ACCT Midterm 2

Short-term notes receivable are reported at A) cash (net) realizable value. B) face value. C) gross realizable value. D) maturity value.

A) cash (net) realizable value.

The percentage of sales basis of estimating expected uncollectibles A) emphasizes the matching of expenses with revenues. B) emphasizes balance sheet relationships. C) emphasizes cash realizable value. D) is not generally accepted as a basis for estimating bad debts.

A) emphasizes the matching of expenses with revenues.

When an account becomes uncollectible and must be written off, A) Allowance for Doubtful Accounts should be credited. B) Accounts Receivable should be credited. C) Bad Debts Expense should D) Sales should be debited.

B) Accounts Receivable should be credited.

A 90-day note dated June 21 has a maturity date of A) September 21. B) September 19. C) September 20. D) September 22.

B) September 19.

If a company fails to record estimated bad debts expense, A) cash realizable value is understated. B) expenses are understated. C) revenues are understated. D) receivables are understated.

B) expenses are understated.

A debit balance in the Allowance for Doubtful Accounts A) is the normal balance for that account. B) indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. C) indicates that actual bad debt write-offs have been less than what was estimated. D) cannot occur if the percentage of sales method of estimating bad debts is used.

B) indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

An aging of a company's accounts receivable indicates that $8,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a A) debit to Bad Debts Expense for $8,000. B) debit to Allowance for Doubtful Accounts for $6,900. C) debit to Bad Debts Expense for $6,900. D) credit to Allowance for Doubtful Accounts for $8,000.

C) debit to Bad Debts Expense for $6,900.

The maturity value of a $60,000, 10%, 60-day note receivable dated July 3 is A) $60,000. B) $66,000. C) $70,000. D) $61,000.

D) $61,000.

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited A) when a credit sale is past due. B) at the end of each accounting period. C) whenever a pre-determined amount of credit sales have been made. D) when an account is determined to be uncollectible.

D) when an account is determined to be uncollectible.

Morton Company uses a perpetual inventory system. On December 1, 2006, the company purchased inventory on account for $9,000. The credit terms are 2/10, n/30. If Morton pays the bill on December 29, 2006, what amount of discount will be taken? A) $0 B) $90 C) $180 D) $882

a. $0

A company just starting business made the following four inventory purchases in June: June 1 150 Units $ 780 June 10 200 Units 1,170 June 15 200 Units 1,260 June 28 150 Units 900 --------- $4,200 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. 15. Using the LIFO inventory method, the value of the ending inventory on June 30 (rounded to the nearest dollar) is A) $1,073. B) $1,305. C) $2,895. D) $3,128.

a. $1,073

Tier II Company uses a periodic inventory system. Details for the inventory account for the month of January 2006 are as follows: Units Per unit price Total Balance 1/1/2006 200 $5.00 $1,000 Purchase1/15/2006 100 5.30 530 Purchase1/28/2006 100 5.50 550 If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month? A) $1,376 B) $1,424 C) $2,800 D) $3,000

a. $1,376

Which of the following would be deducted from the balance per bank on a bank reconciliation? A) Outstanding checks. B) Deposits in transit. C) Service charge. D) Electronic funds transfer to supplier

a. Outstanding checks.

Meyer Company. uses a perpetual inventory system. Meyer purchased inventory on account for $1,000. The credit terms are 2/10, n/60. The purchase will be recorded with the following journal entry: A) debit Merchandise Inventory, $1,000; credit Accounts Payable, $1,000. B) debit Purchases, $1,000; credit Accounts Payable, $1,000. C) debit Merchandise Inventory, $980; credit Accounts Payable, $980. D) debit Cost of Goods Sold, $1,020; credit Merchandise Inventory, $1,020.

a. debit Merchandise Inventory, $1000; credit Accounts Payable, $1,000

A company just starting business made the following four inventory purchases in June: June 1 150 Units $ 780 June 10 200 Units 1,170 June 15 200 Units 1,260 June 28 150 Units 900 --------- $4,200 The inventory method which results in the highest gross profit for June is A) the FIFO method. B) the LIFO method. C) the weighted average unit cost method. D) not determinable.

a. the FIFO method.

Flynn Company purchased merchandise inventory with an invoice price of $3,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Flynn Company pays within the discount period? A) $3,000. B) $2,940. C) $2,700. D) $2,760.

b. $2,940

Company A sells $300 of merchandise on account to Company B with credit terms of 2/10, n/30. If Company B remits a check taking advantage of the discount offered, what is the amount of Company B's check? A) $210 B) $294 C) $270 D) $240

b. $294

Vic's Used Cars uses the specific identification method of costing inventory. During March, Vic purchased three cars for $4,000, $5,000, and $6,500, respectively. During March, two cars are sold for $6,000 each. Vic determines that at March 31, the $6,500 car is still on hand. What is Vic's gross profit for March? A) $3,500. B) $3,000. C) $500. D) $5,500

b. $3,000

During 2006, Salon Enterprises generated revenues of $60,000. Their expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000. Salon's gross profit is A) $60,000 B) $30,000 C) $18,000 D) $16,000

b. $30,000

CMP Inc. maintains perpetual inventory records. During January, the company made purchases of $40,000 and sold goods with a cost of $42,000 for $104,000. Cost of goods sold for the month is: A) $40,000 B) $42,000 C) $62,000 D) $64,000

b. $42,000

Tier II Company uses a periodic inventory system. Details for the inventory account for the month of January 2006 are as follows: Units Per unit price Total Balance 1/1/2006 200 $5.00 $1,000 Purchase1/15/2006 100 5.30 530 Purchase1/28/2006 100 5.50 550 If the company uses LIFO, what is the value of the ending inventory? A) $520 B) $600 C) $656 D) $1,480

b. $600

If a check correctly written and paid by the bank for $438 is incorrectly recorded on the company's books for $483, the appropriate treatment on the bank reconciliation would be to A) add $45 to the bank's balance. B) add $45 to the book's balance. C) deduct $45 from the bank's balance. D) deduct $438 from the book's balance.

b. Add $45 to the book's balance

39. Which of the following would be added to the balance per bank on a bank reconciliation? A) Outstanding checks. B) Deposits in transit. C) Service charge. D) Electronic funds transfer to supplier.

b. Deposits in transit

Detailed records of goods held for resale are not maintained under a A) perpetual inventory system. B) periodic inventory system. C) double entry accounting system. D) single entry accounting system.

b. periodic inventory system.

During 2006, Salon Enterprises generated revenues of $60,000. Their expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000. Salon's operating income is A) $60,000 B) $30,000 C) $18,000 D) $12,000

c. $18,000

A company just starting business made the following four inventory purchases in June: June 1 150 Units $ 780 June 10 200 Units 1,170 June 15 200 Units 1,260 June 28 150 Units 900 --------- $4,200 Using the FIFO inventory method, the amount allocated to cost of goods sold for June is A) $1,305. B) $2,545. C) $2,895. D) $3,128.

c. $2,895

Tier II Company uses a periodic inventory system. Details for the inventory account for the month of January 2006 are as follows: Units Per unit price Total Balance 1/1/2006 200 $5.00 $1,000 Purchase1/15/2006 100 5.30 530 Purchase1/28/2006 100 5.50 550 If the company uses FIFO, what is the value of the ending inventory? A) $520 B) $600 C) $656 D) $1,424

c. $656

On a classified balance sheet, merchandise inventory is classified as A) an intangible asset. B) property, plant, and equipment. C) a current asset. D) a long-term investment.

c. A current asset

Eaton Company sells merchandise on account for $1,000 to Tang Company with credit terms of 2/10, n/30. Tang Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Eaton Company make upon receipt of the check? a. Cash 700 Accounts Receivable 700 b. Cash 686 Sales Returns and Allowances 314 Accounts Receivable 1,000 c. Cash 686 Sales Returns and Allowances 300 Sales Discounts 14 Accounts Receivable 1,000 d. Cash 980 Sales Discounts 20 Sales Returns and Allowances 300 Accounts Receivable 700

c. Cash 686 Sales Returns and Allowances 300 Sales Discounts 14 Accounts Receivable 1,000

Which of the following would be deducted from the balance per books on a bank reconciliation? A) outstanding checks. B) deposits in transit. C) NSF check. D) Collection of note by bank.

c. NSF check

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is: Cost of Goods Sold Net Income a. Understated Understated b. Overstated Overstated c. Understated Overstated d. Overstated Understated

c. Understated; Overstated

Trade accounts receivable are valued and reported on the balance sheet A) in the investment section. B) at gross amounts less sales returns and allowances. C) at net realizable value. D) only if they are not past due.

c. at net realizable value

Sales revenues are usually considered earned when A) cash is received from credit sales. B) an order is received. C) goods have been transferred from the seller to the buyer. D) adjusting entries are made.

c. goods have been transferred from the seller to the buyer.

A company just starting business made the following four inventory purchases in June: June 1 150 Units $ 780 June 10 200 Units 1,170 June 15 200 Units 1,260 June 28 150 Units 900 --------- $4,200 Using the average cost method, the amount allocated to the ending inventory on June 30 is A) $4,200. B) $3,000. C) $1,150. D) $1,200.

d. $1,200

During 2006, Salon Enterprises generated revenues of $60,000. Their expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000. Salon's net income is A) $60,000 B) $30,000 C) $18,000 D) $16,000

d. $16,000

Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? A) $980 B) $984 C) $800 D) $784

d. $784

Tier II Company uses a periodic inventory system. Details for the inventory account for the month of January 2006 are as follows: Units Per unit price Total Balance 1/1/2006 200 $5.00 $1,000 Purchase1/15/2006 100 5.30 530 Purchase1/28/2006 100 5.50 550 An end of the month (1/30/2006) inventory showed that 120 units were on hand. 20. How many units did the company sell during January 2006? A) 80 B) 120 C) 200 D) 280

d. 280

On July 1, Freeman Company sold goods on account for $5,000 with credit terms 1/15, n/30.The journal entry to record the revenue portion of the sale is: a. Cash 5,000 Sales 5,000 b. Cash 4,550 Service Revenue 4,550 c. Accounts Receivable 4,500 Service Revenue 4,500 d. Accounts Receivable 5,000 Sales 5,000

d. Accounts Receivable 5,000 Sales 5,000

Which of the following would be added to the balance per books on a bank reconciliation? A) Outstanding checks. B) Deposits in transit. C) NSF check. D) Collection of note by bank

d. Collection of note by bank