______.

current asset; balance sheet

The potential disadvantages of extending credit include all of the following except:

customers buying too much.

Beginning inventory plus purchases equals:

goods available for sale.

If companies are required to adopt IFRS, companies will

no longer be able to use LIFO

The principles of internal control include which of the following?

segregate duties

Assume ABC sells its receivables to another company for immediate cash on a regular basis. How should the factoring fee be reported in the income statement?

selling expense

If your company factors its accounts receivable, it:

sells outstanding receivables to another company.

NSF checks from customers should be a(n) ______ on a bank reconciliation

subtraction from the book balance

A process for approving and documenting all purchases and payments on account is referred to as a(n):

voucher system

Outstanding checks refer to checks that have been

written, recorded, sent to the payees, but not yet paid by the bank

An internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual is a(n):

bank reconciliation

Outstanding checks have

been recorded by the company but not yet by the bank

The direct write-off method for uncollectible accounts is required:

by the IRS

The purpose of internal controls includes all of the following except

completely eliminating fraud