Accounting Unit 3

Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should: A) Not record sales until the right to return has expired B) Record a refund liability in the year of the sale C) Debit sales returns in the period of the return D) Debit sales in the period of the return

B) Record a refund liability in the year of the sale

The primary reason for the popularity of LIFO is that it: A) Provides better matching of physical flow and cost flow B) Saves income taxes currently C) Simplifies recordkeeping D) Provides a permanent reduction of income taxes

B) Saves income taxes currently

The LIFO Conformity Rule states that if LIFO is used for: A) One class of inventory, it must be used for all classes of inventory B) Tax purposes, it must be used for financial reporting C) One company in an affiliated group, it must be used by all companies in an affiliated group D) Domestic companies, it must be used by foreign partners

B) Tax purposes, it must be used for financial reporting

A company uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, cost of goods sold for the current year was: A) Overstated by $94,000 B) Overstated by $30,000 C) Understated by $94,000 D) Understated by $30,000.

A) Overstated by $94,000

Nu Company reported the following pretax data for its first year of operations. Net sales 7,340 Cost of goods available for sale 5,790 Operating expenses 1,728 Effective tax rate 25% Ending inventories: If LIFO is elected 616 If FIFO is elected 798 What is Nu's gross profit ratio if it elects FIFO? A) 30% B) 32% C) 12.9% D) 60%

B) 32%

Baker Incorporated acquired equipment from the manufacturer on 10/1/2024 and gave a noninterest-bearing note in exchange. Baker is obligated to pay $918,000 on 4/1/2025 to satisfy the obligation in full. If Baker accrued interest of $9,000 on the note in its 2024 year-end financial statements, what is its imputed annual interest rate? A) 2% B) 4% C) 6% D) None of these answer choices are correct

B) 4%

A company reported the following in its 2024 financial statements: Sales 420,000 Cost of goods sold: Inventory, January 1 82,000 Net purchases 340,000 Goods available for sale 422,000 Inventory, December 31 86,000 Cost of goods sold 336,000 Gross profit 84,000 The company's 2024 inventory turnover ratio is: A) 3.91 B) 4.00 C) 4.88 D) 5.00

B) 4.00

Alliance Software began 2024 with accounts receivable of $115,000. All sales are made on credit. Sales and cash collections from customers for the year were $780,000 and $700,000, respectively. Cost of goods sold for the year was $450,000. What was Alliance's receivables turnover ratio (rounded) for 2024? A) 4.00 B) 5.03 C) 2.90 D) 6.78

B) 5.03

Hazelton Manufacturing prepares a bank reconciliation at the end of every month. At the end of May, the general ledger checking account showed a balance of $1,360 and the bank statement showed a bank balance of $1,445. Outstanding checks totaled $350 and deposits in transit were $150. The bank statement listed service charges of $30 and NSF checks totaling $85. The corrected cash balance is: A) $1,130 B) $1,160 C) $1,245 D) $1,445

C) $1,245

The balance in accounts receivable at the beginning of 2024 was $300. During 2024, $1,600 of credit sales were recorded. If the ending balance in accounts receivable was $250 and $100 in accounts receivable were written off during the year, the amount of cash collected from customers during 2024 was: A) $1,600 B) $1,650 C) $1,550 D) $1,900

C) $1,550

In applying the lower of cost or market method, a company reports its inventory at net realizable value (NRV). Which of the following statements is correct? A) NRV is greater than replacement cost B) Cost is less than NRV C) Cost is greater than NRV D) Cost is less than NRV minus a normal profit margin

C) Cost is greater than NRV

When using the gross profit method to estimate ending inventory, it is not necessary to know: A) Beginning inventory B) Net purchases C) Cost of goods sold D) Net sales

C) Cost of goods sold

A company has four types of products in its inventory as shown below: Product / Quantity / Cost / Net Realizable Value A 15 7 10 B 10 18 12 C 20 8 6 D 15 11 15 When accounting for the lower of cost or net realizable value by individual items, the year-end adjustment to write down inventory would be: A) $100 B) $15 C) $10 D) $0

A) $100

Cinnamon Buns Company (CBC) started 2024 with $52,000 of inventory on hand. During 2024, $280,000 in inventory was purchased on account with credit terms of 2/10, n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $9,000. Inventory with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $316,000. CBC uses a perpetual inventory system.Assuming CBC uses the gross method to record purchases, ending inventory would be: A) $15,480 B) $6,480 C) $15,400 D) $21,000

A) $15,480

Portman Incorporated uses the conventional retail inventory method. Expressed in millions of dollars, information about Portman's 2024 inventory account is expressed in the table below: Cost / Retail Beginning inventory 55 90 Purchases 1,160 2,170 Freight-in 30 Purchase returns 45 115 Net markups 255 Net markdowns 100 Normal spoilage 60 Net sales 1,940 What is the value of Portman's inventory at 12/31/2024? A) $150 million B) $252 million C) $300 million D) None of the other answer choices are correct.

A) $150 million

Harvey's Junk Jewelry started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2024: Cost Retail Beginning inventory 15,000 23,000 Purchases 49,000 78,000 Freight-in 2,500 Purchase returns 1,700 2,600 Net markups 2,000 Net markdowns 4,100 Net sales 70,600 Employee discounts 700 The estimated ending inventory at cost is: A) $16,359 B) $16,256 C) $16,346 D) $16,304

A) $16,359

The Constance Corporation's inventory on December 31, 2024, was $125,000 (at cost) based on a physical count of inventory on hand, before any necessary adjustment for the following: - Inventory costing $15,000, shipped f.o.b. shipping point from a vendor on December 27, 2024, was received by Constance on January 5, 2025. - Inventory costing $45,000 was shipped to a customer f.o.b. shipping point on December 28, 2024, arrived at the customer's location on January 6, 2025. - Inventory costing $21,000 was being held on hand for Jess Company on consignment. - Estimated sales returns are 10% of annual sales. Sales revenue was $550,000 with a gross profit ratio of 25% What amount should Constance Corporation report as inventory in its December 31, 2024, balance sheet? A) $160,250 B) $145,250 C) $187,250 D) $190,250

A) $160,250

CMN Incorporated uses LIFO and has experienced increasing costs since its founding. CMN disclosed that the LIFO reserve (also known as the LIFO allowance) at the end of 2024 was $3 million. The balance sheet showed ending inventory of $17 million at the end of 2024. What would the ending inventory have been if CMN had always used FIFO? A) $20 million B) $17 million C) $14 million D) None of the other answer choices are correct

A) $20 million

Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/2024: Currency and coins 650 Balance in checking account 2,600 Customer checks waiting to be deposited 1,200 Treasury bills 3,000 Marketable equity securities 10,200 Commercial paper 5,000 What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents? A) $9,450 B) $12,450 C) $7,450 D) $19,650

A) $9,450

Mogul Company ships inventory to Ski Outfit in a consignment arrangement. The arrangement specifies that Ski Outfit will attempt to sell the inventory, and in return, Mogul will pay to Ski Outfit a 20% sales commission on any inventory sold. During the year, Mogul ships inventory with a cost of $80,000 to Ski Outfit. By the end of the year, $60,000 of the inventory has been sold to customers for a total of $85,000. What amount of inventory will Mogul report at year end? A) $20,000 B) $0 C) $5,000 D) $16,000

A) $20,000

As of January 1, 2024, Farley Company had a credit balance of $520,000 in its allowance for uncollectible accounts. Based on experience, 2% of Farley's credit sales have been uncollectible. During 2024, Farley wrote off $650,000 of accounts receivable. Credit sales for 2024 were $18,000,000. In its December 31, 2024, balance sheet, what amount should Farley report as allowance for uncollectible accounts? A) $230,000 B) $360,000 C) $590,000 D) $880,000

A) $230,000

Cinnamon Buns Company (CBC) started 2024 with $52,000 of inventory on hand. During 2024, $280,000 in inventory was purchased on account with credit terms of 2/10, n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $9,000. Inventory with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $316,000. CBC uses a perpetual inventory system.Assume instead that (a) freight costs were paid by the vendor, (b) no discounts were taken, and (c) the inventory on hand at the beginning of 2024 was determined by a physical count that failed to realize that $10,000 of inventory was being held on consignment for Frosting R Us Incorporated. What is cost of goods available for sale, assuming CBC uses the gross method to record purchase discounts? A) $318,000 B) $327,000 C) $321,480 D) $337,000

A) $318,000

A company adopted the dollar-value LIFO inventory method on January 1, 2024. In applying the LIFO method, the company uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO: Year End Inventory / Year Cost End Inventory / Cost Index 1/1/2024 300,000 300,000 1.00 12/31/2024 345,600 320,000 1.08 12/31/2025 420,000 350,000 1.20 Under the dollar-value LIFO method, the inventory on December 31, 2025, should be: A) $357,600 B) $350,000 C) $351,600 D) None of the other answer choices are correct

A) $357,600

Logistics Company had the following items listed in its trial balance at 12/31/2024: Balance in checking account, Bank of the East 442,000 Treasury bills 20,000 Loan payable, long-term, Bank of the East 300,000 Included in the checking account balance is $50,000 of restricted cash that Bank of the East requires as a compensating balance for the $300,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents? A) $412,000 B) $462,000 C) $392,000 D) $442,000

A) $412,000

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price: 180,000 / 140,000 / 120,000 / 60,000 Cost: 128,000 / 133,000 / 90,000 / 45,000 Replacement cost: 120,000 / 130,000 / 110,000 / 41,000 Sales commission 10% In applying the lower of cost or net realizable value rule, the inventory of supplies would be valued at: A) $45,000 B) $54,000 C) $41,000 D) $60,000

A) $45,000

Inventory records for Herb's Chemicals revealed the following:March 1, 2024, inventory: 1,000 gallons @ $7.20 per gallon = $7,200 Purchases: Sales: March 10 600 gallons @ $7.25 March 5 400 gallons March 16 800 gallons @ $7.25 March 14 700 gallons March 23 600 gallons @ $7.25 March 20 500 gallons March 26 700 gallons Ending inventory assuming LIFO in a periodic inventory system would be: A) $5,040 B) $5,055 C) $5,075 D) $5,135

A) $5,040

Inventory records for Herb's Chemicals revealed the following:March 1, 2024, inventory: 1,000 gallons @ $7.20 per gallon = $7,200 Purchases: Sales: March 10 600 gallons @ $7.25 March 5 400 gallons March 16 800 gallons @ $7.30 March 14 700 gallons March 23 600 gallons @ $7.35 March 20 500 gallons March 26 700 gallons The ending inventory under a periodic inventory system assuming average cost is: A) $5,087 B) $5,107 C) $5,077 D) $5,005

A) $5,087

Inventory records for Herb's Chemicals revealed the following:March 1, 2024, inventory: 1,000 gallons @ $7.20 per gallon = $7,200 Purchases: Sales: March 10 600 gallons @ $7.25 March 5 400 gallons March 16 800 gallons @ $7.30 March 14 700 gallons March 23 600 gallons @ $7.35 March 20 500 gallons March 26 700 gallons The ending inventory assuming FIFO is: A) $5,140 B) $5,080 C) $5,060 D) $5,050

A) $5,140

Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2024: Cost Retail Beginning inventory 80,000 130,000 Net purchases 261,000 500,000 Net markups 25,000 Net markdowns 35,000 Net sales 520,000 The estimated ending inventory is: A) $55,000 B) $52,061 C) $57,311 D) $54,127

A) $55,000

As of December 31, 2023, Gill Company reported accounts receivable of $216,000 and an allowance for uncollectible accounts of $8,400. During 2024, accounts receivable increased by $22,000 (that change includes $7,800 of bad debts that were written off). An analysis of Gill Company's December 31, 2024, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2024 would be: A) $6,540 B) $7,800 C) $7,140 D) None of these answer choices are correct

A) $6,540

A company has determined its year-end inventory on a LIFO basis to be $600,000. Information pertaining to that inventory is as follows: Selling price 720,000 Costs to sell 30,000 Normal profit margin 80,000 Replacement cost 620,000 What should be the reported amount of the company's inventory? A) $600,000 B) $620,000 C) $690,000 D) $610,000

A) $600,000

A company uses the average cost retail method to estimate inventories. Data for the first six months of 2024 include: beginning inventory at cost and retail were $60,000 and $120,000, net purchases at cost and retail were $312,000 and $480,000, and sales during the first six months totaled $490,000. The estimated inventory at June 30, 2024, would be: A) $68,200 B) $55,000 C) $71,500 D) $63,250

A) $68,200

A company adopted dollar-value LIFO (DVL) as of January 1, 2024, when it had an inventory of $800,000. Its inventory as of December 31, 2024, was $811,200 at year-end costs and the cost index was 1.04. What was DVL inventory on December 31, 2024? A) $780,000 B) $800,000 C) $811,200 D) $832,000

A) $780,000

A company reported the following financial data for 2024 and 2023: 2024 / 2023 Sales 305,000 284,000 Sales returns and allowances 9,000 6,000 Net sales 296,000 278,000 Cost of goods sold: Inventory, January 1 43,000 36,000 Net purchases 152,000 146,000 Goods available for sale 195,000 182,000 Inventory, December 31 57,000 43,000 Cost of goods sold 138,000 139,000 Gross profit 158,000 139,000 The gross profit ratio in 2024 is: A) 53.4% B) 51.9%. C) 50.3% D) None of the other answer choices are correct

A) 53.4%

Clarabell Incorporated uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: Cost Retail Beginning inventory 112,000 191,000 Net purchases 402,000 703,000 Net markups 42,000 Net markdowns 21,000 Net sales 685,000 The conventional cost-to-retail percentage is: A) 54.9% B) 58.9% C) 53.6% D) 70.6%

A) 54.9%

Excerpts from Huckabee Company's December 31, 2024 and 2023, financial statements are presented below: 2024/2023 Accounts receivable 80,000/72,000 Merchandise inventory 58,000/72,000 Net sales 400,000/372,000 Cost of goods sold 240,000/220,000 Huckabee's 2024 average collection period (rounded) is: A) 69 days B) 116 days C) 111 days D) 73 days

A) 69 days

Data below for the year ended December 31, 2024, relates to Houdini Incorporated. Houdini started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Cost Retail Beginning inventory 66,000 104,000 Net purchases 280,000 220,000 Net markups 20,000 Net markdowns 40,000 Net sales 375,000 Current period cost-to-retail percentage is: A) 70.0% B) 68.7% C) 63.6% D) 63.5%

A) 70.0%

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2024. The notes included: - Note A: Dated 5/31/2024, principal of $120,000 and interest due 3/31/2025 - Note B: Dated 7/1/2024, principal of $200,000 and interest at 8% annually, due on 4/1/2025 Frankenstein had accrued a total of $14,400 interest receivable from these notes in its 12/31/2024 balance sheet. The annual interest rate on Note A is closest to: A) 9.14% B) 8.00% C) 9.74% D) 9.44%.

A) 9.14%

In a perpetual average cost system: A) A new weighted-average unit cost is calculated each time additional units are purchased B) The cost allocated to ending inventory is generally the same as it would be in a periodic inventory system C) The moving-average unit cost is determined following each sale D) The average is determined by dividing the total number of units sold by the cost of units purchased during the period

A) A new weighted-average unit cost is calculated each time additional units are purchased

When you use an aging schedule for estimating uncollectible accounts, bad debts expense is: A) A plug that is determined by the difference between the pre-adjustment balance and the necessary post-adjustment balance in the allowance for uncollectible accounts, and the necessary post-adjustment balance in the allowance for uncollectible accounts balance is calculated using the aging schedule B) A plug that is determined by the difference between the pre-adjustment balance and the necessary post-adjustment balance in accounts receivable C) Calculated using the aging schedule to determine the amount of bad debts that will occur, with that amount recognized as bad debts expense D) Calculated using the aging schedule as applied to the pre-adjustment and post-adjustment balances in the allowance for uncollectible accounts balance

A) A plug that is determined by the difference between the pre-adjustment balance and the necessary post-adjustment balance in the allowance for uncollectible accounts, and the necessary post-adjustment balance in the allowance for uncollectible accounts balance is calculated using the aging schedule

A company has the following information for the current year's operations: Cost Retail Beginning inventory 40,000 60,000 Purchases 400,000 660,000 Net markups 50,000 Net markdowns 10,000 Net sales 580,000 Management calculates the cost-to-retail percentage as 57.9%, equal to cost of $440,000 (= $40,000 + $400,000) divided by retail of $760,000 (= $60,000 + $660,000 + $50,000 − $10,000). Which application of the retail inventory method is the company using? A) Average cost B) LIFO C) Conventional D) Dollar-value LIFO

A) Average cost

The lower of cost or net realizable value method for inventory helps to: A) Avoid reporting inventory at an amount that exceeds the cash it can provide to the company B) Provide an alternative to the FIFO, LIFO, and weighted-average methods C) Prevent the company from selling the inventory below its original cost D) Prevent the company from selling inventory to customers who are not likely to pay

A) Avoid reporting inventory at an amount that exceeds the cash it can provide to the company

Compensating balances represent: A) Cash in a bank account that can't be spent B) Balances in a payroll checking account C) Accounts that are subject to bank service charges D) Accounts on which banks pay interest, e.g., NOW accounts.

A) Cash in a bank account that can't be spent

The practice of using the lower of cost or market to evaluate inventory reflects which of the following accounting principles? A) Conservatism B) Matching principle C) Revenue recognition D) Materiality

A) Conservatism

A company reported inventory in the 2023 year-end balance sheet, using the average cost method, as $342,000. In 2024, the company decided to change its inventory method to FIFO. If the company had used the FIFO method in 2023, ending inventory would have been $367,000. What adjustment would the company make for this change in inventory method? A) Debit Inventory for $25,000; Credit Retained earnings for $25,000 B) Debit Inventory for $367,000; Credit Cost of goods sold for $367,000 C) Debit Cost of goods sold for $25,000; Credit Inventory for $25,000 D) No adjustment is necessary

A) Debit Inventory for $25,000; Credit Retained earnings for $25,000

In the balance sheet at the end of its first year of operations, Dinty Incorporated reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.In Dinty's adjusting entry for bad debts at year-end, which of these would be included? A) Debit to bad debt expense for $114,000 B) Credit to allowance for uncollectible accounts for $82,000 C) Debit to accounts receivable for $32,000 D) All of these answer choices are correct

A) Debit to bad debt expense for $114,000

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District 45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for sales discounts. What entry would Oswego make on April 12? A) Debit: Accounts Receivable 46,000 Credit: Sales 46,000 B) Debit: Accounts Receivable 46,000 Credit: Sales 45,540 Credit: Sales Discount 460 C) Debit: Accounts Receivable 45,540 Credit: Sales 45,540 D) Debit: Accounts Receivable 45,540 Debit: Sales Discounts 460 Credit: Sales 46,000

A) Debit: Accounts Receivable 46,000 Credit: Sales 46,000

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for sales discounts.What entry would Cherokee make on November 10? A) Debit: Accounts Receivable 7,840 Credit: Sales 7,840 B) Debit: Accounts Receivable 8,000 Credit: Sales 8,000 C) Debit: Accounts Receivable 7,840 Debit: Sales Discounts 160 Credit: Sales 8,000 D) Debit: Accounts Receivable 8,000 Credit: Sales Discounts 160 Credit: Sales 7,840

A) Debit: Accounts Receivable 7,840 Credit: Sales 7,840

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for sales discounts.What entry would Cherokee make on November 17, assuming the correct payment was received on that date? A) Debit: Cash 7,840 Credit: Accounts Receivable 7,840 B) Debit: Cash 7,840 Debit: Sales Discounts 160 Credit: Accounts Receivable 8,000 C) Debit: Cash 7,840 Debit: Sales 160 Credit: Accounts Receivable 8,000 D) Debit: Cash 8,000 Debit: Sales Discounts 160 Credit: Accounts Receivable 8,000 Credit: Sales 160

A) Debit: Cash 7,840 Credit: Accounts Receivable 7,840

Plunder Incorporated accepted a six-month noninterest-bearing note for $2,800 on January 1, 2024. The note was accepted as payment of a delinquent receivable of $2,500.The cash collection on July 1, 2024, would be recorded as: A) Debit: Discount on Notes Receivable 300 Credit: Interest Revenue 300 Debit: Cash 2,800 Credit: Notes Receivable 2,800 B) Debit: Cash 2,800 Credit: Notes Receivable 2,800 C) Debit: Cash 2,800 Credit: Accounts Receivable 2,500 Credit: Interest Revenue 300 D) Debit: Cash 2,500 Credit: Discount on Notes Receivable 300 Credit: Notes Receivable 2,800

A) Debit: Discount on Notes Receivable 300 Credit: Interest Revenue 300 Debit: Cash 2,800

Chen Incorporated accepted a two-year noninterest-bearing note for $605,000 on January 1, 2024. The note was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%.The cash collection on December 31, 2025, would be recorded as: A) Debit: Discount on Notes Receivable 55,000 Credit: Interest Revenue 55,000 Debit: Cash 605,000 Credit: Notes Receivable 605,000 B) Debit: Cash 605,000 Credit: Notes Receivable 605,000 C) Debit: Cash 605,000 Credit: Notes Receivable 500,000 Credit: Discount on Notes Receivable 105,000 D) Debit: Discount on Notes Receivable 105,000 Credit: Interest Revenue 105,000 Debit: Cash 605,000 Credit: Notes Receivable 605,000

A) Debit: Discount on Notes Receivable 55,000 Credit: Interest Revenue 55,000 Debit: Cash 605,000 Credit: Notes Receivable 605,000

Long-term interest-bearing notes receivable issued at an unrealistically low interest rate will be: A) Discounted at an imputed interest rate B) Recorded at the contract amount C) Recorded at an amount equal to the future cash flows D) Accounted for on the installment basis

A) Discounted at an imputed interest rate

Long-term notes receivable issued for noncash assets at an unrealistically low interest rate will be: A) Discounted at an imputed interest rate B) Recorded at the contract amount C) Recorded at an amount equal to the future cash flows D) Accounted for on the installment basis

A) Discounted at an imputed interest rate

COSO defines internal control as a process, affected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in: A) Effectiveness and efficiency of operations B) Reliability of financial advice C) Compliance with local ordinances D) All of these answer choices are correct

A) Effectiveness and efficiency of operations

The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be: A) FIFO B) LIFO C) Weighted average D) None of the other answer choices are correct

A) FIFO

At the end of a reporting period, a company determines that its ending inventory has a cost greater than its replacement cost (market). What would be the effect(s) of the adjustment to write down inventory to market? A) Increase expenses B) Increase liabilities C) Decrease revenues D) Increase liabilities and decrease revenues

A) Increase expenses

In applying LCM, market cannot be: A) Less than net realizable value reduced by an allowance for an approximately normal profit margin B) Net realizable value less reasonable completion and disposal costs C) Greater than net realizable value reduced by an allowance for normal profit margin D) Less than cost

A) Less than net realizable value reduced by an allowance for an approximately normal profit margin

Under the LIFO retail method, the denominator in the cost-to-retail percentage includes: A) Net markups and net markdowns B) Neither net markups nor net markdowns C) Net markups, but not net markdowns D) Net markdowns, but not net markups

A) Net markups and net markdowns

When computing the cost-to-retail percentage for the average cost retail method, included in the denominator are: A) Net markups and net markdowns B) Neither net markups nor net markdowns C) Net markups, but not net markdowns D) Net markdowns, but not net markups

A) Net markups and net markdowns

Under the retail method, in determining the cost-to-retail percentage for the current year: A) Net markups are included B) Net markdowns are excluded C) Beginning inventory is excluded D) All of the other answer choices are correct

A) Net markups are included

A company understated its ending inventory in Year 1 by $25,000 and also understated its ending inventory in Year 2 by $20,000. Neither error was discovered until Year 3. As a result, of these two errors, gross profit for Year 2 was: A) Overstated by $5,000 B) Understated by $45,000 C) Understated by $20,000 D) Overstated by $25,000

A) Overstated by $5,000

Peecher accepted a three-year, noninterest-bearing note in exchange for merchandise sold. Which of the following is true? A) Peecher would credit a discount on notes receivable when recording the sale B) Peecher would debit interest revenue over the life of the note C) Peecher would debit notes receivable when the note is collected D) Peecher would multiply sales revenue by the effective interest rate to determine interest revenue each period

A) Peecher would credit a discount on notes receivable when recording the sale

In a periodic inventory system, the cost of purchases is debited to: A) Purchases B) Cost of goods sold C) Inventory D) Accounts payable

A) Purchases

Nontrade receivables do not include: A) Sales to customers B) Loans to employees C) Income tax refund receivable D) Advances to affiliated companies

A) Sales to customers

A company uses the periodic average cost method to account for inventory. For the year, the company had the following beginning inventory and purchases: Beginning inventory on Jan 1 100 units at $2,800 per unit Purchase on Mar 1 400 units at $3,000 per unit Purchase on Sept 1 800 units at $3,200 per unit Sales for the year totaled 1,000 units, leaving 300 units on hand at the end of the year. The company reported ending inventory for $900,000. Which of the following statements is correct? A) The amount reported for ending inventory is incorrect because management used a simple average instead of weighted-average to calculate the unit cost of inventory for the year B) The amount reported for ending inventory cannot be determined with the information given because the amount depends on which of the 1,000 units were assumed to be sold C) The amount reported for ending inventory is incorrect because the unit cost of ending inventory should be the average cost of the last 300 units purchased D) The amount reported for ending inventory is correct

A) The amount reported for ending inventory is incorrect because management used a simple average instead of weighted-average to calculate the unit cost of inventory for the year

In deciding whether financing with receivables is a secured borrowing or a sale under IFRS, the critical element is the extent to which the: A) Transferee has received substantially all the risks and rewards of ownership B) Age of the receivables transferred differs from the average age of the receivables C) Transferor of the receivable surrenders control over the assets transferred D) Transferee relies on assets received from the transferor to maintain operations

A) Transferee has received substantially all the risks and rewards of ownership

If a company uses LIFO, a LIFO liquidation causes a company's income taxes to increase: A) When inventory purchase costs are rising B) When inventory purchase costs are declining C) Whether inventory purchase costs are declining or rising D) LIFO liquidations have no effect on a company's income taxes

A) When inventory purchase costs are rising

Dollar-value LIFO: A) starts with ending inventory measured at current costs and re-creates LIFO layers for measuring inventory costs B) increases the recordkeeping costs of LIFO C) only is allowed for internal reporting purposes D) None of the other answer choices are correct

A) starts with ending inventory measured at current costs and re-creates LIFO layers for measuring inventory costs

Nu Company reported the following pretax data for its first year of operations. Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 25% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060 What is Nu's net income if it elects FIFO? A) $480 B) $360 C) $1,360 D) $180

B) $360

Fulbright Corporation uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): - 40 units at $100 per unit - 70 units at $80 per unit - 170 units at $60 per unit Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.In comparing the ending inventory balances of FIFO and LIFO, the ending inventory value under FIFO less the ending inventory balance under LIFO results in a difference of: A) $400 B) $(400) C) $0 D) $50

B) $(400)

Fulbright Corporation uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): - 40 units at $100 per unit - 70 units at $80 per unit - 170 units at $60 per unit Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.Ending inventory using the LIFO method is: A) $650 B) $1,000 C) $707 D) $600

B) $1,000

On June 1, Parson Association sold equipment to Arleo and agreed to accept a 3-month, $50,000, 10% interest-bearing note in payment at a time when the prevailing rate of interest for similar transactions was 10%. When the note was collected upon maturity, Parson would recognize interest revenue of: A) $0 B) $1,250 C) $2,500 D) $3,750

B) $1,250

Calistoga Produce estimates bad debt expense at 0.50% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2023. During 2024, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2024, is: A) $1,575 B) $1,505 C) $1,650 D) $1,720

B) $1,505

Northwest Fur Company started 2024 with $94,000 of inventory on hand. During 2024, $400,000 in inventory was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Inventory with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system.What is ending inventory assuming Northwest uses the gross method to record purchases? A) $112,490 B) $112,550 C) $116,500 D) $120,300

B) $112,550

On January 1, 2024, a company adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: Ending Inventory at Year-End Costs / Cost Index 2024 126,000 1.05 2025 143,000 1.10 2026 153,600 1.20 What inventory balance should the company report on its 12/31/2024 balance sheet? A) $126,000 B) $121,000 C) $120,000 D) $100,000

B) $121,000

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price: 180,000 / 140,000 / 120,000 / 60,000 Cost: 128,000 / 133,000 / 90,000 / 45,000 Replacement cost: 120,000 / 130,000 / 110,000 / 41,000 Sales commission 10% In applying the lower of cost or net realizable value rule, the inventory of skis would be valued at: A) $162,000 B) $128,000 C) $120,000 D) $180,000

B) $128,000

On January 1, 2024, a company adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: Ending Inventory at Year-End Costs / Cost Index 2024 126,000 1.05 2025 143,000 1.10 2026 153,600 1.20 What inventory balance would the company report on its 12/31/2026 balance sheet? A) $128,000 B) $129,800 C) $153,600 D) None of the other answer choices are correct

B) $129,800

Nu Company reported the following pretax data for its first year of operations. Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 25% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060 What is Nu's net income if it elects LIFO? A) $288 B) $180 C) $240 D) $480

B) $180

On July 10, 2024, a company signed a purchase commitment to purchase inventory for $200,000 on or before February 15, 2025. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2025, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $210,000. The market price of the inventory on December 31, 2024, was $180,000. The company uses a perpetual inventory system.How much loss on purchase commitment will the company recognize in 2024? A) $10,000 B) $20,000 C) $30,000 D) None

B) $20,000

In the balance sheet at the end of its first year of operations, Dinty Incorporated reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.What accounts receivable balance would Dinty report in its first year-end balance sheet? A) $196,000 B) $218,000 C) $230,000 D) None of these answer choices are correct

B) $218,000

Mogul Company ships inventory to Ski Outfit in a consignment arrangement. The arrangement specifies that Ski Outfit will attempt to sell the inventory, and in return, Mogul will pay to Ski Outfit a commission of 20% of the selling price on any inventory sold. During the year, Mogul ships inventory with a cost of $80,000 to Ski Outfit and pays shipping costs of $8,000. By the end of the year, $60,000 of the inventory has been sold to customers for a total of $85,000. Mogul allocates $6,000 of the shipping costs to inventory sold and the other $2,000 to inventory not sold. Mogul also paid advertising costs during the year of $10,000. What amount of inventory will Mogul report at year end? A) $20,000 B) $22,000 C) $42,000 D) $52,000

B) $22,000

Harvey's Junk Jewelry started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2024: Cost Retail Beginning inventory 15,000 23,000 Purchases 49,000 78,000 Freight-in 2,500 Purchase returns 1,700 2,600 Net markups 2,000 Net markdowns 4,100 Net sales 70,600 Employee discounts 700 The estimated ending inventory at retail is: A) $27,300 B) $25,000 C) $26,600 D) $26,400

B) $25,000

Nu Company reported the following pretax data for its first year of operations. Net sales 7,340 Cost of goods available for sale 5,790 Operating expenses 1,728 Effective tax rate 25% Ending inventories: If LIFO is elected 616 If FIFO is elected 798 What is Nu's net income if it elects LIFO? A) $440 B) $330 C) $620 D) $465

B) $330

A company uses the average cost retail method to estimate inventories. Data for the first six months of 2024 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated inventory at June 30, 2024, would be: A) $330,000 B) $360,000 C) $362,300 D) None of the other answer choices are correct

B) $360,000

As of January 1, 2024, Barley Company had a credit balance of $520,000 in its allowance for uncollectible accounts. Based on experience, 2% of Barley's gross accounts receivable have been uncollectible. During 2024, Barley wrote off $650,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2024 is $18,000,000.In its December 31, 2024, balance sheet, what amount should Barley report as allowance for uncollectible accounts? A) $230,000 B) $360,000 C) $490,000 D) $880,000

B) $360,000

Inventory records for Herb's Chemicals revealed the following:March 1, 2024, inventory: 1,000 gallons @ $7.20 per gallon = $7,200 Purchases: Sales: March 10 600 gallons @ $7.25 March 5 400 gallons March 16 800 gallons @ $7.30 March 14 700 gallons March 23 600 gallons @ $7.35 March 20 500 gallons March 26 700 gallons Ending inventory assuming LIFO in a perpetual inventory system would be: A) $4,960 B) $5,060 C) $5,080 D) $5,140

B) $5,060

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at: A) $5,940 B) $5,880 C) $6,000 D) $6,120

B) $5,880

Harlequin Company adopted the dollar-value LIFO retail method at the beginning of 2024 (its base year). Its beginning inventory for 2024 was $36,000 at cost and $72,000 at retail prices. At the end of 2024, it computed its estimated ending inventory at retail to be $110,000. Assuming its cost-to-retail percentage for 2024 transactions was 60%, and that the retail price index at the end of 2024 was 1.10, what is the inventory balance that Harlequin Company would report in its 12/31/2024 balance sheet? A) $66,000 B) $54,480 C) $110,000 D) $60,000

B) $54,480

Wilson Company had the following cash balance items listed in its trial balance at 12/31/2024: Peterson Savings and Loan: 50,000 Right Bank: (5,000) Clinton County Trust Bank: 10,000 If Wilson reports under IFRS, its 12/31/2024 balance sheet would show what cash balance? A) ($5,000) B) $55,000 C) $60,000 D) None of these answer choices are correct

B) $55,000

Rusty Hardware makes only cash sales. It began 2024 with a credit balance of $32,000 in the refund liability account. Sales during 2024 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2024, customers returned merchandise for credit of $28,000 to their accounts.Rusty's 2024 income statement would report net sales of: A) $600,000 B) $564,000 C) $568,000 D) $604,000

B) $564,000

A company adopted dollar-value LIFO (DVL) as of January 1, 2024, when it had a cost inventory of $600,000. Its inventory as of December 31, 2024, was $667,800 at year-end costs and the cost index was 1.06. What was DVL inventory on December 31, 2024? A) $630,000 B) $631,800 C) $636,000 D) None of the other answer choices are correct

B) $631,800

A company's inventory was destroyed by a hurricane on August 5, 2024. At January 1, the company reported an inventory of $170,000. Sales from January 1, 2024, to August 5, 2024, totaled $480,000 and purchases totaled $195,000 during that time. The company consistently marks up its products 60% over cost to arrive at a selling price. The estimated inventory loss due to the hurricane would be: A) $131,175 B) $65,000 C) $69,000 D) None of the other answer choices are correct

B) $65,000

Harvey's Junk Jewelry started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2024: Cost Retail Beginning inventory 15,000 23,000 Purchases 49,000 78,000 Freight-in 2,500 Purchase returns 1,700 2,600 Net markups 2,000 Net markdowns 4,100 Net sales 70,600 Employee discounts 700 The denominator for the current period's cost-to-retail percentage is: A) $96,300 B) $73,300 C) $101,000 D) $81,500

B) $73,300

Data below for the year ended December 31, 2024, relates to Houdini Incorporated. Houdini started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Cost Retail Beginning inventory 66,000 104,000 Net purchases 280,000 220,000 Net markups 20,000 Net markdowns 40,000 Net sales 375,000 Estimated ending inventory at cost is: A) $90,720 B) $83,500 C) $91,600 D) None of the other answer choices are correct

B) $83,500

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price: 180,000 / 140,000 / 120,000 / 60,000 Cost: 128,000 / 133,000 / 90,000 / 45,000 Replacement cost: 120,000 / 130,000 / 110,000 / 41,000 Sales commission 10% In applying the lower of cost or net realizable value rule, the inventory of apparel would be valued at: A) $108,000 B) $90,000 C) $110,000 D) $99,000

B) $90,000

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price 180,000 / 150,000 / 120,000 / 60,000 Cost 128,000 / 133,000 / 90,000 / 48,000 Replacement cost 120,000 / 130,000 / 110,000 / 50,000 Sales commission 10% Normal gross profit ratio 20% / 20% / 15% / 15% In applying the lower of cost or market rule, the inventory of apparel would be valued at: A) $108,000 B) $90,000 C) $110,000 D) $115,000

B) $90,000

The following information relates to Halloran Company's accounts receivable for 2024: Accounts receivable balance, 1/1/2024 $ 840,000 Credit sales for 2024 3,300,000 Accounts receivable written off during 2024 70,000 Collections from customers during 2024 3,100,000 Allowance for uncollectible accounts balance 210,000 What amount should Halloran report for accounts receivable, before allowances, at December 31, 2024? A) $1,040,000 B) $970,000 C) $760,000 D) None of these answer choices are correct

B) $970,000

A company reported the following financial data for 2024 and 2023: 2024 / 2023 Sales 305,000 284,000 Sales returns and allowances 9,000 6,000 Net sales 296,000 278,000 Cost of goods sold: Inventory, January 1 43,000 36,000 Net purchases 152,000 146,000 Goods available for sale 195,000 182,000 Inventory, December 31 57,000 43,000 Cost of goods sold 138,000 139,000 Gross profit 158,000 139,000 The inventory turnover ratio for 2024 is: A) 2.42 B) 2.76 C) 3.21 D) None of the other answer choices are correct

B) 2.76

Benny's Bed Company uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of September 2024. Cost Retail Beginning inventory 30,000 50,000 Net purchases 125,000 220,000 Net markups 15,000 Net markdowns 6,000 Net sales 208,000 The average cost-to-retail percentage (rounded) is: A) 74.5% B) 55.6% C) 57.4% D) 58.7%

B) 55.6%

San Mateo Company had the following account balances at December 31, 2024, before recording bad debt expense for the year: Accounts receivable $ 1,400,000 Allowance for uncollectible accounts (credit balance) 22,000 Credit sales for 2024 1,950,000 San Mateo is considering the following approaches for estimating bad debts for 2024 - Based on 3% of credit sales - Based on 6% of year-end accounts receivable What amount should San Mateo charge to bad debt expense at the end of 2024 under each method? % of Credit Sales / % of Accounts Receivable A) 36,500 / 62,000 B) 58,500 / 62,000 C) 58,500 / 84,000 D) 117,000 / 95,000

B) 58,500 / 62,000

Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: Cost Retail Beginning inventory 46,000 63,000 Net purchases 154,000 215,000 Net markups 22,000 Net markdowns 35,000 Net sales 220,000 The conventional cost-to-retail percentage is: A) 82.6% B) 66.7% C) 71.9% D) 75.5%

B) 66.7%

On July 1, 2024, Cromartie Furniture established a $150 petty cash fund. A check for $150 was made out to the petty cash custodian. During July, the petty cash custodian paid the following bills from the petty cash fund: Office supplies 36 Postage 22 Delivery charges 40 Bottled water 28 Total 126 At the end of July the petty cash fund was replenished.The journal entry to establish the petty cash fund includes: A) A credit to petty cash and a debit to cash for $150 B) A debit to petty cash and a credit to cash for $150 C) A credit to cash and a debit to various expenses for $126 D) A credit to petty cash and a debit to various expenses for $126

B) A debit to petty cash and a credit to cash for $150

A note receivable Mild Max Cycles discounted with recourse was dishonored on its maturity date. Mild Max would debit: A) A loss on dishonored receivable B) A receivable C) Dishonored note expense D) Interest expense

B) A receivable

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in: A) Accounts receivable B) Allowance for uncollectible accounts C) Bad debts expense D) Retained earnings

B) Allowance for uncollectible accounts

In a perpetual inventory system, which of the following is recorded at the time of the sale? A) Sales revenue only B) Both sales revenue and cost of goods sold C) Cost of goods sold only D) Neither sales revenue nor cost of goods sold

B) Both sales revenue and cost of goods sold

Assume a company has been maintaining a receivables factoring program for the past five years and has been experiencing the same level of sales, factoring, and bad debts over that period. Customers typically pay their receivables within 60 days. Which of the following is true with respect to the current period (all else equal)? A) The accounts receivable balance will decrease B) Cash flow from operations is stable C) Net income is likely to decline D) Accounts receivable payable within 60 days cannot be factored

B) Cash flow from operations is stable

If a company adopts an accounts receivable factoring program, and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal)? A) The accounts receivable balance will increase B) Cash flow from operations may increase C) A retroactive restatement is necessary due to a change in accounting principle D) The factoring arrangement needs to be with a consolidated entity to qualify for sale accounting

B) Cash flow from operations may increase

Using the dollar-value LIFO retail method for inventory: A) Is the same as dollar-value LIFO, except that the inventory is measured at retail, rather than at cost B) Combines retail LIFO accounting with dollar-value LIFO accounting C) Allows companies to report inventory on the balance sheet at retail prices D) All of the other answer choices are correct

B) Combines retail LIFO accounting with dollar-value LIFO accounting

The allowance for uncollectible accounts is a: A) Deferred charge to expense B) Contra asset account C) Deferred revenue account D) Quasi-liability account

B) Contra asset account

The largest expense on a retailer's income statement is typically: A) Salaries and wages B) Cost of goods sold C) Income tax expense D) Depreciation expense

B) Cost of goods sold

If a company understates its ending balance of inventory in Year 1 and it reports inventory correctly in Year 2, which one of the following is true? A) Net income is overstated in Year 1 B) Cost of goods sold is understated in Year 2 C) Net income is understated in Year 2 D) Retained earnings is understated in Year 2

B) Cost of goods sold is understated in Year 2

A journal entry to record receipt of interest on an interest-bearing notes receivable will include a: A) Credit to cash B) Credit to interest revenue C) Debit to notes receivable D) Debit to bad debt expense

B) Credit to interest revenue

During 2024, its first year of operations, Ashbaugh Industries recorded sales of $21,000,000 and experienced returns of $1,400,000. Returns are accounted for as they occur, with additional estimated returns accrued at the end of the period. Cost of goods sold totaled $12,600,000 (60% of sales). The company estimates that 8% of all sales will be returned. The year-end adjusting journal entry to account for anticipated sales returns would include a: A) Credit to sales returns of $280,000 B) Credit to refund liability of $280,000 C) Debit to sales returns of $1,680,000 D) Debit to cost of sales of $168,000

B) Credit to refund liability of $280,000

A company reported inventory in the 2023 year-end balance sheet, using the FIFO method, as $185,000. In 2024, the company decided to change its inventory method to average cost. If the company had used the average cost method in 2023, ending inventory would have been $171,000. What adjustment would the company make for this change in inventory method? A) Debit Inventory for $14,000; Credit Cost of goods sold for $14,000 B) Debit Retained earnings for $14,000; Credit Inventory for $14,000 C) Debit Retained earnings for $14,000; Credit Cost of goods sold for $14,000 D) No adjustment is necessary

B) Debit Retained earnings for $14,000; Credit Inventory for $14,000

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for sales discounts.What is the correct entry for Flores on November 10? A) Debit: Accounts Receivable 7,840 Credit: Sales 7,840 B) Debit: Accounts Receivable 8,000 Credit: Sales 8,000 C) Debit: Accounts Receivable 7,840 Debit: Sales Discounts 160 Credit: Sales 8,000 D) Debit: Accounts Receivable 8,000 Credit: Sales Discounts 160 Credit: Sales 7,840

B) Debit: Accounts Receivable 8,000 Credit: Sales 8,000

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for sales discounts.What entry would Harvey's make on June 10, assuming the customer made the correct payment on that date? A) Debit: Cash 46,000 Credit: Accounts Receivable 45,540 Credit: Sales Discounts Revenue 460 B) Debit: Cash 46,000 Credit: Accounts Receivable 45,540 Credit: Sales Discounts Forfeited 460 C) Debit: Cash 46,000 Credit: Accounts Receivable 46,000 D) Debit: Cash 46,460 Credit: Accounts Receivable 46,000 Credit: Sales Discounts Forfeited 460

B) Debit: Cash 46,000 Credit: Accounts Receivable 45,540 Credit: Sales Discounts Forfeited 460

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for sales discounts.What is the correct entry for Flores on November 17, assuming the correct payment was received on that date? A) Debit: Cash 7,840 Credit: Accounts Receivable 7,840 B) Debit: Cash 7,840 Debit: Sales Discounts 160 Credit: Accounts Receivable 8,000 C) Debit: Cash 7,840 Debit: Sales 160 Credit: Accounts Receivable 8,000 D) Debit: Cash 8,000 Debit: Sales Discounts 160 Credit: Accounts Receivable 8,000 Credit: Sales 160

B) Debit: Cash 7,840 Debit: Sales Discounts 160 Credit: Accounts Receivable 8,000

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for sales discounts.What entry would Cherokee make on December 10, assuming the correct payment was received on that date? A) Debit: Cash 8,000 Credit: Accounts Receivable 7,840 Credit: Discounts Revenue 160 B) Debit: Cash 8,000 Credit: Accounts Receivable 7,840 Credit: Sales Discounts Forfeited 160 C) Debit: Cash 8,160 Credit: Accounts Receivable 7,840 Credit: Sales Discounts Forfeited 160 D) Debit: Cash 8,000 Credit: Accounts Receivable 8,000

B) Debit: Cash 8,000 Credit: Accounts Receivable 7,840 Credit: Sales Discounts Forfeited 160

Plunder Incorporated accepted a six-month noninterest-bearing note for $2,800 on January 1, 2024. The note was accepted as payment of a delinquent receivable of $2,500.What is the correct entry to record the note? A) Debit: Notes Receivable 2,500 Credit: Accounts Receivable 2,500 B) Debit: Notes Receivable 2,800 Credit: Accounts Receivable 2,500 Credit: Discount on Notes Receivable 300 C) Debit: Notes Receivable 2,800 Credit: Reserve for Delinquent Accounts 2,500 Credit: Allowance for Bad Debts 300 D) Debit: Notes Receivable 2,800 Credit: Accounts Receivable 2,500 Credit: Gain on Delinquent Accounts 300

B) Debit: Notes Receivable 2,800 Credit: Accounts Receivable 2,500 Credit: Discount on Notes Receivable 300

Which of the following would not require the company to account for the change retrospectively? A) From average cost to FIFO B) From FIFO to LIFO C) From LIFO to FIFO D) From LIFO to average cost

B) From FIFO to LIFO

Cash equivalents do not include: A) Money market funds B) High grade marketable equity securities C) U.S. treasury bills D) Commercial paper

B) High grade marketable equity securities

Which of the following statements is(are) true? A) In a period of rising costs and stable inventory levels, using the LIFO method leads to a lower taxable income and higher net income compared to the FIFO method B) In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method C) In a period of falling costs and stable inventory levels, cost of goods sold is the same under LIFO and FIFO D) All of the other answer choices are true

B) In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method

Cash that is restricted in some way and not available for current operations usually is reported in the balance sheet as: A) Equity B) Investments or other assets C) Liabilities D) A separate section between liabilities and equity

B) Investments or other assets

When reported in financial statements, a LIFO allowance account usually: A) Is shown in the firm's income statement B) Is added to LIFO cost to indicate what the inventory would cost on a FIFO basis C) Indicates the effect on income if LIFO were not used D) Shows the current rate of inflation for that asset

B) Is added to LIFO cost to indicate what the inventory would cost on a FIFO basis

Management has adopted a policy of reporting its unsold inventory at the end of each year at the lower of FIFO cost or the most recent selling price of that inventory in the current year. Which of the following statements is correct? A) Management should instead choose the higher of the two amounts to report inventory B) Management should instead compare the inventory's cost to an estimate of its selling price in the next year C) Management's policy is acceptable D) Management should instead report inventory at the lower of cost or market value based on replacement cost

B) Management should instead compare the inventory's cost to an estimate of its selling price in the next year

A company has the following information available that was used to report inventory using the dollar-value LIFO method. Year-End Cost / Cost Index 12/31/2023 320,000 1.05 12/31/2024 347,000 1.08 For the year ended 12/31/2024, the company reported ending inventory at its year-end cost of $347,000. Which of the following statements is correct? A) The company should have multiplied $347,000 by 1.08 to determine ending inventory B) Most of the ending inventory should be reported at a cost index of 1.05, with the remainder at 1.08 C) The company should have divided $347,000 by 1.05 to determine ending inventory D) Most of the ending inventory should be reported at a cost index of 1.08, with the remainder at 1.05

B) Most of the ending inventory should be reported at a cost index of 1.05, with the remainder at 1.08

Under International Financial Reporting Standards (IFRS), inventory is valued at the lower of cost or: A) Replacement cost B) Net realizable value C) Net realizable value reduced by a normal profit margin D) None of these answer choices are correct

B) Net realizable value

A company has the following information related to its ending inventory: FIFO / LIFO 12/31/2023 400,000 300,000 12/31/2024 480,000 350,000 The company makes an adjusting entry with a debit to Cost of Goods Sold and a credit to LIFO Reserve for $130,000 at the end of 2024 ($480,000 − $350,000). Which of the following statements is correct? A) The company should instead debit the LIFO Reserve B) The adjusting entry should instead be made for $30,000 C) Cost of goods sold is higher under LIFO than under FIFO by $130,000 in 2024 D) Two of the other answers are correct

B) The adjusting entry should instead be made for $30,000

A company uses the periodic FIFO method to account for inventory. For the year, the company had the following beginning inventory and purchases: Beginning inventory on Jan 1 100 units at $2,800 per unit Purchase on Mar 1 400 units at $3,000 per unit Purchase on Sept 1 800 units at $3,200 per unit Sales for the year totaled 1,000 units, leaving 300 units on hand at the end of the year. The company reported cost of goods sold as $3,120,000 [(400 units @ $3,000) + (600 units @ $3,200)]. Which of the following statements is correct? A) The amount reported for cost of goods sold is incorrect because it assumes the units sold based on a perpetual system instead of a periodic system B) The amount reported for cost of goods sold is incorrect because the units assumed sold would first include those in beginning inventory C) The amount reported for cost of goods sold is incorrect because the units assumed sold would include all of those purchased on September 1 D) The amount reported for cost of goods sold is correct

B) The amount reported for cost of goods sold is incorrect because the units assumed sold would first include those in beginning inventory

The lower of cost or market rule causes losses in the value of inventory to be recognized in the period when: A) The inventory is purchased B) The market value of inventory declines below cost C) Cash collection from the customer fails to occur D) The inventory is sold

B) The market value of inventory declines below cost

A company does not include in ending inventory any goods that have been shipped to consignees to be sold on consignment. The company has a policy of removing those goods from the inventory records at the time of shipment. Which of the following is an accurate statement regarding the company's policy? A) The policy is correct if management believes it is probable the inventory will be sold within the next year B) The policy is not correct because the company has title to consignment goods until those goods are sold to a third-party customer C) The policy is correct if the current selling price of inventory is above its original purchase cost D) The policy is not correct because inventory is recorded at fair value, and fair value is not known until those goods are sold

B) The policy is not correct because the company has title to consignment goods until those goods are sold to a third-party customer

A company using the conventional retail method has the following information for the current year's operations: Cost Retail Beginning inventory 100,000 150,000 Net purchases 500,000 800,000 Net markups 85,000 Net markdowns 35,000 Net sales 750,000 Management calculates the cost-to-retail percentage as 60%, equal to cost of $600,000 (= $100,000 + $500,000) divided by retail of $1,000,000 (= $150,000 + $800,000 + $85,000 − $35,000). Which of the following statements is correct? A) The cost-to-retail percentage should be calculated as cost of $600,000 divided by retail of $750,000 (Net sales) B) The retail amount should be $1,035,000, excluding net markdowns C) The cost and retail amounts should not include beginning inventory of $100,000 and $150,000, respectively D) The retail amount should be $950,000, excluding net markups and net markdowns

B) The retail amount should be $1,035,000, excluding net markdowns

Suppose a company overstates its ending inventory in the current year. What effect will this have on the reported amount of cost of goods sold in the current year? A) Overstate cost of goods sold B) Understate cost of goods sold C) No effect on cost of goods sold D) Cannot be determined without knowing the amount of the error

B) Understate cost of goods sold

A company's estimate of inventory that will be returned by customers should be: A) included in inventory at an amount equal to the selling price of the inventory B) included in inventory at an amount equal to the cost of the inventory C) excluded from inventory but deducted from sales revenue and accounts receivable D) None of the other answer choices are correct.

B) included in inventory at an amount equal to the cost of the inventory

One difference between periodic and perpetual inventory systems is that cost of goods sold is: A) not recorded under a perpetual system until the end of the period B) not recorded under a periodic system until the end of the period C) always significantly higher under a perpetual system D) always significantly higher under a periodic system

B) not recorded under a periodic system until the end of the period

A company sells inventory that is subject to a great deal of price volatility. A recent item of inventory that cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation of $3. The latest selling price is: A) $23 B) $26 C) $29 D) $35

C) $29

The practice of using the lower of cost or net realizable value to evaluate inventory reflects which of the following accounting principles? A) Matching principle B) Revenue recognition C) Conservatism D) Materiality

C) Conservatism

In the balance sheet at the end of its first year of operations, Dinty Incorporated reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.What bad debt expense would Dinty report in its first-year income statement? A) $50,000 B) $82,000 C) $114,000 D) Cannot be determined from the given information

C) $114,000

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price: 180,000 / 140,000 / 120,000 / 60,000 Cost: 128,000 / 133,000 / 90,000 / 45,000 Replacement cost: 120,000 / 130,000 / 110,000 / 41,000 Sales commission 10% In applying the lower of cost or net realizable value rule, the inventory of boots would be valued at: A) $140,000 B) $133,000 C) $126,000 D) $130,000

C) $126,000

Clarabell Incorporated uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: Cost Retail Beginning inventory 112,000 191,000 Net purchases 402,000 703,000 Net markups 42,000 Net markdowns 21,000 Net sales 685,000 Estimated ending inventory using the conventional retail method is: A) $136,006 B) $132,812 C) $126,717 D) $129,622

C) $126,717

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price 180,000 / 150,000 / 120,000 / 60,000 Cost 128,000 / 133,000 / 90,000 / 48,000 Replacement cost 120,000 / 130,000 / 110,000 / 50,000 Sales commission 10% Normal gross profit ratio 20% / 20% / 15% / 15% In applying the lower of cost or market rule, the inventory of boots would be valued at: A) $135,000 B) $133,000 C) $130,000 D) $105,000

C) $130,000

A company has four types of products in its inventory as shown below: Product / Quantity / Cost / Net Realizable Value A 15 7 10 B 10 18 12 C 20 8 6 D 15 11 15 Products A and B are one category of inventory, and Products C and D are one category. When accounting for the lower of cost or net realizable value by category, the year-end adjustment to write down inventory would be: A) $100 B) $55 C) $15 D) $0

C) $15

Frasquita acquired equipment from the manufacturer on 6/30/2024 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/2025 to satisfy the obligation in full.If Frasquita accrued interest of $15,000 on the note in its 2024 year-end financial statements, what would the manufacturer record in its 2024 income statement for this transaction? A) $15,000 of interest revenue B) $25,000 of interest revenue C) $15,000 of interest revenue and $525,000 of sales revenue D) $550,000 of sales revenue

C) $15,000 of interest revenue and $525,000 of sales revenue

Data related to the inventories of Costco Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price: 260 / 100 / 340 / 165 Cost: 170 / 90 / 250 / 162 Costs to sell: 30 / 15 / 25 / 10 In applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at: A) $230 B) $240 C) $170 D) $152

C) $170

Data related to the inventories of Kimzey Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price 260 / 120 / 340 / 165 Cost 170 / 90 / 250 / 162 Replacement cost 240 / 80 / 235 / 158 Costs to sell 30 / 5 / 25 / 10 Normal gross profit ratio 30% / 30% / 30% / 20% In applying the lower of cost or market rule, the inventory of surgical equipment would be valued at: A) $230 B) $240 C) $170 D) $152

C) $170

On July 10, 2024, a company signed a purchase commitment to purchase inventory for $200,000 on or before February 15, 2025. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2025, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $210,000. The market price of the inventory on December 31, 2024, was $180,000. The company uses a perpetual inventory system.At what amount will the company record the inventory purchased on February 1, 2025? A) $210,000 B) $200,000 C) $180,000 D) $190,000.

C) $180,000

On January 1, 2024, the Coldstone Corporation adopted the dollar-value LIFO retail inventory method. Beginning inventory at cost and at retail were $180,000 and $282,000, respectively. Net purchases during the year at cost and at retail were $604,500 and $920,000, respectively. Markups during the year were $10,000. There were no markdowns. Net sales for 2024 were $900,000. The retail price index at the end of 2024 was 1.04. What is the inventory balance that Coldstone would report in its 12/31/2024 balance sheet? A) $195,000 B) $312,000 C) $192,168 D) $202,800

C) $192,168

The Nile Group is owed $1,000,000 by Scorpion Enterprises under an 8% note with three years remaining to maturity. The prior year of interest was unpaid. Nile estimates credit losses with respect to this receivable and calculates that it will only receive amounts equal to a present value of $880,000. The journal entry that O'Hara would make to record this transaction would include a credit loss as bad debt expense in the amount of: A) $0 B) $80,000 C) $200,000 D) $220,000

C) $200,000

The O'Hara Group is owed $1,000,000 by Hilton Enterprises under an 8% note with three years remaining to maturity. The prior year of interest was unpaid. O'Hara agrees to restructure the note under terms that yield a present value of $880,000. The journal entry that O'Hara would make to record this transaction would include a loss on troubled debt restructuring as bad debt expense in the amount of: A) $0 B) $80,000 C) $200,000 D) $220,000

C) $200,000

A company suffered a fire loss on April 20, 2024. The company's last physical inventory was taken January 30, 2024, at which time the inventory totaled $220,000. Sales from January 30 to April 20 were $600,000 and purchases during that time were $450,000. The company consistently reports a 30% gross profit. The estimated inventory loss is: A) $490,000 B) $238,000 C) $250,000 D) None of the other answer choices are correct

C) $250,000

A company using the conventional retail method has the following information for the current year's operations: Cost Retail Beginning inventory 313,000 540,000 Net markups 30,000 Net markdowns 20,000 Net sales 480,000 What amount should be reported as cost of goods sold for the year? A) $273,600 B) $272,861 C) $275,000 D) None of the other answer choices are correct

C) $275,000

An argument against use of the lower of cost or net realizable value rule is its lack of: A) Relevance B) Reliability C) Consistency D) Objectivity

C) Consistency

For 2024, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2023. During 2024, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off.Rahal's final balance in its allowance for uncollectible accounts at December 31, 2024, is: A) $4,340 B) $4,100 C) $3,800 D) $4,040

C) $3,800

Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2024, Chez Fred's credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2024, if $180 in accounts receivable were written off during 2024 and if the allowance account had a balance of $750 on December 31, 2024? A) $5,820 B) $31,000 C) $31,180 D) None of these answer choices are correct

C) $31,180

Cinnamon Buns Company (CBC) started 2024 with $52,000 of inventory on hand. During 2024, $280,000 in inventory was purchased on account with credit terms of 2/10, n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $9,000. Inventory with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $316,000. CBC uses a perpetual inventory system.What is cost of goods available for sale, assuming CBC uses the gross method? A) $312,480 B) $326,000 C) $331,480 D) $337,000

C) $331,480

Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2024. The note, along with interest at 6%, is due on June 30, 2025. On September 30, 2024, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank? A) $40,600 B) $36,000 C) $39,220 D) $36,820

C) $39,220

A company through no fault of its own, lost an entire building due to an earthquake on May 1, 2024. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2024, $300,000; sales and purchases from January 1, 2024, to May 1, 2024, $1,300,000 and $875,000, respectively. The company consistently reports a 40% gross profit. The estimated inventory on May 1, 2024, is: A) $302,500 B) $360,000 C) $395,000 D) $455,000

C) $395,000

A company's inventory on December 31, 2024, was $325,000 based on a physical count priced at cost, and before any necessary adjustment for the following: - Inventory costing $30,000, shipped f.o.b. shipping point from a vendor on December 30, 2024, was received on January 5, 2025. - Inventory costing $22,000, shipped f.o.b. destination from a vendor on December 28, 2024, was received on January 3, 2025. - Inventory costing $38,000 was shipped to a customer f.o.b. destination on December 28, arrived at the customer's location on January 6, 2025. - Inventory costing $12,000 was being held on consignment by Traynor Company What amount should the company report as inventory in its December 31, 2024, balance sheet? A) $367,000 B) $427,000 C) $405,000 D) $325,000

C) $405,000

False Value Hardware began 2024 with a credit balance of $32,000 in the refund liability account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2024, customers returned merchandise for credit of $28,000 to their accounts.What is the balance in the refund liability account at the end of 2024? A) $11,000 B) $39,000 C) $43,000 D) $21,000

C) $43,000

Calistoga Produce estimates bad debt expense at 0.50% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2023. During 2024, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.Calistoga's accounts receivable at December 31, 2024, are: A) $467,000 B) $473,280 C) $465,280 D) $469,280

C) $465,280

The following aging information pertains to Jacobsen Company's accounts receivable at December 31, 2024: Days Outstanding/Amount/Estimated % Uncollectible 0-30/$ 420,000/2% 31-60/140,000/5% 61-120/100,000/10% Over 120/120,000/20% During 2024, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2023, allowance for uncollectible accounts was $40,000. Using the balance sheet approach, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2024? A) $55,400 B) $28,000 C) $49,400 D) $31,400

C) $49,400

As of January 1, 2024, Barley Company had a credit balance of $520,000 in its allowance for uncollectible accounts. Based on experience, 2% of Barley's gross accounts receivable have been uncollectible. During 2024, Barley wrote off $650,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2024 is $18,000,000.How much bad debt expense should Barley record for 2024? A) $230,000 B) $360,000 C) $490,000 D) $880,000

C) $490,000

As of December 31, 2024, Amy Jo's Appliances had unadjusted account balances in accounts receivable of $311,000 and $970 in the allowance for uncollectible accounts, following 2024 write-offs of $6,450 in bad debts. An analysis of Amy Jo's December 31, 2024, accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for 2024 should be: A) $6,220 B) $6,450 C) $5,250 D) None of these answer choices are correct

C) $5,250

A company adopted dollar-value LIFO on January 1, 2024, when the inventory value was $500,000 and the cost index was 1.0. On December 31, 2024, the inventory value at year-end costs was $535,000 and the cost index was 1.06. The company would report a LIFO inventory of: A) $504,717 B) $530,000 C) $505,000 D) $533,019

C) $505,000

A company has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: Selling price 620,000 Costs to sell 30,000 Replacement cost 520,000 What should be the reported amount of the company's inventory? A) $600,000 B) $520,000 C) $590,000 D) $620,000

C) $590,000

Wilson Company had the following cash balance items listed in its trial balance at 12/31/2024: Peterson Savings and Loan: 50,000 Right Bank: (5,000) Clinton County Trust Bank: 10,000 If Wilson reports under U.S. GAAP, its 12/31/2024 balance sheet would show what cash balance? A) ($5,000) B) $55,000 C) $60,000 D) None of these answer choices are correct

C) $60,000

Fulbright Corporation uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): - 40 units at $100 per unit - 70 units at $80 per unit - 170 units at $60 per unit Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.Ending inventory using the average cost method (rounded) is: A) $650 B) $1,000 C) $707 D) $600

C) $707

A company adopted dollar-value LIFO (DVL) as of January 1, 2024, when it had an inventory of $700,000. Its inventory as of December 31, 2024, was $777,000 at year-end costs and the cost index was 1.05. What was DVL inventory on December 31, 2024? A) $735,000 B) $740,000 C) $742,000 D) $777,000

C) $742,000

The Salamander Company has evaluated its receivables, and has identified the following possible credit losses: - Note 1 has recently deteriorated in credit quality. For Note 1, Salamander estimates the present value of credit losses occurring in the next twelve months is $50,000, and the present value of credit losses occurring after twelve months is $20,000. - Note 2 has not deteriorated in credit quality. For Note 2, Salamander estimates the present value of credit losses occurring in the next twelve months is $5,000, and the present value of credit losses occurring after twelve months is $10,000 If Salamander is reporting under IFRS and therefore uses the ECL model, it would recognize a bad debt expense of: A) $50,000 B) $55,000 C) $75,000 D) $85,000

C) $75,000

A company has determined its year-end inventory on a FIFO basis to be $785,000. Information pertaining to that inventory is as follows: Selling price 805,000 Costs to sell 35,000 Replacement cost 765,000 What should be the reported value of inventory if the company prepares its financial statements according to International Financial Reporting Standards (IFRS)? A) $765,000 B) $785,000 C) $770,000 D) $750,000

C) $770,000

Data related to the inventories of Kimzey Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price 260 / 120 / 340 / 165 Cost 170 / 90 / 250 / 162 Replacement cost 240 / 80 / 235 / 158 Costs to sell 30 / 5 / 25 / 10 Normal gross profit ratio 30% / 30% / 30% / 20% In applying the lower of cost or market rule, the inventory of surgical supplies would be valued at: A) $100 B) $90 C) $80 D) $75

C) $80

Data related to the inventories of Costco Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price: 260 / 100 / 340 / 165 Cost: 170 / 90 / 250 / 162 Costs to sell: 30 / 15 / 25 / 10 In applying the lower of cost or net realizable value rule, the inventory of surgical supplies would be valued at: A) $100 B) $90 C) $85 D) $75

C) $85

A company reported the following financial data for 2024 and 2023: 2024 / 2023 Sales 305,000 284,000 Sales returns and allowances 9,000 6,000 Net sales 296,000 278,000 Cost of goods sold: Inventory, January 1 43,000 36,000 Net purchases 152,000 146,000 Goods available for sale 195,000 182,000 Inventory, December 31 57,000 43,000 Cost of goods sold 138,000 139,000 Gross profit 158,000 139,000 The average days inventory for 2024 is: A) Less than 100 days B) 114 days C) 132 days D) 151 days

C) 132 days

A company reported the following in its 2024 financial statements: Sales 420,000 Cost of goods sold: Inventory, January 1 82,000 Net purchases 340,000 Goods available for sale 422,000 Inventory, December 31 86,000 Cost of goods sold 336,000 Gross profit 84,000 The company's 2024 gross profit ratio is: A) 25% B) 19% C) 20% D) None of the other answer choices are correct

C) 20%

Nu Company reported the following pretax data for its first year of operations. Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 25% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060 What is Nu's gross profit ratio if it elects LIFO? A) 80% B) 49% C) 40% D) 6.4%

C) 40%

Excerpts from Huckabee Company's December 31, 2024 and 2023, financial statements are presented below: 2024/2023 Accounts receivable 80,000/72,000 Merchandise inventory 58,000/72,000 Net sales 400,000/372,000 Cost of goods sold 240,000/220,000 Huckabee's 2024 receivables turnover (rounded) is: A) 3.69 B) 5.00 C) 5.26 D) 3.16

C) 5.26

On July 1, 2024, Cromartie Furniture established a $150 petty cash fund. A check for $150 was made out to the petty cash custodian. During July, the petty cash custodian paid the following bills from the petty cash fund: Office supplies 36 Postage 22 Delivery charges 40 Bottled water 28 Total 126 At the end of July the petty cash fund was replenished.The journal entry to replenish the petty cash fund includes: A) A credit to petty cash and a debit to various expenses for $126 B) A debit to petty cash and a credit to cash for $150 C) A credit to cash and a debit to various expenses for $126 D) None of these answer choices are correct

C) A credit to cash and a debit to various expenses for $126

A company has decided that because it employs a perpetual system, a physical count of inventory at the end of the year is not needed. Which of the following choices most likely identifies a flaw with this decision? A) A physical count is needed because there is no record of units sold during the year B) A physical count is needed to understand whether inventory costs have increased or decreased during the year C) A physical count is needed because theft, breakage, and spoilage during the year likely have not been captured in a perpetual system D) A physical count is needed to understand whether the selling prices of inventory have increased or decreased during the year

C) A physical count is needed because theft, breakage, and spoilage during the year likely have not been captured in a perpetual system

Priscilla's Exotic Pets discounted a note receivable without recourse and the sales criteria were met. The discounting is recorded as: A) A secured borrowing B) Only note disclosure of the arrangement is required C) A sale D) None of these answer choices are correct

C) A sale

On January 1, 2024, a company adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: Ending Inventory at Year-End Costs / Cost Index 2024 126,000 1.05 2025 143,000 1.10 2026 153,600 1.20 In determining the inventory balance for the company to report in its 12/31/2025 balance sheet: A) An additional layer of $23,000 is added to the 12/31/2024 balance B) An additional layer of $22,000 is added to the 12/31/2024 balance C) An additional layer of $11,000 is added to the 12/31/2024 balance D) None of the other answer choices are correct

C) An additional layer of $11,000 is added to the 12/31/2024 balance

On April 1, a company purchased two units of inventory, A and B. The cost of unit A was $650, and the cost of unit B was $625. On April 30, the company had not sold the inventory. The net realizable value of unit A was now $685, while the net realizable value of unit B was $550. The adjusting entry associated with the lower of cost or net realizable value on April 30 will be: A) Debit Cost of goods sold; credit Inventory for $40 B) Debit Inventory; credit Cost of goods sold for $40 C) Debit Cost of goods sold; credit Inventory for $75 D) Debit Inventory; credit Cost of goods sold for $75

C) Debit Cost of goods sold; credit Inventory for $75

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for sales discounts.What entry would Harvey's make on April 12? A) Debit: Accounts Receivable 46,000 Credit: Sales 46,000 B) Debit: Accounts Receivable 46,000 Credit: Sales 45,540 Credit: Sales Discounts 460 C) Debit: Accounts Receivable 45,540 Credit: Sales 45,540 D) Debit: Accounts Receivable 45,540 Debit: Sales Discounts 460 Credit: Sales 45,540

C) Debit: Accounts Receivable 45,540 Credit: Sales 45,540

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District 45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for sales discounts.What entry would Oswego make on April 23, assuming the customer made the correct payment on that date? A) Debit: Cash 45,540 Debit: Sales 460 Credit: Accounts Receivable 46,000 B) Debit: Cash 46,000 Debit: Sales Discounts 460 Credit: Accounts Receivable 46,000 Credit: Sales Discounts Forfeited: 460 C) Debit: Cash 45,540 Debit: Sales Discounts 460 Credit: Accounts Receivable 46,000 D) Debit: Cash 46,000 Credit: Accounts Receivable 45,540 Credit: Sales 460

C) Debit: Cash 45,540 Debit: Sales Discounts 460 Credit: Accounts Receivable 46,000

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District 45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for sales discounts.What entry would Oswego make on June 10, assuming the customer made the correct payment on that date? A) Debit: Cash 46,000 Credit: Accounts Receivable 45,540 Credit: Discounts Receivable 460 B) Debit: Cash 46,000 Credit: Accounts Receivable 45,540 Credit: Sales Discounts Forfeited 460 C) Debit: Cash 46,000 Credit: Accounts Receivable 46,000 D) Debit: Cash 46,460 Credit: Accounts Receivable 46,000 Credit: Sales Discounts Forfeited 460

C) Debit: Cash 46,000 Credit: Accounts Receivable 46,000

Chen Incorporated accepted a two-year noninterest-bearing note for $605,000 on January 1, 2024. The note was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%.What is the correct entry to record the note? A) Debit: Debit: Notes Receivable 605,000 Credit: Accounts Receivable 605,000 B) Debit: Debit: Notes Receivable 500,000 Credit: Accounts Receivable 500,000 C) Debit: Notes Receivable 605,000 Credit: Discount on Notes Receivable 105,000 Credit: Sales Revenue 500,000 D) Debit: Notes Receivable 605,000 Credit: Interest Revenue 105,000 Credit: Cost of Sales 500,000

C) Debit: Notes Receivable 605,000 Credit: Discount on Notes Receivable 105,000 Credit: Sales Revenue 500,000

In a perpetual inventory system, the cost of inventory sold is: A) Debited to accounts receivable B) Credited to cost of goods sold C) Debited to cost of goods sold D) Not recorded at the time goods are sold

C) Debited to cost of goods sold

The first step, when using dollar-value LIFO retail method for inventory, is to: A) Determine the estimated ending inventory at current year retail prices B) Determine the estimated cost of goods sold for the current year C) Determine the cost-to-retail percentage for the current year transactions D) Price index adjust the LIFO inventory layers

C) Determine the cost-to-retail percentage for the current year transactions

Accounting for the pledging of accounts receivable as collateral for a loan requires: A) Reporting the receivables net of the borrowed amount B) Removal of the pledged receivables from current assets and including them with noncurrent investments C) Disclosure of the arrangement in notes to the financial statements D) None of these answer choices are correct

C) Disclosure of the arrangement in notes to the financial statements

Management has adopted a policy of reporting its unsold inventory at the end of each year at the lower of LIFO cost or market. Which of the following statements is correct? A) Ending inventory will be correctly stated when (i) current replacement cost is less than cost and (ii) replacement cost is less than net realizable value less a normal profit margin B) Ending inventory will be correctly stated when (i) current replacement cost is less than cost and (ii) replacement cost is greater than net realizable value C) Ending inventory will be correctly stated when (i) current replacement cost is less than cost and (ii) replacement cost is less than net realizable value and greater than net realizable value reduced by an allowance for an approximately normal profit margin D) Ending inventory will be correctly stated under any scenario when current replacement cost is less than cost

C) Ending inventory will be correctly stated when (i) current replacement cost is less than cost and (ii) replacement cost is less than net realizable value and greater than net realizable value reduced by an allowance for an approximately normal profit margin

In accounting for inventory, net realizable value equals: A) Estimated selling price less expected returns by customers B) Original purchase cost minus the estimated profit on the sale of inventory C) Estimated selling price less any estimated costs of completion, disposal, and transportation D) Estimated cost to replace the inventory

C) Estimated selling price less any estimated costs of completion, disposal, and transportation

Accounts receivable are normally reported at the: A) Present value of future cash receipts B) Current value plus accrued interest C) Expected amount to be collected D) Current value less expected collection costs

C) Expected amount to be collected

In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is: A) Weighted average B) Moving average C) FIFO D) LIFO

C) FIFO

Which of the following is considered a sale of receivables? A) Pledging receivables B) Assigning receivables C) Factoring receivables without recourse D) None of these answer choices are correct

C) Factoring receivables without recourse

A company's correct ending balance for the inventory account at the end of Year 1 should be $57,000, but the company incorrectly reported it as $43,000. In Year 2, the company correctly recorded its ending balance of the inventory account. Which one of the following is true? A) Gross profit is overstated by $14,000 in Year 1 B) Retained earnings is understated by $14,000 in Year 2 C) Gross profit is overstated by $14,000 in Year 2 D) Cost of goods sold is understated by $14,000 in Year 1

C) Gross profit is overstated by $14,000 in Year 2

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be: Gross Profit / Inventory Turnover A) Lower / Lower B) Higher / Higher C) Higher / Lower D) Lower / Higher

C) Higher / Lower

Which of the following is true about accounting for a troubled debt restructuring? A) If a receivable is expected to be uncollectible, it is remeasured at the discounted present value of the cash flows that were originally expected to be collected, but at a revised discount rate B) Receivables are not remeasured; instead, fair values are obtained from reliable factors C) If a receivable is continued, but with modified terms, a loss is typically recorded D) Receivables are never settled outright at the time of a restructuring

C) If a receivable is continued, but with modified terms, a loss is typically recorded

A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off? Allowance for Uncollectible Accounts/Accounts Receivable A) Increase/Decrease B) No Effect/Decrease C) Increase/No Effect D) No Effect/No Effect

C) Increase/No Effect

In a perpetual inventory system, the cost of purchases is debited to: A) Purchases B) Cost of goods sold C) Inventory D) Accounts payable

C) Inventory

A company that prepares its financial statements according to International Financial Reporting Standards (IFRS) can use each of the following inventory valuation methods except: A) Average cost B) FIFO C) LIFO D) All of these inventory valuation methods can be used

C) LIFO

The conventional retail inventory method is based on: A) Average cost B) LIFO cost C) Lower of average cost or market value D) Lower of LIFO cost or market value

C) Lower of average cost or market value

During periods when costs are rising and inventory quantities are stable, cost of goods sold will be: A) Higher under FIFO than LIFO B) Higher under FIFO than average cost C) Lower under average cost than LIFO D) Lower under LIFO than FIFO

C) Lower under average cost than LIFO

Management has adopted a policy of reporting its unsold inventory at the end of each year at the lower of LIFO cost or the estimated selling price of that inventory in the next year. Which of the following statements is correct? A) Management's policy is acceptable B) Management should instead choose the higher of the two amounts to report inventory C) Management also needs to consider the inventory's replacement cost D) Management should instead report inventory at the lower of cost or the most recent selling price in the current year

C) Management also needs to consider the inventory's replacement cost

Compared to dollar-value LIFO, unit LIFO is: A) Less costly to implement B) Less susceptible to LIFO liquidation C) More costly to implement D) More concerned with cost indexes

C) More costly to implement

Under the dollar-value LIFO retail method, to determine the value of a LIFO layer: A) Divide the LIFO layer by the layer-year price index and multiply by the layer-year cost-to-retail percentage B) Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage C) Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage D) Divide the LIFO layer by the layer-year cost-to-retail percentage and multiply by the layer-year price index

C) Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage

Under the conventional retail method, the denominator in the cost-to-retail percentage includes: A) Net markups and net markdowns B) Neither net markups nor net markdowns C) Net markups, but not net markdowns D) Net markdowns, but not net markups

C) Net markups, but not net markdowns

Purchases equal the invoice amount: A) Plus freight-in, plus discounts lost B) Less purchase returns, plus purchase allowances C) Plus freight-in, less purchase discounts D) Plus discounts, less purchase returns

C) Plus freight-in, less purchase discounts

Galaxy sells used video games for cash and provides a one-week return right. Returns are material and reasonably predictable. Galaxy should: A) Not record sales until the right to return has expired B) Record a contra-receivable in the year of the sale C) Recognize a refund liability associated with estimated returns D) Credit sales in the period of the return

C) Recognize a refund liability associated with estimated returns

Which of the following does not reduce the balance in accounts receivable? A) Returns on credit sales B) Collections from customers C) Recognizing bad debts expense D) Write-offs

C) Recognizing bad debts expense

A company uses the dollar-value LIFO method to report inventory. In the current year, the cost index for inventory has increased. If the company reports ending inventory at its year-end cost, which of the following statements is correct? A) Reported ending inventory is understated B) Reported ending inventory is correct C) Reported ending inventory is overstated D) Cannot determine with the information given

C) Reported ending inventory is overstated

The amount of cash reported as a current asset may not include: A) Foreign currency B) Money orders C) Restricted cash D) Undeposited customer checks

C) Restricted cash

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's would credit accounts receivable and debit: A) Sales B) Sales discount C) Sales returns D) Sales allowances

C) Sales returns

A company using the LIFO retail method has the following information for the current year's operations: Cost Retail Beginning inventory 50,000 80,000 Net purchases during the year 425,000 740,000 Net sales 710,000 To convert ending inventory to cost, management calculates the cost-to-retail percentage as cost of $475,000 (= $50,000 + $425,000) divided by retail of $820,000 (= $80,000 + $740,000). Which of the following statements is correct? A) The retail amount used to calculate the cost-to-retail percentage should be $110,000 (= $80,000 + $740,000 − $710,000) B) Only net purchases during the year are used to calculate the cost-to-retail percentage to convert ending inventory to cost C) Separate cost-to-retail percentages for beginning inventory and net purchases are needed to convert ending inventory to cost D) The calculation of the cost-to-retail percentage is correct

C) Separate cost-to-retail percentages for beginning inventory and net purchases are needed to convert ending inventory to cost

The use of LIFO during a long inflationary period can result in: A) A net increase in income tax expense B) An inflated balance sheet C) Significant cash flow advantages over FIFO D) A reduction in inventory turnover over FIFO

C) Significant cash flow advantages over FIFO

A company has the following information available that was used to report inventory using the dollar-value LIFO method. Year-End Cost / Cost Index 12/31/2023 250,000 1.00 12/31/2024 259,000 1.06 For the year ended 12/31/2024, the company reported inventory of $274,540 (= $259,000 × 1.06). Which of the following statements is correct? A) The amount reported for ending inventory should be calculated as $250,000 + ($9,000 ÷ 1.06) B) The amount reported for ending inventory should be calculated as $250,000 + ($9,000 × 1.06) C) The amount reported for ending inventory should be calculated as $259,000 ÷ 1.06 D) The amount reported for ending inventory is correct

C) The amount reported for ending inventory should be calculated as $259,000 ÷ 1.06

Inventory does not include: A) Materials used in the production of goods to be sold B) Assets intended to be sold in the normal course of business C) The cost of office equipment D) Assets currently in production for normal sales

C) The cost of office equipment

A company implements the following policy regarding inventory in transit: Goods purchased are included in inventory records, while goods sold are not included in inventory records. Management feels this policy is reasonable because it assigns inventory in transit to the party that initiated the transactions. Which of the following concepts is management not considering in implementing this policy? A) The likelihood that inventory purchased or sold will be returned B) The quantity of the inventory involved in the transaction C) The party who has title to the inventory while in transit D) The materiality of shipping costs

C) The party who has title to the inventory while in transit

A company purchases inventory for $10,000, with terms 3/10, n/30. The company uses a perpetual system and the net method to record purchases. To record this transaction, the company debits the Inventory account for $9,970. Which of the following statements is correct? A) The company should instead credit Inventory B) The company should instead debit Purchases C) The recorded amount should instead be $9,700 D) Two of the other answer choices are correct

C) The recorded amount should instead be $9,700

In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which the: A) Transferee has received substantially all the risks and rewards of ownership B) Age of the receivables transferred differs from the average age of the receivables C) Transferor of the receivable surrenders control over the assets transferred D) Transferee relies on assets received from the transferor to maintain operations

C) Transferor of the receivable surrenders control over the assets transferred

Which of the following is not true regarding accounting for transfers of receivables under IFRS? A) Transfers of receivables sometimes are treated as a sale of receivables B) Transfers of receivables sometimes are treated as a secured borrowing C) Transfers of receivables can be treated as a sale if the transferee is a qualified special purpose entity D) Transfer of substantially all the risk and rewards of ownership is an important consideration

C) Transfers of receivables can be treated as a sale if the transferee is a qualified special purpose entity

A company uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, cost of goods sold for the current year was: A) Overstated by $31,000 B) Overstated by $5,000 C) Understated by $31,000 D) Understated by $48,000

C) Understated by $31,000

Ending inventory is equal to the cost of items on hand plus: A) items in transit sold f.o.b. shipping point B) purchases in transit f.o.b. destination C) items in transit sold f.o.b. destination D) None of the other answer choices are correct

C) items in transit sold f.o.b. destination

GG Incorporated uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2024 would have been $16 million higher than the difference between LIFO and FIFO at the end of 2023. Assuming GG has a 25% income tax rate: A) its reported cost of goods sold for 2024 would have been $12 million higher if it had used FIFO rather than LIFO for its financial statements B) its reported cost of goods sold for 2024 would have been $16 million higher if it had used FIFO rather than LIFO for its financial statements C) its reported net income for 2024 would have been $12 million higher if it had used FIFO rather than LIFO for its financial statements D) its reported net income for 2024 would have been $16 million higher if it had used FIFO rather than LIFO for its financial statements

C) its reported net income for 2024 would have been $12 million higher if it had used FIFO rather than LIFO for its financial statements

The use of LIFO in accounting for a firm's inventory: A) usually matches the physical flow of goods through the business B) is usually used for internal management purposes C) usually provides a better match of expenses with revenues D) none of the other answer choices are correct

C) usually provides a better match of expenses with revenues

A company adopted dollar-value LIFO on January 1, 2024, when the inventory value was $360,000 and the cost index was 1.25. On December 31, 2024, the inventory was valued at year-end cost of $395,000 and the cost index was 1.30. The company would report a LIFO inventory of: A) $410,800 B) $374,400 C) $379,808 D) $380,600

D) $380,600

A company has four types of products in its inventory as shown below: Product / Quantity / Cost / Net Realizable Value A 15 7 10 B 10 18 12 C 20 8 6 D 15 11 15 When accounting for the lower of cost or net realizable value by total inventory, the year-end adjustment to write down inventory would be: A) $100 B) $55 C) $15 D) $0

D) $0

Texas Petrochemical reported the following April activity for its VC-30 lubricant, which had a balance of 300 quarts @ $2.40 per quart on April 1. Purchases: Sales: April 10 500 quarts @ $2.50 April 3 200 quarts April 14 400 quarts @ $2.60 April 12 500 quarts April 20 400 quarts @ $2.65 April 26 300 quarts The ending inventory assuming LIFO and a periodic inventory system is: A) $1,580 B) $1,510 C) $1,575 D) $1,470

D) $1,470

Calistoga Produce estimates bad debt expense at 0.50% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2023. During 2024, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.Calistoga's 2024 bad debt expense is: A) $1,720 B) $1,650 C) $1,505 D) $1,575

D) $1,575

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price 180,000 / 150,000 / 120,000 / 60,000 Cost 128,000 / 133,000 / 90,000 / 48,000 Replacement cost 120,000 / 130,000 / 110,000 / 50,000 Sales commission 10% Normal gross profit ratio 20% / 20% / 15% / 15% In applying the lower of cost or market rule, the inventory of skis would be valued at: A) $162,000 B) $128,000 C) $120,000 D) $126,000

D) $126,000

Data below for the year ended December 31, 2024, relates to Houdini Incorporated. Houdini started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Cost Retail Beginning inventory 66,000 104,000 Net purchases 280,000 220,000 Net markups 20,000 Net markdowns 40,000 Net sales 375,000 Estimated ending inventory at retail is: A) $65,000 B) $169,600 C) $25,000 D) $129,000

D) $129,000

Data related to the inventories of Costco Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price: 260 / 100 / 340 / 165 Cost: 170 / 90 / 250 / 162 Costs to sell: 30 / 15 / 25 / 10 In applying the lower of cost or net realizable value rule, the inventory of rehab supplies would be valued at: A) $165 B) $152 C) $162 D) $155

D) $155

Data related to the inventories of Kimzey Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price 260 / 120 / 340 / 165 Cost 170 / 90 / 250 / 162 Replacement cost 240 / 80 / 235 / 158 Costs to sell 30 / 5 / 25 / 10 Normal gross profit ratio 30% / 30% / 30% / 20% In applying the lower of cost or market rule, the inventory of rehab supplies would be valued at: A) $122 B) $158 C) $162 D) $155

D) $155

Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the balance in the general ledger checking account was $2,750 and the bank balance on the bank statement was $2,980. Outstanding checks totaled $680 and deposits in transited were $400. The bank statement revealed that a check written for $120 was incorrectly recorded by Brockton as a $220 disbursement. The bank statement listed service charges and NSF check charges totaling $150. The corrected cash balance is: A) $2,270 B) $2,550 C) $2,470 D) $2,700

D) $2,700

Consider the following information pertaining to a company's inventory: Product / Quantity / Cost / Net Realizable Value Revolvers 16 120 150 Spurs 23 27 22 Hats 12 56 40 At what amount should the company report its inventory using the lower of cost or net realizable value? A) $3,213 B) $3,386 C) $2,996 D) $2,906

D) $2,906

A company's inventory balance was $22,000 at the beginning of the year and $20,000 at the end. The inventory turnover ratio for the year was 6.0 and the gross profit ratio 40%. What were net sales for the year? A) $126,000 B) $200,000 C) $120,000 D) $210,000

D) $210,000

Data related to the inventories of Kimzey Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price 260 / 120 / 340 / 165 Cost 170 / 90 / 250 / 162 Replacement cost 240 / 80 / 235 / 158 Costs to sell 30 / 5 / 25 / 10 Normal gross profit ratio 30% / 30% / 30% / 20% In applying the lower of cost or market rule, the inventory of rehab equipment would be valued at: A) $315 B) $247 C) $150 D) $235

D) $235

Data related to the inventories of Costco Medical Supply are presented below: S Equipment / S Supplies / R Equipment / R Supplies Selling price: 260 / 100 / 340 / 165 Cost: 170 / 90 / 250 / 162 Costs to sell: 30 / 15 / 25 / 10 In applying the lower of cost or net realizable value rule, the inventory of rehab equipment would be valued at: A) $315 B) $340 C) $225 D) $250

D) $250

On July 8, a fire destroyed the entire inventory on hand of a company. The following information is available: Sales, January 1 through July 8 700,000 Inventory, January 1 130,000 Purchases, January 1 through July 8 640,000 Gross profit ratio 30% What is the estimated inventory on July 8 immediately prior to the fire? A) $192,000 B) $490,000 C) $510,000 D) $280,000

D) $280,000

Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: Cost Retail Beginning inventory 46,000 63,000 Net purchases 154,000 215,000 Net markups 22,000 Net markdowns 35,000 Net sales 220,000 Estimated ending inventory using the conventional retail method is: A) $37,037 B) $32,374 C) $33,962 D) $30,000

D) $30,000

Benny's Bed Company uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of September 2024. Cost Retail Beginning inventory 30,000 50,000 Net purchases 125,000 220,000 Net markups 15,000 Net markdowns 6,000 Net sales 208,000 Estimated ending inventory is:Note: Round cost-to-retail ratio to 4 decimal places. A) $38,614 B) $41,686 C) $40,759 D) $39,444

D) $39,444

Rusty Hardware makes only cash sales. It began 2024 with a credit balance of $32,000 in the refund liability account. Sales during 2024 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2024, customers returned merchandise for credit of $28,000 to their accounts.What is the balance in the refund liability account at the end of 2024? A) $32,000 B) $39,000 C) $43,000 D) $40,000

D) $40,000

Nu Company reported the following pretax data for its first year of operations. Net sales 7,340 Cost of goods available for sale 5,790 Operating expenses 1,728 Effective tax rate 25% Ending inventories: If LIFO is elected 616 If FIFO is elected 798 How much more will Nueva report in income tax if it elects FIFO instead of LIFO? A) $135 B) $110 C) $155 D) $45

D) $45

Nu Company reported the following pretax data for its first year of operations. Net sales 7,340 Cost of goods available for sale 5,790 Operating expenses 1,728 Effective tax rate 25% Ending inventories: If LIFO is elected 616 If FIFO is elected 798 What is Nu's net income if it elects FIFO? A) $440 B) $330 C) $620 D) $465

D) $465

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price 180,000 / 150,000 / 120,000 / 60,000 Cost 128,000 / 133,000 / 90,000 / 48,000 Replacement cost 120,000 / 130,000 / 110,000 / 50,000 Sales commission 10% Normal gross profit ratio 20% / 20% / 15% / 15% In applying the lower of cost or market rule, the inventory of supplies would be valued at: A) $45,000 B) $54,000 C) $50,000 D) $48,000

D) $48,000

Harvey's Junk Jewelry started business January 1, 2024, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2024: Cost Retail Beginning inventory 15,000 23,000 Purchases 49,000 78,000 Freight-in 2,500 Purchase returns 1,700 2,600 Net markups 2,000 Net markdowns 4,100 Net sales 70,600 Employee discounts 700 The numerator for the current period's cost-to-retail percentage is: A) $64,800 B) $48,100 C) $47,700 D) $49,800

D) $49,800

A company has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows: Selling price 520,000 Costs to sell 30,000 Replacement cost 440,000 What should be the reported value of inventory if the company prepares its financial statements according to International Financial Reporting Standards (IFRS)? A) $500,000 B) $440,000 C) $470,000 D) $490,000

D) $490,000

A company has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows: Selling price 520,000 Costs to sell 30,000 Replacement cost 440,000 What should be the reported value of inventory? A) $500,000 B) $440,000 C) $470,000 D) $490,000

D) $490,000

Northwest Fur Company started 2024 with $94,000 of inventory on hand. During 2024, $400,000 in inventory was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Inventory with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system.Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale? A) $492,500 B) $496,500 C) $490,500 D) $492,550

D) $492,550

Frasquita acquired equipment from the manufacturer on 6/30/2024 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/2025 to satisfy the obligation in full.If Frasquita accrued interest of $15,000 on the note in its 2024 year-end financial statements, what amount would it have recorded the equipment for on 6/30/2024? A) $500,000 B) $515,000 C) $550,000 D) $525,000

D) $525,000

Trell Corporation transferred $50,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 80% of the factored amount to Trell and retains the remaining 20%. When the bank collects the receivables, it will remit to Trell the retained amount less a fee equal to 3% of the total amount factored. Trell estimates a fair value of its 20% interest in the receivables of $8,000 (not including the 3% fee). Trell will show an amount receivable from factor of: A) $10,000 B) $8,500 C) $8,000 D) $6,500

D) $6,500

Fulbright Corporation uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): - 40 units at $100 per unit - 70 units at $80 per unit - 170 units at $60 per unit Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.Ending inventory using the FIFO method is: A) $650 B) $1,000 C) $707 D) $600

D) $600

False Value Hardware began 2024 with a credit balance of $32,000 in the refund liability account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2024, customers returned merchandise for credit of $28,000 to their accounts.False Value Hardware's 2024 income statement would report net sales of: A) $622,000 B) $607,000 C) $646,000 D) $611,000

D) $611,000

Brewer Incorporated is owed $200,000 by Carol Company under a 10% note with two years remaining to maturity. Due to financial difficulties Carol Company did not pay the prior year's interest. Brewer agrees to settle the receivable (and accrued interest) in exchange for a cash payment of $150,000. The journal entry that Brewer would make to record this transaction would include a loss on troubled debt restructuring as bad debt expense in the amount of: A) $0 B) $20,000 C) $50,000 D) $70,000

D) $70,000

For 2024, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2023. During 2024, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off.Rahal's accounts receivable balance at December 31, 2024 is: A) $90,500 B) $88,160 C) $82,500 D) $80,160

D) $80,160

For 2024, Rahal's Auto Parts estimates bad debt expense at 3% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $92,000 and $3,200, respectively, at December 31, 2023. During 2024, Rahal's credit sales and collections were $415,000 and $419,000, respectively, and $3,440 in accounts receivable were written off.Rahal's accounts receivable balance at December 31, 2024 is: A) $96,000 B) $92,560 C) $88,000 D) $84,560

D) $84,560

The Salamander Company has evaluated its receivables, and has identified the following possible credit losses - Note 1 has recently deteriorated in credit quality. For Note 1, Salamander estimates the present value of credit losses occurring in the next twelve months is $50,000, and the present value of credit losses occurring after twelve months is $20,000. - Note 2 has not deteriorated in credit quality. For Note 2, Salamander estimates the present value of credit losses occurring in the next twelve months is $5,000, and the present value of credit losses occurring after twelve months is $10,000 If Salamander is using the CECL model, it would recognize a bad debt expense of: A) $50,000 B) $55,000 C) $75,000 D) $85,000

D) $85,000

Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2024: Cost Retail Beginning inventory 80,000 130,000 Net purchases 261,000 500,000 Net markups 25,000 Net markdowns 35,000 Net sales 520,000 The average cost-to-retail percentage is: A) 52.2% B) 61.5% C) 56.8% D) 55%

D) 55%

Gershwin Wallcovering Incorporated shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by debiting sales returns and crediting: A) Sales B) Sales discounts C) Allowance for uncollectible accounts D) Accounts receivable

D) Accounts receivable

A company using the conventional retail method has the following information for the current year's operations: Cost Retail Beginning inventory 100,000 150,000 Net purchases 500,000 800,000 Net markups 85,000 Net markdowns 35,000 Net sales 750,000 Management reports ending inventory in the balance sheet as $200,000 (= $150,000 + $800,000 − $750,000). Which of the following statements is correct? A) The calculation of ending inventory should include adding net markups B) The calculation of ending inventory should include subtracting net markdowns C) The calculation of ending inventory should include converting retail prices to cost D) All of the other answer choices are correct

D) All of the other answer choices are correct

When changing from the average cost method to FIFO, the company: A) Provides a disclosure note explaining why the change to FIFO is preferable B) Revises comparative financial statements C) Records a journal entry to adjust the book balances from their current amounts to what those balances would have been using FIFO D) All of the other answer choices are correct

D) All of the other answer choices are correct

Under the retail method, the numerator in the cost-to-retail percentage includes: A) Beginning inventory B) Purchases C) Freight-in D) All of the other answer choices are included in the numerator

D) All of the other answer choices are included in the numerator

Which of the following is false regarding the FIFO inventory method? A) FIFO under a perpetual inventory system results in the same cost of goods sold as FIFO under a periodic inventory system B) A company can choose to account for the flow of inventory using the FIFO method even if this doesn't match the actual flow of its inventory C) Perishable goods often follow an actual physical flow that is consistent with the FIFO method assumptions D) All of the other answer choices are true

D) All of the other answer choices are true

A company's investment in receivables is influenced by several variables, including: A) The level of sales B) The nature of the product or service sold C) The credit and collection policies D) All of these answer choices are correct

D) All of these answer choices are correct

Retrospective treatment of prior years' financial statements is required when there is a change from: A) Average cost to FIFO B) FIFO to average cost C) LIFO to average cost D) All of these answer choices are correct

D) All of these answer choices are correct

The transferor is considered to have surrendered control over its receivables if: A) The transferred assets have been isolated from the transferor B) Each transferee has the right to pledge or exchange the assets it received C) The transferor does not maintain effective control over the transferred assets through either repurchase or redemption agreements before maturity or the ability to cause the transferee to return the assets D) All of these answer choices must occur

D) All of these answer choices must occur

TNM Incorporated uses LIFO and was founded in on January 1, 2023. At the end of 2023, TNM disclosed that the LIFO reserve was $1 million, indicating that the ending inventory balance would have been $1 million higher under FIFO. At the end of 2024, the LIFO reserve decreased to $0.5 million and inventory balances were relatively stable compared to 2023. Which of the following is true regarding TNM's costs? A) Costs have been increasing since TNM was founded because the LIFO reserve is greater than zero B) Costs have been decreasing since TNM was founded because the LIFO reserve is greater than zero C) Costs were increasing in 2024, but decreasing in 2023 D) Costs were decreasing in 2024, but increasing in 2023

D) Costs were decreasing in 2024, but increasing in 2023

On April 1 of the current year, Troubled Company factored receivables with a carrying value of $85,000 for $60,000 in cash from Scrooge Lenders. The transfer was made without recourse. On April 1, Troubled would: A) Credit Deferred Interest Expense for $25,000 B) Credit Factored Accounts Receivable for $85,000 C) Debit Discount on Liability for $25,000 D) Debit Loss on Sale of Receivables for $25,000

D) Debit Loss on Sale of Receivables for $25,000

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for sales discounts.What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date? A) Debit: Cash 45,540 Debit: Sales 460 Credit: Accounts Receivable 46,000 B) Debit: Cash 46,000 Debit: Sales Discounts 460 Credit: Accounts Receivable 46,000 Credit: Sales Discounts Forfeited 460 C) Debit: Cash 45,540 Debit: Sales Discounts 460 Credit: Accounts Receivable 46,000 D) Debit: Cash 45,540 Credit: Accounts Receivable 45,540

D) Debit: Cash 45,540 Credit: Accounts Receivable 45,540

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for sales discounts.What is the correct entry for Flores on December 5, assuming the correct payment was received on that date? A) Debit: Cash 8,000 Credit: Accounts Receivable 7,840 Credit: Sales Discounts Revenue 160 B) Debit: Cash 8,000 Credit: Accounts Receivable 7,840 Credit: Interest Revenue 160 C) Debit: Cash 8,000 Credit: Accounts Receivable 7,840 Credit: Sales Discount Forfeited 160 D) Debit: Cash 8,000 Credit: Accounts Receivable 8,000

D) Debit: Cash 8,000 Credit: Accounts Receivable 8,000

Chen Incorporated accepted a two-year noninterest-bearing note for $605,000 on January 1, 2024. The note was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%.The entry to record interest on December 31, 2024 would be: A) Debit: Cash 50,000 Credit: Interest Receivable 50,000 B) Debit: Cash 50,000 Credit: Discount on Notes Receivable 50,000 C) Debit: Discount on Notes Receivable 50,000 Credit: Notes Receivable 50,000 D) Debit: Discount on Notes Receivable 50,000 Credit: Interest Revenue 50,000

D) Debit: Discount on Notes Receivable 50,000 Credit: Interest Revenue 50,000

At the end of a reporting period, a company determines that its ending inventory has a cost greater than its net realizable value. What would be the effect(s) of the adjusting entry to write down inventory to net realizable value? A) Decrease total assets B) Decrease net income C) Increase retained earnings D) Decrease total assets and net income

D) Decrease total assets and net income

Using the gross method, purchase discounts lost are: A) Included in inventory purchased B) Added to accounts payable C) Included as a reduction to purchase returns D) Deducted from discount income

D) Deducted from discount income

Under the gross method, purchase discounts taken are: A) Deducted from purchase allowances B) Added to net purchases C) Added to interest income D) Deducted from inventory purchased

D) Deducted from inventory purchased

Under the dollar-value LIFO retail method, to determine if the increase in the value of inventory was due to an increase in quantities: A) Compare beginning and ending inventory amounts at current year prices B) Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year C) Inflate beginning inventory amount to end of year prices and compare to ending inventory amount D) Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount

D) Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount

In periods when costs are rising, LIFO liquidations: A) Can't occur B) Are used to reduce tax liabilities C) Are a source of off-balance-sheet financing D) Distort the net income

D) Distort the net income

The second step, when using dollar-value LIFO retail method for inventory, is to determine the estimated: A) Ending inventory at current year retail prices B) Cost of goods sold for the current year C) Ending inventory at cost D) Ending inventory at base year retail prices

D) Ending inventory at base year retail prices

In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of: A) Weighted average B) LIFO C) Moving average D) FIFO

D) FIFO

Under the retail method, the denominator in the cost-to-retail percentage does not include: A) Purchases B) Purchase returns C) Abnormal shortages D) Freight-in

D) Freight-in

In applying LCM, market cannot be: A) Less than net realizable value B) Greater than the normal profit C) Less than the normal profit margin D) Greater than net realizable value

D) Greater than net realizable value

During periods when costs are rising and inventory quantities are stable, ending inventory will be: A) Higher under LIFO than FIFO B) Lower under average cost than LIFO C) Higher under average cost than FIFO D) Higher under FIFO than LIFO

D) Higher under FIFO than LIFO

Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising inventory costs, Company C's gross profit and inventory turnover ratio, compared to Company D's, would be: Gross Profit / Inventory Turnover A) Higher / Higher B) Higher / Lower C) Lower / Lower D) Lower / Higher

D) Lower / Higher

For companies using LIFO, inventory is valued at: A) Net realizable value B) Cost C) Replacement cost D) Lower of cost or market

D) Lower of cost or market

For companies using a cost method other than LIFO or the retail inventory method, inventory is reported at: A) Net realizable value B) Cost C) Replacement cost D) Lower of cost or net realizable value

D) Lower of cost or net realizable value

Cost of goods sold is given by: A) Beginning inventory − net purchases + ending inventory B) Beginning inventory + accounts payable − net purchases C) Net purchases + ending inventory − beginning inventory D) Net Purchases + beginning inventory − ending inventory

D) Net Purchases + beginning inventory − ending inventory

Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage? A) Purchase returns B) Net markups C) Purchases D) Net markdowns

D) Net markdowns

A company reported inventory in the 2023 year-end balance sheet, using the FIFO method, as $154,000. In 2024, the company decided to change its inventory method to LIFO. If the company had used the LIFO method in 2023, the company estimates that ending inventory would have been in the range $130,000-$135,000. What adjustment would the company make for this change in inventory method? A) Debit Inventory for $21,500; Credit Cost of goods sold for $21,500 B) Debit Retained earnings for $24,000; Credit Inventory for $24,000 C) Debit Retained earnings for $19,000; Credit Cost of goods sold for $19,000 D) No adjustment is necessary

D) No adjustment is necessary

A company overstated its ending inventory in Year 1 by $60,000. The error was not discovered until Year 3. No errors were made in Year 2. After finding the error in Year 3, management provides restated balance sheets for Year 1 and Year 2 by reducing the reported ending inventory in both Year 1 and Year 2 by $60,000. Which of the following statements is correct for Year 2? A) Only the amount reported for retained earnings in Year 2 needs to be decreased by $60,000 B) The amounts reported for both inventory and retained earnings in Year 2 should instead be increased by $60,000 C) The amount reported for inventory in Year 2 needs to be increased by $60,000, and the amount reported for retained earnings in Year 2 needs to be decreased by $60,000 D) No adjustments to the amounts reported for inventory or retained earnings are needed in Year 2

D) No adjustments to the amounts reported for inventory or retained earnings are needed in Year 2

Under the LIFO retail method, which of the following is used to calculate the denominator of the current-period cost-to-retail percentage? A) Beginning inventory B) Employee discounts C) Normal spoilage D) None of the other answer choices are correct

D) None of the other answer choices are correct

For 2024, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2023. During 2024, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off.Rahal's 2024 bad debt expense is: A) $2,100 B) $2,340 C) $4,080 D) None of these answer choices are correct

D) None of these answer choices are correct

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2024. The notes included: - Note A: Dated 5/31/2024, principal of $120,000 and interest due 3/31/2025 - Note B: Dated 7/1/2024, principal of $200,000 and interest at 8% annually, due on 4/1/2025 Assume Frankenstein views the financing component of these sales to be significant. What amount of interest revenue would Frankenstein earn on these notes during 2025? A) More than $12,000 B) Between $7,000 and 10,000 C) Less than $5,000 D) None of these answer choices are correct

D) None of these answer choices are correct

In a periodic inventory system, the cost of inventory sold is: A) Debited to accounts receivable B) Credited to cost of goods sold C) Debited to cost of goods sold D) Not recorded at the time goods are sold

D) Not recorded at the time goods are sold

Which of the following is true about reporting cash under IFRS? A) Cash accounts include loans made to customers, but not to related parties B) Overdrafts typically cannot be offset against positive balance in other cash accounts on the balance sheet C) Cash overdrafts are not allowed D) Overdrafts typically are not shown as current liabilities on the balance sheet

D) Overdrafts typically are not shown as current liabilities on the balance sheet

The purpose of assigning accounts receivable is to: A) Satisfy a court order B) Complete the legal prerequisites to record their sale C) Comply with form and content rules of bankruptcy proceedings D) Provide collateral for a loan

D) Provide collateral for a loan

If a company overstates its ending balance of inventory in Year 1 and it reports inventory correctly in Year 2, which one of the following is true? A) Net income is overstated in Year 2 B) Cost of goods sold is overstated in Year 1 C) Net income is understated in Year 1 D) Retained earnings is overstated in Year 1

D) Retained earnings is overstated in Year 1

If a company uses the balance sheet approach to estimate bad debt expense, bad debt expense for a period can be determined by: A) Multiplying net credit sales by the bad debt experience ratio B) Adding the beginning balance in the allowance for uncollectible accounts to the provision for uncollectible accounts and deducting the desired ending balance in the allowance for uncollectible accounts C) Multiplying ending accounts receivable in each age category by the expected loss ratio for each age category D) Taking the difference between the unadjusted balance in the allowance account and the desired balance of the allowance account

D) Taking the difference between the unadjusted balance in the allowance account and the desired balance of the allowance account

A company has the following information related to its ending inventory: FIFO / LIFO 12/31/2023 230,000 200,000 12/31/2024 280,000 260,000 The company's accountant informs the CEO that because the company reports using LIFO instead of FIFO, gross profit will be lower in 2024. Which of the following statements is correct? A) The accountant is incorrect because the LIFO reserve has increased in the current year B) The accountant is correct C) The accountant is incorrect because the choice of LIFO or FIFO does not affect gross profit D) The accountant is incorrect because the LIFO reserve has decreased in the current year

D) The accountant is incorrect because the LIFO reserve has decreased in the current year

Harlequin Company has used the dollar-value LIFO retail method since it began operations in early 2023 (its base year). Its beginning inventory for 2024 was $36,000 at cost and $72,000 at retail prices. At the end of 2024, it computed its estimated ending inventory at retail to be $120,000. Assuming its cost-to-retail percentage for 2024 transactions was 60%, what is the inventory balance that Harlequin Company would report in its 12/31/2024 balance sheet? A) $64,800 B) $72,000 C) $120,000 D) The balance cannot be determined with the given information

D) The balance cannot be determined with the given information

If a company understates its count of ending inventory in Year 1 and it reports inventory correctly in Year 2, which of the following is true? A) Costs of goods sold is understated at the end of Year 1 B) Net income is correct in Year 2 C) The balance of retained earnings is overstated at the end of Year 1 D) The balance of retained earnings is correct at the end of Year 2

D) The balance of retained earnings is correct at the end of Year 2

Which of the following might explain why a company has switched from a periodic system to a perpetual system to record inventory transactions? A) Management is attempting to overstate performance and total assets in the year-end financial statements B) The cost of inventory has increased during the year C) The selling price of inventory has decreased during the year D) The company has made several technological upgrades to its system for tracking inventory items

D) The company has made several technological upgrades to its system for tracking inventory items

Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, five-year, noninterest-bearing note when an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to: A) $50,000 B) Zero C) The future value of $50,000 using a 10% interest rate D) The present value of $50,000 using a 10% interest rate

D) The present value of $50,000 using a 10% interest rate

Important elements of an internal control system for cash disbursements include each of the following except: A) Only authorized personnel should sign checks B) All expenditures should be authorized before a check is prepared C) All disbursements, other than very small disbursements, should be made by check D) The same person that prepares the check should also record it in the proper journal

D) The same person that prepares the check should also record it in the proper journal

The lower of cost or net realizable value rule causes losses in the value of inventory to be recognized in the period when: A) The inventory is purchased B) Cash collection from the customer fails to occur C) The inventory is sold D) The value of inventory declines below cost

D) The value of inventory declines below cost

Management adopts a policy of reporting all shipping costs (freight-in and freight-out) in an operating expense account - Shipping Expense - at the time those costs are incurred. The cost of the physical units sold are reported in the Cost of Goods Sold account at the time those units are sold. Management believes this policy better communicates its inventory decisions to financial statement users. Which of the following statements is correct? A) Management's policy is not correct because the cost of inventory includes all costs necessary to get the inventory ready for sale B) Management's policy is not correct because freight-in should be expensed only when the inventory is sold C) Management's policy is not correct because the cost of freight-out represents a reduction of revenue, not an expense D) Two of the other answers are correct

D) Two of the other answers are correct

Which of the following is recorded by a credit to accounts receivable? A) Sale of inventory on account B) Estimating the annual allowance for uncollectible accounts C) Estimating annual sales returns D) Write-off of bad debts

D) Write-off of bad debts

During 2024, WW Incorporated reduced its LIFO eligible inventory quantities due to a problem with its major supplier. The effect of this liquidation was to increase its cost of goods sold by approximately $40 million. WW has a 25% income tax rate. If WW had not experienced these supplier problems and the resulting liquidation: A) its 2024 net income would have been $30 million lower because inventory purchase prices were rising B) its 2024 net income would have been $30 million lower because inventory purchase prices were declining C) its 2024 net income would have been $30 million higher because inventory purchase prices were rising D) its 2024 net income would have been $30 million higher because inventory purchase prices were declining

D) its 2024 net income would have been $30 million higher because inventory purchase prices were declining

HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2024 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2023. Assuming HH has a 25% income tax rate: A) its reported cost of goods for 2024 would have been $15 million less if it had used FIFO rather than LIFO for its financial statements B) its reported cost of goods for 2024 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements C) its reported cost of goods sold for 2024 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements D) its reported cost of goods sold for 2024 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements

D) its reported cost of goods sold for 2024 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements