ACCT 2113 CHAPTER 4-6 PRACTICE MC

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

6.0.

Which of following best describes a merchandising company?

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

At the end of its first year of operations, a company estimates future uncollectible accounts to be $4,500. The company's year-end adjusting entry would include

A credit to Allowance for Uncollectible Accounts for $4,500.

At the end of a reporting period, Gaston Corporation determines that its ending inventory has a cost of $6,500 and a net realizable value of $5,800. The adjustment to write down inventory to net realizable value would include:

A credit to inventory for $700.

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

A debit to Allowance for Uncollectible Accounts.

The entry to record the estimate for uncollectible accounts includes:

A debit to Bad Debt Expense.

The effect of writing off a specific account receivable is:

A reduction in the Allowance for Uncollectible Accounts.

When employee expenditures with company-issued credit cards are recorded:

Accounts Payable is credited.

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

Accounts Payable.

The amount of cash owed to the company by its customers from the sale of products or services on account is known as:

Accounts Receivable.

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

Accounts Receivable.

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

After reconciliation, the correct balance of cash is: $4,500.

The allowance method for uncollectible accounts

All of the answer choices are correct. -Is required by Generally Accepted Accounting Principles. -Allows for the possibility that some accounts will not be collected. -Reports net accounts receivable for the amount of cash expected to be collected.

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

All of the these are included to record the sale. -Debit to Accounts Receivable. -Credit to Sales Revenue -Debit to Cost of Goods Sold.

When a company determines that the net realizable value of its ending inventory is lower than its cost, what would be the effect(s) of the adjustment to write down inventory to net realizable value?

All of these answer choices are correct -Decrease total assets. -Decrease net income. -Decrease retained earnings.

Net income is defined as:

All revenues minus all expenses.

Accounts receivable are best described as

Assets of the company representing the amount owed by customers.

Which of following companies record revenues when selling inventory?

Both manufacturing and merchandising companies.

A company's petty cash refers to:

Cash on hand to pay for minor purchases.

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

Checks outstanding.

A sales discount is recorded by the seller as a(n):

Contra revenue.

Under a perpetual inventory system:

Cost of goods sold is recorded with each sale.

Under the allowance method for uncollectible accounts, the balance of Allowance for Uncollectible Accounts increases when:

Future bad debts are estimated.

Operating income is defined as:

Gross Profit minus Operating Expenses.

Which of the following levels of profitability in a multiple-step income statement represents revenues from the sale of inventory less the cost of that inventory?

Gross profit.

Using a perpetual inventory system, the sale of inventory on account would be recorded as I. Debit Cost of Goods Sold; credit Inventory. II. Debit Inventory; credit Sales Revenue. III.Debit Accounts Receivable; credit Sales Revenue.

I and III

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

Interest earned.

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

Interest on bank deposit

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

Inventory.

Inventory is defined as:

Items a company intends for sale to customers.

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

LIFO.

Which inventory cost flow assumption generally results in the lowest reported amount for inventory when inventory costs are rising?

Last-in, first-out (LIFO).

Using the allowance method, the effect on the current year's financial statements of writing off an account receivable generally is to I. Decrease total assets. II.Decrease net income.

Neither I nor II

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

Net accounts receivable do not change.

Which of the following levels of profitability in a multiple-step income statement represents all revenues less all expenses?

Net income.

The purpose of a petty cash fund is to

Provide cash on hand for minor expenditures.

Which of the following transactions would result in an account receivable?

Providing services to customers on account.

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

The cost of inventory sold during the year.

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

The entry to update the company's cash balance after the bank reconciliation is prepared would include a: Debit to Accounts Receivable.

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

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

A company's inventory turnover ratio measures:

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

If a company uses the allowance method of accounting for uncollectible accounts and collects cash on an account receivable previously written off:

There is no change in total assets.

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

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

At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $4,000. What amount will Bennett report for cost of goods sold?

$11,500.

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

$11,760.

On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What amount would Fox record as revenue on March 17?

$12,000.

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

$22,200

A company has the following account balances at the end of the year: -Credit Sales = $400,000 -Accounts receivable = $80,000 -Allowance for Uncollectible Accounts = $400 debit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement?

$3,600.

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

$5,100.

At the end of its first year of operations, a company establishes an allowance for future uncollectible accounts for $5,600. At what amount would bad debt expense be reported in the current year's income statement?

$5,600.

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

$6,000.

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

$6,100.

On January 1, 2021, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in eight months. Calculate the amount of interest revenue Nees will record on September 1, 2021, the date that the note is due.

$600.

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

$2,000.

A company has the following account balances at the end of the year: -Credit Sales = $400,000 -Accounts receivable = $80,000 -Allowance for Uncollectible Accounts = $400 credit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement?

$2,800.

Suppose the balance of the allowance for uncollectible accounts at the end of the current year is $800 (credit) before any adjustment entry. The company estimates future uncollectible accounts to be $5,600. At what amount would bad debt expense be reported in the current year's income statement?

$4,800.

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What is the amount of net revenues (total revenue minus sales discounts) as of August 12?

$4,850.

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

$5,000.

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

$91,000.

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

$96,000.

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

20%

For the year, Simmons Incorporated reports net sales of $100,000, cost of goods sold of $80,000, and an average inventory balance of $40,000. What is Simmons' gross profit ratio?

20%.

On May 1, 2021, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in 12 months. Nees has a December 31 year-end. Calculate the amount of interest revenue Nees will report in its 2021 and 2022 income statements.

2021 = $600; 2022 = $300.

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

Debit Inventory; credit Accounts Payable.

For the year, Simmons Incorporated reports net sales of $100,000, cost of goods sold of $80,000, and an average inventory balance of $40,000. What is Simmons' gross profit ratio?

Debit Purchases; credit Accounts Payable.

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

Debit Sales Discount for $10.

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

Debit to Cost of Goods Sold.

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

Decrease in net income.

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

Deposits outstanding

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

FIFO.

Which inventory cost flow assumption generally results in the lowest reported amount for cost of goods sold when inventory costs are rising?

First-in, first-out (FIFO).

Which of the following refers to the seller reducing the customer's balance owed because of some deficiency in the company's product or service?

Sales Allowance.

Gross profit is defined as:

Sales Revenue minus Cost of Goods Sold.

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities.

When preparing a bank reconciliation, outstanding checks would be:

Subtracted from the bank's cash balance.

When preparing a bank reconciliation, nonsufficient funds (NSF) checks would be:

Subtracted from the company's cash balance.

A company's gross profit ratio measures:

The amount by which the sale of inventory exceeds its cost per dollar of sales.