acg exam 2

A company sold merchandise for $255000. Returns from customers totaled $3,600. If the company's gross profit rate is 30%, what is the company's cost of goods sold?

$175,980

At the start of the year a company's Allowance for Doubtful Accounts had a credit balance of $22,000. During the year, it had credit sales of $1,100,000. It also wrote-off $50,000 of uncollectible accounts receivable during the year. Past experience indicates that the allowance should be 2% of the balance in receivables. If the accounts receivable balance at December 31 was $250,000, what is the bad debt expense for the year?

$33,000

On June 15 a company sold merchandise on account to a customer for $1,000 with terms 2/10, n/30. On June 20, the customer returned $300 of merchandise. On June 24, the customer pays the company the balance due. What is the amount of cash received by the company on June 24?

$686

On January 5 a company sold merchandise on account to a customer for $1,500 with terms 3/10, n/30. On January 10, the customer returns merchandise worth $300. On January 14, the customer pays the balance due. What is the amount of cash received by the company on January 14?

1164 =payment made within 10 day discount period, amount received is 1200 (1500- return of $300) minus 3% discount of $36 (1200 x 3%) for cash of $1164

A company purchased merchandise with an invoice price of $3000 and credit terms of 2/10, n/40. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?

24%

At the start of the current year a company's allowance for doubtful accounts had a credit balance of $15,000. During the current year, it had net credit sales of $600,000 and it wrote-off $24,000 of accounts receivable as uncollectible. The company's accounts receivable at the end of the year is $160,000. Past experience indicates that the allowance should be 10% of the balance in receivables. What is the bad debt expense for the year?

25000

The interest on a $5000, 10%, 6-month note receivable is

250Principal x annual intrest rate x number of years (6/12)

Which of the following is closest to this company's gross profit rate?

32% (gross profit rate= gross profit/ net sales)

Using the allowance method the uncollectible accounts for the year are estimated to be $40,000. The Allowance for Doubtful Accounts has a $9,000 debit balance before recording the year-end adjusting entries. What is the bad debt expense for the period?

49000

The financial statements of a company reports net sales of $200000. It also reports inventory of $60,000 and $50,000 at the beginning of the year and end of year, respectively. Its average net accounts receivable is $30,000. What is the average collection period for accounts receivable in days (rounded)?

54.8 days

A corporation had net credit sales during the year of $400000 and cost of goods sold of $150,000. The net accounts receivable at the beginning of the year was $60,000 and at the end of the year was $70,000. The balance of total assets at the beginning of the year was $1,200,000 and at the end of the year was $1,300,000. How much is the accounts receivables turnover?

6.15

Under a perpetual inventory system

Accounting records continuously show amout of inventory

Used to compute cash realizable value?

Accounts Receivable and Allowance for Doubtful Accounts

Both permanent accounts are

Accounts Receivable; Allowance for Doubtful Accounts

Which one of the following accounts is a temporary account?

Bad debits expense

If goods in transit are shipped FOB shipping point

Buyer has title once goods given to transport company

A company sells merchandise on account for $1500 with credit terms of 2/10, n/30. The buyer returns $500 of merchandise that was damaged. A couple days later, the buyer pays the account. The buyer's payment occurs within the discount period. What journal entry does the seller record when it receives the check from the buyer?

Cash: 980, sales discounts: 20, accounts receivable: 1000

Inventory costing methods place primary reliance on assumptions about the flow of

Costs

A company's net credit sales for the year are $6000,000. On December 31, its accounts receivable balance is $300,000. The allowance is calculated as 7% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $10,000 before adjustment. How much is the balance of the allowance account after adjustment?

Credit balance of $21,000

A corporation uses a perpetual inventory system. It purchased $3000 of merchandise on August 2 on account with terms 1/10, n/30. It returned $250 of the merchandise on August 4. It pays on August 12. Which of the following is part of the journal entry it records when it pays on August 12?

Credit inventory for $27.50

A company uses a perpetual inventory system. On December 10 the company bought inventory for $3,000. It is the only item of inventory it owns. On December 29, it sells the inventory for $5,500 on account with terms 2/10 n/30. The company's customer pays for the inventory on January 3. Which of the following is recorded by the company on December 29?

Credit inventory for $5500

A certain company is a retailer and it uses a perpetual inventory system. Which statement is correct about the company?

Credits inventory account when returns purchased merch to supplier

When an uncollectible account is recovered after it has been written off which of the following journal entries will be recorded first?

Debit Accounts Receivable and credit Allowance for Doubtful Accounts

A company holds a $10000, 120-day, 6% note issued by a corporation. What is the journal entry recorded by the company that holds the note when it matures assuming no interest has previously been accrued?

Debit Cash for $10,200, credit Notes Receivable for $10,000, and credit Interest Revenue for $200

A company loaned $30000 to a debtor on May 1, at 10% interest for 3 months. What adjusting entry should the company record on June 30 before preparing the financial statements on June 30?

Debit Interest Receivable for $500 and credit Interest Revenue for $500

A bank holds a 120-day 10%, $21,000 note. The maker of the note pays in full on the maturity date. Which of the following is part of the journal entry that the bank will record on the maturity date?

Debit to cash for $21,700

A company sold $7000 of merchandise to customers who charged their purchases with a bank credit card. The company's bank charges it a 5% fee. Which one of the following is part of the journal entry to record this transaction?

Debit to cash for $6,650

If a company fails to record its estimated bad debts expense then its

Equity is overstated

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods purchased as inventory has increased during the period then the company using

FIFO will have highest retained earnings

What is the maturity value equal to?

Face value plus interest

Which of the following should be included in the physical inventory of a company?

Goods shipped on consignment to another country

Which of the following would not be classified as an operating expense on a multi-step income statement?

Income tax expense

In a period of declining inventory costs which inventory flow assumption will result in the highest net income?

LIFO

Under what inventory system is cost of goods sold determined after each sale?

Perpetual inventory system

If a company is concerned about lending money to a risky customer which one of the following would it not want to do?

Provide the customer a lengthy payment period

Which of the following is true with regards to receivables?

Receivables are claims that are expected to be collected in cash

If company given credit terms of 2/10,n/30, it will

Receive 2% discount if paid within 10 days of invoice, otherwise price due in 30 days

A corporation uses the perpetual inventory system. On May 1 it sells merchandise on account for $10,000 with terms 2/10, n/30. The corporation had paid $6,000 to acquire the merchandise. On May 7, the customer returns merchandise with an invoice price of $1,000 to the corporation. The merchandise returned to it had cost the corporation $600. On May 10, the corporation receives payment for the merchandise retained by the customer. How would the corporation record the return of merchandise from the customer on May 7?

Record 2 journal entries. Debit sales returns and allowances for $1000, credit accounts receivable for $1000, debit inventory for $600, credit cost of goods sold for $600

Which of the following accounts is classified as a contra revenue account?

Sales returns and allowances (other is sales discounts)

Which of the following ordinarily has the shortest operating cycle?

Service companies

Which of the following is false with regards to notes receivable?

When a note is dishonored, the lender no longer has a claim against the maker of the note.

When is a physical inventory is taken what is included?

Work in progress

Which one of the following is not a method used by companies to accelerate cash receipts?

Writing off receivables

A company sells $200000 of accounts receivable to a factor for cash less a 2% service charge. The entry to record the sale should include

a debit to Cash for $196,000.

Factoring arrangements

are a way to accelerate receivables collection.

A high accounts receivable turnover ratio indicates

customers are making payments very quickly.

An analysis of a company's accounts receivable indicates that $4500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance before adjustment, the adjustment to record bad debts for the period will require a

debit to Bad Debt Expense for $3,300.

A company accepted a customer's Visa card as payment for $900 of merchandise it sold to the customer. The bank that issued the credit card charges a 4% credit card fee. The company's journal entry to record this transaction will include

debits to Cash $864 and Service Charge Expense $36.

If a company collects from a customer after the customer's account has been written off as uncollectible, the company is said to recover the uncollectible account. When a company uses accrual basis accounting and it recovers an uncollectible accounts, the recovery...

does not affect the company's income in the period it is collected.

Which factor would not affect gross profit rate?

increase in price of heating in the store

when recording uncollectible accounts expense

it is not possible to know which specific accounts will not be collected from customers.

Which of the following would most likely employ the specific identification method of inventory costing?

jewelery store

Interest is almost always associated with

notes receivable.

Under the allowance method of accounting for uncollectible accounts

the net realizable value of accounts receivable in balance sheet is same before and after account written off

If a company that uses the allowance method for uncollectible accounts collects an account receivable after having been previously written it off

there will be both a debit and a credit to accounts receivable.

Companies that sell merchandise to retailers that the retailers sell to customers are known as

wholesalers