chapter 4, 5, 6 practice exam ACC 131

a customers check for $25 that had been deposited into the companys checking account the previous month was returned stamped NSF by the bank which of the following journal entries is required

accounts receivable at 25 debit and cash at 25 credit

the method of recording bad debts that results in a bad debt expense before the actual default is the

allowance

checks presented for payment and paid by the bank are known as

cancelled checks

are those investments and deposits with financial institutions that are readily convertible into known amounts of cash and that have original maturities of 3 months or less

cash equivalent

cash collected and recorded by a company but not yet reflected in a bank statement are known as

deposits in transit

shipping terms of FOB destination means that the shipping costs are paid by the

seller

costs of goods sold is equal to beginning inventory plus the net cost of purchases minus

end inventory

a ___ is the buyer of receivables from a big company who acquires the right to collect the receivables and assumes the risk of uncollectibility

factor

cost of goods sold represents an outflow of a resource inventory which is caused by the sale of products (T/F)

false

for a merchandising company the cost of goods sold is subtracted from net sales to arrive at gross profit (T/F)

false

sales discounts decrease the cost of inventory acquired (T/F)

false

the best response to an employee caught stealing from a company is to say "don't ever let me catch you doing that again" (T/F)

false

cost of completed unsold items

finished goods

check written on the companys account in may and paid by the bank is returned with the bank statement

not included on the reconciliation

the understatement of ending inventories in one period leads to an

over of cost of goods sold in the same period

requires updating of the inventory account at the time of each purchase and each sale

perpetual inventory system

cost of ingredients used to make a product

raw materials

management of publicly traded corporations has increased responsibility for a system of internal controls that ensures reliability of financial statements

sabres oxley 2002 act

used to induce the customer to keep damaged goods

sales allowance

to encourage prompt payment sellers offer a

sales discount

used to encourage prompt payment

sales discount

check written on the companys account in may that does not appear on the bank statement

subtraction from bank balance

customers check was deposited on may 31 but is not included on the bank statement

subtraction from company balance

reduction of price granted by the seller for a particular class of customers

trade discount

shipping costs paid to acquire merchandise

transportation-in

accounts receivable are shown on the balance sheet at their net realizable value (T/F)

true

for a merchandising company the cost of goods sold is subtracted from net sales to arrive at gross profit (T/F)

true

petty cash is NOT considered to be a cash equivalent (T/F)

true

sales discounts decrease the cost of inventory acquired (T/F)

true

the use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period din which a sale on credit takes place (T/F)

true

under the FIFO method of inventory costing the units in the ending inventory represent the oldest purchases (T/F)

true

under the periodic inventory system a physical inventory must be taken to determine cost of goods sold (T/F)

true