Exam 2 Review - Accounting

A business purchased on account $2,000 of goods for resale to its customers. The terms of the purchase was 3/10, n/30. $300 of these goods were returned the day after they were received. The business paid for remainding goods in full during the discount period. How much was paid on the remaining goods?

$1,649

The above account balances were taken from Baker Company's adjusted trial balance at the end of the month of May. What is the amount of income from operations reported on Baker's Income Statement for the month of May?

$16,200

The above accounts were taken from Baker Company's adjusted trial balance for the month of May. What is the amount of net income reported on Baker's Income Statement for the month of May?

$18,700

Baker Company purchased a piece of inventory for $200 which it can now replace at a cost of $185. It currently sells that inventory item to a customer for $350. Applying the concept of Lower of Cost or Market, at which value should this piece of inventory be valued on Baker's books?

$185

A business uses a petty cash fund to pay for postage. At the end of the month, a $50 petty cash fund is down to a balance of $28. There are receipts for $20 in postages expenses. The entry to reimburse the petty cash fund would include a

$2 debit to Cash Over and Short

The beginning inventory, purchases, and sales for item ABC for the month of June are as follows: Assuming a perpetual inventory system and the weighted average cost method, what is the Cost of Goods Sold for the month of June?

$3,156

The beginning inventory, purchases and sales for product ABC for the month of June are below: Assuming a perpetual inventory system, what is the Cost of Goods Sold for the month of June using the first-in, first-out (FIFO) method?

$302

The beginning inventory, purchases and sales for item ABC for the month of June are as follows: Assuming a perpetual inventory system and the last-in, first-out (LIFO) method, what is the Cost of Goods Sold for the month of June?

$316

A company's bank statement shows that the bank collected a $300 note plus $30 in interest. There was a $10 fee for collecting the note. Which of the following statements regarding the bank reconciliation is true?

$320 would be added to the Book balance

Foster Company has 100 units of inventory that were originally purchased for $40 each. If Foster were to buy those items today, they would cost $50 each. However, the price Foster can charge its customers for these items recently dropped from $100 to $80 each due to competition. What value should Foster show for the 100 items on the company's balance sheet?

$4,000

The beginning inventory, purchases and sales for product XYZ for the month of October are below: Assuming a perpetual inventory system, what is the value of ending inventory on October 31 using the first-in, first-out method?

$450

The above account balances were taken from Baker Company's adjusted trial balance for the month of May. What is the amount of gross profit reported on Baker's Income Statement for the month of May?

$48,900

Check #230 was written for $21 but incorrectly recorded in the accounting records of Portman Company for $12. On the bank reconciliation

$9 would be deducted from the Book Balance

The beginning inventory, purchases and sales for item ABC for the month of June are as follows: Assuming a perpetual inventory system and the last-in, first-out (LIFO) method, what is the value reported for ending inventory on June 30?

7 units x $12 + 2 units x $14 = $112

The beginning inventory, purchases and sales for product ABC for the month of June are below: Assuming a perpetual inventory system, what is the value of ending inventory on June 30 using the first-in, first-out (FIFO) method?

9 units x $14 = $126

Which of the following items would not appear on a bank reconciliation.

A petty cash reimbursement

The purpose(s) of Internal Controls are:

All of the choices are purposes for internal controls

The beginning inventory, purchases and sales for product XYZ for the month of October are below:

Assuming a perpetual inventory system, what is the value of ending inventory on October 31 using the last-in, first-out (LIFO) system?

Baker Company's ending inventory for Dec. 31, 2013 was understated by $5,000. As a result of this error, which of the following statements is true regarding Baker's financial statements?

Baker's net income for 2013 was too low by $5,000

What accounting principle or concept allows businesses to use the lower-of-cost-or-market rule to report inventory on their balance sheet at an amount below what they actually paid for the inventory in certain circumstances?

Conservatism Constraint

During the first year of operations, Foster Company used the LIFO inventory costing method. For the coming year, the owner would like to try the FIFO method to see if that method better matches the business operations. Making this change would violate which of the following accounting principles or concepts?

Consistency Concept

On July 14, Butler Company purchased on account $700 of inventory, terms FOB Shipping Point, 2/10, n/30. Prepaid transportation costs of $50 were added to the invoice. If Baker pays for the merchandise on July 20, what is the journal entry to record this payment?

Debit Accounts Payable $750; credit Inventory $14 and credit Cash $736

On January 20, Baker Company purchased on account $3,000 of inventory, terms FOB Shipping Point, 2/10, n/30. Prepaid transportation costs of $300 were added to the invoice. If Baker pays for the merchandise on January 26, what is the journal entry to record this payment?

Debit Accounts Payable for $3,300, credit Cash for $3,240 and credit Inventory for $60

Baker Company sold $500 of inventory to a customer on account, terms 1/10, n/45. The cost of the inventory that was sold was $200. The journal entry to record this transaction should be

Debit Accounts Receivable and credit Sales for $500; Debit Cost of Goods Sold and credit Inventory for $200

On January 8, Baker Company sold $1,000 on inventory on account, terms 2/10, n/30. The cost of the sold inventory was $450. On January 10, the customer returned $300 of these items with a cost of $145. On January 15, the customer paid Baker in full. The journal entry to record this receipt of cash by Baker should be:

Debit Cash for $686, debit Sales Discounts for $14, and credit Accounts Receivable for $700

Baker Company uses a perpetual inventory system. At the end of the year, its inventory account has an unadjusted balance of $50,000. When Baker's inventory is counted, however, the inventory actually on hand is $48,800. The adjusting entry that should be made is:

Debit Cost of Goods Sold and credit Inventory for $1,200

On September 6, Butler Company purchased $12,000 of inventory on account, terms FOB Shipping Point, 3/10, n/45. $200 in prepaid trasportation costs were added to the invoice. What is the journal entry that should be made to record this purchase?

Debit Inventory $12,200; credit Accounts Payable $12,200

In a retail store, a cash register is used to record sales transactions. At the end of each day, the register's tape (which is a record of the day's sales) and the cash from the register should go to the accounting department so the bank deposit and the accounting entries can be made on a timely basis.

False

On January 8, Baker Company sold $1,000 of inventory on account, terms 2/10, n/30. The cost of this inventory was $450. Two days later the customer returned $300 of this inventory. The cost of the returned inventory was $145. The journal entry to record this return should be:

Debit Sales Returns and Allowances and credit Accounts Receivable for $300; Debit Inventory and credit Cost of Goods Sold for $145

It is permissible for an accountant to open customer payments, prepare the checks received for the bank deposit and record the customer payments in the accounts receivable records.

False

Separation of duties mandates that a company's accountant should not record customer payments in the accounting records at the same time he/she is preparing the bank deposit.

False

To maintain a good system of internal controls, the purchasing agent for a business should be allowed to order goods and sign the voucher authorizing payment for goods.

False

Baker Farmer's Market sells fresh fruits and vegetables. Which inventory method most likely mimics the actually flow of the inventory?

First-in, First-out (FIFO)

The above balances were taken from the Baker Company's adjusted trial balance for the month of May. Which of the accounts would be properly reported in the "Other Revenue and Expense" section of a multiple step income statement?

Interest Expense

During a period of rising inventory costs, which inventory costing method will lead to the lowest inventory value reported the balance sheet?

Last-in, first-out (LIFO)

Which of the following inventory costing methods will result in the lowest net income during a period of time when inventory costs are rising?

Last-in, first-out (LIFO)

The above balances were taken from Baker Company's adjusted trial balance for the month of May. Which of these accounts would be reported as a general expense?

Office Salaries Expense

Which of the following should not be reported as "Inventory" on a balance sheet?

Supplies such as paper shopping bags and cash register tapes used in a retail store

Baker Company's ending inventory for 2013 was too high by $10,000. Which of the following statements is true?

The beginning inventory for 2014 is too high by $10,000.

All of the following are ways a merchandising business differs from a service business except:

The merchandising business uses journal and ledgers to maintain its accounting records.

Which of the following is NOT a good internal control activity related to cash?

The same person should record cash transactions in the accounting records and make bank deposits.

Who pays the freight when the terms of the sale are FOB Destination?

The seller

Based on the entry above, which of the following statements is true.

This entry records reimbursing petty cash if a business established a $100 petty cash fund and the balance has dropped to $10.

FOB Shipping Point means

Title passes to the buyer when the goods are shipped

After the petty cash fund is established, the Petty Cash account is not debited or credited again unless the amount of the fund is changed.

True

Before signing a check to pay for goods purchased on account, the treasurer needs to compare the invoice for the goods with both the purchase order and the receiving report.

True

Both External and Internal auditors can assist in the monitoring of internal controls.

True

The Inventory account is reported in the financial statements as

a current asset on the balance sheet

After completing a bank reconciliation, the entry to record a NSF check would include

a debit to Accounts Receivable

The accounting system in which the inventory account is constantly updated for purchases and sales of inventory is called

a perpetual system

Which of the policies below would indicate that a company has a weak system of internal controls?

a single employee is responsible for collecting and recording cash transactions

After completing a bank reconcilation, journal entries are needed for

all items added to or deducted from the Book balance

Good internal controls would prompt a business to

all of the answers listed are important for good internal controls

The entry to establish a petty cash fund is

debit Petty Cash and credit Cash

When preparing a bank reconciliation, outstanding checks are

deducted from the Bank Statement balance

The inventory shrinkage adjusting entry is needed in a perpetual system because

even though the inventory account has been updated all year, the value from an actual physical count may be different than the amount in the accounting records.

The cost of inventory would be increased or decreased by all of the following except

the freight charges to ship the sold inventory to the customer

In the credit terms of 2/10, n/30, the 2 represents

the interest rate of the discount

The entry to record Outstanding Checks listed on the Bank Reconciliation would include

there is no entry needed for Outstanding Checks

The purpose of a petty cash fund is

to pay for small items such as postage or minor repairs