cornett financial accounting quiz five and six
(T/F) The weighted average cost is calculated by adding the units' costs from each purchase and then dividing by the number of purchases.
False
Satoor, Inc., which uses a periodic inventory system, purchased merchandise from Taye Company on July 7 for $15,000. The credit terms were 1/10, n/30. The goods were shipped FOB shipping point on July 7. Satoor, Inc. received the merchandise on July 10 and paid the amount due on July 15.Refer to the information provided for Satoor, Inc. When the buyer records the payment on July 15th, its journal entry will include a.a decrease to Cash for $15,000. b.an increase to Inventory for $14,850. c.a decrease to Accounts Payable for $15,000. d.a decrease to Purchases for $15,000.
c.a decrease to Accounts Payable for $15,000.
Echols Company sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on seller's accounting equation? a.Assets and stockholders' equity decrease. b.Assets and stockholders' equity increase. c.Assets decrease and liabilities increase. d.No net effect.
d. No net effect.
(T/F) If a company estimates its bad debt expense on the basis of a receivables aging, the balance in the Allowance for Doubtful Accounts account will not affect the amount of the end-of-period adjusting entry for bad debts.
False
(T/F) If ending inventory is understated, then cost of goods sold is understated.
False
(T/F) The lender of a note recognizes a note payable on the balance sheet and interest expense on its income
False
(T/F) Under a perpetual inventory system, each time goods are purchased, the inventory account is transferred to sales revenue.
False
(T/F) During periods of stable purchase prices, FIFO produces the highest ending inventory relative to the other inventory costing methods.
False
(T/F) A primary advantage of the allowance method to account for bad debts is that it supports the matching principle.
True
(T/F) Because the allowance method results in better matching, accounting standards require its use rather than the direct write-off method, unless bad debts are immaterial.
True
(T/F) Cost of goods sold is the difference between costs of goods available for sale and ending inventory.
True
(T/F) If ending inventory is overstated, then net income is overstated as well.
True
(T/F) The amount of interest paid is a function of three variables, the amount borrowed, the interest rate, and the length of the loan period.
True
(T/F) The difference between the FIFO, LIFO, and average cost methods is that each of these methods of inventory costing makes a specific assumption about the flow of costs.
True
(T/F) The higher the accounts receivable turnover the better because it indicates that the company is more quickly collecting cash (through sales).
True
(T/F) The inventory turnover ratio is defined as cost of goods sold divided by average inventory.
True
(T/F) The lower of cost or market (LCM) rule violates the historical cost principle.
True
(T/F) The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place.
True
(T/F) The weighted average cost per unit must be continually updated under the perpetual inventory system.
True
(T/F) Under the allowance method of accounting for bad debts, the company estimates the amount of bad debts before those debts actually occur.
True
At the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of a. the buyer. b. the seller. c. neither the buyer nor the seller. d. the shipping company.
b. the seller.
A company had beginning accounts receivable of $175,000. All sales were on account and totaled $550,000. Cash collected from customers totaled $650,000. Calculate the ending accounts receivable balance. a. $725,000 b. $175,000 c. $75,000 d. $275,000
c. $75,000 --> $175,000 (Beginning Accounts Receivable) + $550,000 (Net Credit Sales) − $650,000 (Cash Collected) = $75,000
Which of the following statements is false regarding the reason that inventory costs are recorded as expenses when sold rather than when incurred? a.It helps the company achieve a better matching of expenses with related revenues. b.It gives the user's of the company's financial statements a clearer picture of profitability. c.It gives the company's accounting personnel more time to record inventory transactions. d.Inventory is an asset at the time it is acquired.
c. It gives the company's accounting personnel more time to record inventory transactions.
Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2019.Refer to the information provided for Eli Company. If the customer pays the amount of the invoice for its purchase on March 14, 2019, how much cash will Eli Company receive? a.$2,000 b.$1,400 c.$1,800 d.$1,980
d. $1,980 --> ($20 x 100 packs) - 1%($20 x 100) = $1,980
A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of: a. (100% - 10%) x $20,000 b. (100% - 2%) x $20,000 c. 10% of $20,000 d. 2% of $20,000
d. 2% of $20,000