Ch. 4,5,6 ACG

True or false: Variability in operating cash flows is unimportant as long as the total cash flows over a three-year period is sufficiently positive.

False

Fraudulent reporting by management could include

Fictitious revenues from a fake customer, improper asset valuation, and mismatching revenues and expenses

The allowance method is required by

GAAP

Where is a note receivable reported in the balance sheet?

In either current or noncurrent assets, as appropriate.

The Sarbanes-Oxley Act applies to

companies that are required to file with the SEC.

Allowance for Uncollectible Accounts has a credit balance because it is a(n) ______ account.

contra-asset

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.)

cost of goods sold. inventory.

The account "Allowance for Uncollectible Accounts" normally has a _______ balance.

credit

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be _________ than cost of goods sold determined using the FIFO inventory assumption.

higher

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

included in Gerald's inventory.

A multiple-step income statement reports multiple levels of

income

The direct write-off method is required for

income tax purposes

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:

inventory

Items held for sale in the normal course of business are referred to as

inventory

Companies are free to choose FIFO, LIFO, or weighted-average cost to report inventory and cost of goods sold. The reported amounts for ending inventory and cost of goods sold will not be the same across inventory reporting methods because:

inventory costs generally change over time.

A formal credit arrangement between a creditor and debtor is called a(n)

note receivable.

When adjusting the company's cash account balance in a bank reconciliation, which item must be added to the cash account balance?

Collections of funds by the bank

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

Inventory Cost of Goods Sold

The allowance method for uncollectible accounts

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.

The definition of inventory includes which of the following items?

Items held for resale Materials used currently in the production of goods to be sold Items currently in production for future sale

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory?

LIFO

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income?

LIFO

A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n) __________ _________ fund.

petty cash

Separation of duties and E-commerce controls are examples of Blank______ controls.

preventive

Two types of control activities are

preventive and detective controls.

Financing cash flows would include which of the following?

Repayment of long-term borrowing to the bank.

Which of the following generally would not be considered good internal control of cash receipts?

Requiring the employee receiving the cash from the customer to also deposit the cash into the company's bank account.

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.

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the

Sarbanes-Oxley Act.

Which of the following are preventive controls?

Separation of duties. Physical controls. Proper authorization. Employee management. E-commerce controls.

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance? (Select all that apply.)

Service charges Charges for NSF checks

Which of the following generally would be considered good internal control of cash disbursements?

Set maximum purchase limits on debit cards and credit cards.

Which of the following methods are not used for inventory costing? (Select all that apply.)

Simple-average NIFO

Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in millions were $105, $115, $110 during the same period. From the perspective of operating cash flows, which company would likely be perceived as riskier?

Smith

Which of the following methods are available for costing inventory? (Select all that apply.)

Specific identification FIFO LIFO Weighted-average

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.

The ending balance in cash is reported in which financial statement(s)?

The balance sheet and statement of cash flows

Effective internal control over cash includes the requirement that:

The person who makes deposits should NOT record the deposits.

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.

Which of the following will cause differences between the bank statement balance and the accounting balance for cash?

Timing differences Errors

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.

The account "Allowance for Uncollectible Accounts" is classified as

a contra asset to accounts receivable.

A trade discount is

a reduction in the list price granted to customers

Mueller Inc. utilizes a periodic inventory system. When Mueller incurs shipping costs for purchased goods, the account debited should be

a separate freight-in account.

Under the allowance method, companies estimate ______ uncollectible amounts and report those estimates in the ______ year.

future; current

In a periodic inventory system, freight-in costs are

recognized in a temporary freight-in account.

One of the most important internal controls for cash is the bank

reconciliation

Purchase discounts and purchase returns are recorded as a reduction in inventory cost in a _________ inventory system.

perpetual

Preparation of a bank ______ helps maintain control of cash accounts.

reconciliation

Two entries are required when a previously written off account is collected. These two entries include:

record the collection on the account receivable reinstate the account receivable

The difference between LIFO and FIFO disclosed in the notes to the financial statements of a company currently utilizing the LIFO cost flow assumption is sometimes referred to as the LIFO

reserve

Internal control consists of plans to

safeguard company assets. provide accurate and reliable accounting information.

sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.)

sales on account. credit sales.

A petty cash fund is used for

small amounts of cash needed for low-cost items.

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

A bank statement may not agree with the amount of cash recorded by the company in the cash account because of __________ differences and errors.

timing

A(n) _________ difference in cash occurs when a company records a transaction either before or after the bank records the same transaction.

timing

If a company records a transaction before the bank records the same transaction, this is called a/an Blank______ difference.

timing

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

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?

$18,000

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.

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 September 1, Bates Supplies borrows $30,000 from Vines Incorporated by signing an 8% note due in 12 months. Calculate the amount of interest revenue Vines will record on December 31, four months after the note is issued.

$800.

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.

Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?

$93,000

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.

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.

At the beginning of the year, Clay Ventures has total accounts receivable of $100,000. By the end of the year, Clay reports net credit sales of $900,000 and total accounts receivable of $200,000. What is the average collection period for Clay Ventures?

60.8 days.

Use the information below to calculate the receivables turnover ratio: Net Credit Sales$ 200,000 Beginning Accounts Receivable$ 40,000 Ending Accounts Receivable$ 10,000 Cash$ 20,000

8

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

Accounts Payable is credited.

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

Accounts Payable.

A company's petty cash refers to:

Cash on hand to pay for minor purchases.

Operating cash flows include which of the following?

Cash paid for supplies.

Financing cash flows include which of the following?

Cash received from the issuance of common stock.

Investing cash flows include which of the following?

Cash received from the sale of a used company truck.

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

Checks outstanding.

Which of the following is considered cash for financial reporting purposes?

Checks received from customers.

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

Contra revenue.

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

Debit Inventory

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

Deposits outstanding.

The Sarbanes-Oxley Act (SOX) mandates which of the following?

Increased regulations related to auditor-client relations. Increased regulations related to internal control. Increased regulations related to corporate executive accountability.

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

Interest on bank deposit.

The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the

LIFO reserve

A company's ratio of cash to noncash assets provides some indication of the company's ability to:

Maintain normal operations. Respond quickly to new opportunities. Prevent bankruptcy.

Which of the following is an example of detective controls?

Management periodically determines whether the amount of physical assets agree with the accounting records.

Which of the following items will require a journal entry following a bank reconciliation? (Select all that apply.)

NSF checks Notes collected by the bank

Match each scenario with the type of inventory system.

Perpetual inventory system- Neumann Company can determine the cost of inventory still on hand by referring to the inventory account. Periodic inventory system- Shelly Company must first take a physical inventory to determine the cost of inventory still on hand.

The ________ inventory system records all inventory-related transactions in the Inventory account (e.g. transportation, purchase returns and allowances, purchase discounts) and reduces inventory at the time of sale. The _________ inventory system uses separate accounts for these items and records cost of goods sold at the end of the accounting period.

Perpetual, periodic

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

Providing services to customers on account.

What would cause a bank statement not to agree with the cash balance in the accounting records?

The bank paid interest that the company has not recorded. Deposits outstanding that have been recorded on the company's records, but not on the bank's. The bank made an error in recording a deposit made by the company. The company made an error in recording a deposit.

Who is ultimately responsible for the establishment and success of a company's internal control system?

The company's top executives.

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.

Consistent with the COSO framework, an effective internal control system includes the control environment. The control environment refers to:

The ethical tone set by top management.

The receivables turnover ratio is a measure of:

The number of times during a year that the average accounts receivable balance is collected.

What is the primary purpose of a bank reconciliation?

To ensure the bank balance per reconciliation is equal to the company balance per reconciliation

What is a direct purpose of internal controls?

To improve the accuracy and reliability of accounting information.

Which of the following represent reasons why managers closely monitor inventory levels?

To minimize costs of inventory write-downs due to obsolete inventory. To ensure that sufficient units are available.

Under the direct write-off method, the balance of the accounts receivable account is reduced:

When an account is proven uncollectible.

In a periodic inventory system, purchase returns

are recorded in a separate contra purchases account.

Accounts receivable should be classified as a(n)

asset

Using the perpetual inventory system, what is the effect of a sale of inventory on assets?

assets decrease by the cost of the inventory assets increase by the sales price of the inventory

Meller purchases inventory on account. As a results, Meller's

assets will increase.

Two important ratios that help in understanding a company's effectiveness in managing receivables are the:

average collection period receivables turnover ratio

The lower of cost and net realizable value method was developed to

avoid reporting inventory at an amount that exceeds the benefits it provides.

The cost of estimated accounts receivable that will not be collected is referred to as _______ __________ expense.

bad debit

Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):

decrease in Accounts Receivable

The two types of control procedures are preventive and

detective

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are:

paid by the supplier.

What is the effect of recording a sale of inventory under the perpetual inventory system on the financial statements? (Assume that the sales price is higher than the cost of inventory)

stockholders' equity increases total assets increase net income increases

A bank reconciliation is a procedure used to determine if the cash balance in the bank statement equals

the ending balance of cash in the accounting records.

Purchase returns are recorded in a separate contra purchase account in a _______ inventory system.

periodic

Kidz Incorporated reports the following aging schedule of its accounts receivable with the estimated percent uncollectible. Age GroupAmount ReceivableEstimated Percent Uncollectible0 to 60 days$ 20,0002%61 to 90 days6,00015%More than 90 days past due2,00050%Total$ 28,000 At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet?

$2,300.

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.

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.

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

Suppose the balance of the allowance for uncollectible accounts at the end of the current year is $800 (credit) before any adjusting 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 amount would Sanders record as revenue on August 4?

$5,000.

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.

At the end of the previous year, a company's balance sheet reports cash of $30,000. For the current year, the company's statement of cash flows reports operating cash inflows of $90,000; investing outflows of $110,000; and financing inflows of $40,000. What amount of cash will be reported in the current year's balance sheet?

$50,000.

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.

Nija Incorporated reports the following aging schedule of its accounts receivable with the estimated percent uncollectible. What is the total estimate of uncollectible accounts using the aging method? Age GroupAmount ReceivableEstimated Percent Uncollectible0 to 60 days$ 40,0001%61 to 90 days15,00020%More than 90 days past due5,00060%Total$ 60,000

$6,400.

On January 1, 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, the date that the note is due.

$600.

List the steps for a bank reconciliation in the correct order.

1. Reconcile the banks cash balance2. Reconcile the company's cash balance3. Update the company's cash account by recording items identified in step 2

On May 1, 20X1, 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 20X1 (current year) and 20X2 (next year) income statements.

20X1 = $600; 20X2 = $300.

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.

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.

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.

The direct write-off method is generally not permitted for financial reporting purposes because

Accounts receivable are not stated for the amount of cash expected to be collected.

Which of the following items are not included in cash?

Accounts receivable from customers

Which of the following steps are necessary to reconcile the bank balance and the cash account balance.

Adjust bank's cash balance for items not in bank statement Record items that reconcile the company's cash balance Adjust the company's cash balance for items not in company records

In a bank reconciliation, which of the following will require a journal entry by the company?

Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books

Which of the following is considered cash for financial reporting purposes?

Amounts held in checking accounts.

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?

An entry to reinstate the account receivable and an entry to record payment.

Raven receives a 3-year note receivable from a customer for goods sold. How should Raven report this note receivable in its financial statements?

As a noncurrent asset

Managers should act:

As stewards of the company's assets.

Accounts receivable are best described as

Assets of the company representing the amount owed by customers.

Where is inventory reported in the financial statements?

Balance sheet as a current asset

Which of the following is considered cash for financial reporting purposes?

Balances in savings accounts.

Which of the following is considered cash for financial reporting purposes?

Coins and currency. Debit card sales. Checks received from customers.

The framework for designing an internal control system is provided by the

Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Sarbanes-Oxley Act (SOX) was passed in response to:

Corporate scandals involving unethical behavior of top executives.

Which of the following items are included in cash?

Currency and coins Balance in checking accounts Checks from customers

A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible: Age Group Amount Receivable Estimated Percent UncollectibleNot yet due$ 175,0004%0 to 60 days past due$ 40,00010%61 to 120 days past due$ 10,00030%More than 120 days past due$ 5,00060% Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the following would be recorded in the year-end adjusting entry?

Debit Bad Debt Expense for $14,000.

A company provides services to a customer in the current year and then determines in the following year that the customer's account needs to be classified as uncollectible. If the company uses the direct write-off method, which of the following would be recorded in the following year at the time of the write-off?

Debit Bad Debt Expense.

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 update the company's cash balance after the bank reconciliation is prepared would include a:

Debit to Accounts Receivable.

Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries?

Debit to Allowance for Uncollectible Accounts Credit to Accounts Receivable

Section 404 of the Sarbanes-Oxley Act requires companies to:

Document and assess internal controls.

What is the concept behind separation of duties in establishing internal control?

Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

Which of the following generally would be considered a good internal control over cash payments?

Ensure checks are serially numbered and signed only by authorized employees.

For internal record keeping, most companies carry their inventory using the Blank______ basis.

FIFO

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

False

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

False Reason: Receivables not expected to be collected are not included in assets

he Sarbanes-Oxley Act of 2002 applies to all companies that

File reports with the Securities and Exchange Commission.

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

Future bad debts are estimated.

Which of the following could cause a company to have a high ratio of cash to noncash assets?

Highly volatile operations. Low dividend payments. Significant foreign operations.

Under the direct write-off method, uncollectible accounts are recorded:

In the period the account is determined actually uncollectible.

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to:

Inventory

Using the allowance method, the effect on the current year's financial statements of writing off an account receivable generally is to Decrease total assets. 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 adjusts the company's balance of cash in a bank reconciliation?

Note received by the bank on behalf of the company.

If a company uses the periodic inventory system, how many entries are made when a sale occurs?

One

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?

Opening the mail and deposit of checks in the bank Depositing checks into the bank and recording receipts in the accounting records

In response to widespread fraudulent reporting in the late 1990's and early 2000's, Congress:

Passed the Sarbanes-Oxley Act

Operating cash flows would include which of the following?

Payment for employee salaries.

Investing cash flows would include which of the following?

Payment for land.

Operating cash flows would include which of the following?

Payment for prepaid insurance.

Which of the following inventory systems requires a physical count in order to determine cost of goods sold?

Periodic inventory system

Match each scenario with the type of inventory system.

Perpetual inventory system- Peter Company recognizes cost of goods sold each time it recognizes a sale. Periodic inventory system- Sherman Company recognizes cost of goods sold after completing a physical inventory.

Match the inventory system with the account utilized to record a purchase of inventory.

Perpetual- Inventory Periodic- Purchases

Corporate executive accountability under the Sarbanes-Oxley Act requires corporate executives to:

Personally certify the company's financial statements.

A(n) ______ _______ is the legal right to receive cash from a credit sale and represents an asset of the company.

account receivable

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

account receivable.

The allowance for uncollectible accounts is a contra account to

accounts receivable.

In a perpetual inventory system, freight costs on purchases are

added to the inventory account.

The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the ________ method of accounts receivable.

aging

To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to

allowance for uncollectible accounts.

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the

allowance method

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's: (Select all that apply.)

balance sheet statement of cash flows

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate.

A check that is NSF (nonsufficient funds) is a check that

cannot be paid because the account does not contain enough funds.

The asset that is most easily stolen and susceptible to fraud is

cash

The asset that is most susceptible to employee fraud is

cash

A trade discount is a reduction from the list price, which is used to: (Select all that apply.)

change prices without publishing a new catalog disguise real prices from competitors give quantity discounts to customers

Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called

checks outstanding.

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

credit sales.

Inventory is classified as

current asset

Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include

debit Allowance for Uncollectible Accounts.

The journal entry to record bad debt expense includes: (Select all that apply.)

debit to bad debt expense credit to allowance for uncollectible accounts

When a company finds out that an NSF check was written to the company, the company must ______ the balance in the cash account.

decrease

Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are

deposits outstanding.

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for

designing an internal control system.

The Accounts Receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

In a perpetual inventory system, purchase discounts and purchase returns

directly reduce the Inventory account balance.

The receivables turnover ratio and the average collection period provide information about a company's

effectiveness in managing receivables

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and ___________

errors

The formula for calculating interest on a note is

face amount x annual rate x fraction of the annual period

The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources is called occupational

fraud

When a person intentionally deceives another person or company for personal gain, this is referred to as

fraud

The shipping term FOB stands for

free on board

When the allowance method is used, the write-off of an uncollectible account:

has no effect on net income

Which of the following are common controls over cash receipts?

having two different employees take custody of the checks and make the deposit opening mail daily and making a detailed list of checks received

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be than cost of goods sold determined using the FIFO inventory assumption.

higher

Purchasing inventory on account:

increases assets and increases liabilities

(Face value x annual interest rate x fraction of the annual period) is the formula for

interest on a note.

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as

internal controls.

In a perpetual inventory system, when inventory is purchased, the _________ account is debited, whereas in a periodic system, the __________ account is debited.

inventory, purchases

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be ________ than ending inventory determined using the FIFO inventory assumption.

lower

n times of rising prices, ending inventory determined using the LIFO inventory assumption will be _________ than ending inventory determined using the FIFO inventory assumption.

lower

The Blank______ method of valuing inventory was developed to avoid reporting inventory at an amount that is Blank______ than the benefits it can provide.

lower of cost and net realizable value; greater

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement.

multiple-step

Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write off will ______ net income.

no affect

A formal, signed credit agreement between a lender and a borrower is called a(n) ______ by the lender.

note receivable.

Managers typically monitor inventory very closely to ensure that sufficient units are available for sale and to prevent inventory from becoming

old, expired, aged

When a sale occurs under the periodic inventory system, we record:

only the sale, but not the related cost of goods sold

If a company uses the perpetual inventory system, how many entries are made when a sale occurs?

two

The allowance method estimates

uncollectible accounts

When the direct write-off method is used, an entry for bad debt expense is required

when the account receivable is determined to be uncollectible.

FOB shipping point means title to the goods passes:

when they are shipped.