ACC 211 Test 2 Ch. 4-6

26. On April 24 of the current year, The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory. At the beginning of April, the company reported beginning inventory of $228,150. Inventory purchased during April (until the date of the tornado) was $199,200. Sales for the month of April through April 24 were $643,900. Assuming the company's typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the tornado

$105,400

26. A company purchases merchandise with a catalog price of $21,500. The company receives a 35% trade discount from the seller. The seller also offers credit terms of 2/10, n/30. Assuming no returns were made and that payment was made within the discount period, what is the net cost of the merchandise?

$13,696.

1. On December 31 of the current year, Plunkett Company reported an ending inventory balance of $216,500. The following additional information is also available: Plunkett sold and shipped goods costing $38,300 to Savannah Enterprises on December 28 with shipping terms of FOB shipping point. The goods were not included in the ending inventory amount of $216,500. Plunkett purchased goods costing $44,300 on December 29. The goods were shipped FOB destination and were received by Plunkett on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in the ending inventory balance of $216,500. Plunkett's ending inventory balance of $216,500 included $15,300 of goods being held on consignment from Carole Company. (Plunkett Company is the consignee.) Plunkett's ending inventory balance of $216,500 did not include goods costing $95,300 that were shipped to Plunkett on December 27 with shipping terms of FOB destination and were still in transit at year-end. Based on the above information, the amount that Plunkett should report in ending inventory on December 31 is:

$156,900

24. Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had $105,000 in sales during the second quarter of this year. If it began the quarter with $18,500 of inventory at cost and purchased $72,500 of inventory during the quarter, its estimated ending inventory by the gross profit method is:

$17,500.

20. Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $17,162. Franklin's August bank statement shows $17,437 on deposit in the bank. Determine the adjusted cash balance using the following information: Deposit in transit $5,700 Outstanding checks $4,700 Bank service fees, not yet recorded by company $90 The bank collected on a note receivable, not yet recorded by the company $1,365 The adjusted cash balance should be:

$18,437

19. Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on May 31, its Cash account shows a debit balance of $19,525. Clayborn's May bank statement shows $17,800 on deposit in the bank. Determine the adjusted cash balance using the following information: Deposit in transit $5,950 Outstanding checks $5,100 Bank service fees, not yet recorded by company $50 A NSF check from a customer, not yet recorded by the company $825 The adjusted cash balance should be:

$18,650

2. The following information is available for Fenton Manufacturing Company at June 30: Cash in bank account $6,955 Inventory of postage stamps $79 Money market fund balance $12,900 Petty cash balance $400 NSF checks from customers returned by bank $917 Postdated checks received from customers $516 Money orders $757 A nine-month certificate of deposit maturing on December 31 of current year $8,500 Based on this information, Fenton Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

$21,012...... (6,955+757+12,900+400)

17. A company has net sales of $781,200 and cost of goods sold of $564,200. Its net income is $24,530. The company's gross margin and operating expenses, respectively, are:

$217,000 and $192,470

23. On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,900 Net sales: $78,000 Net purchases: $76,000 The company's gross margin ratio is 30%. Using the gross profit method, the estimated ending inventory value would be:

$26,300.

9. A company had inventory on November 1 of 5 units at a cost of $11 each. On November 2, they purchased 18 units at $13 each. On November 6 they purchased 14 units at $16 each. On November 8, 16 units were sold for $46 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

$263

18. Ryan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows $27,861 on deposit in the bank. Ryan's comparison of the bank statement to its cash account revealed the following: Deposit in transit 3,350 Outstanding checks 1,350 Additionally, a $46 check written and recorded by the company correctly, was recorded by the bank as a $64 deduction.The adjusted cash balance per the bank records should be:

$29,879

10. A company purchased $3,600 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $395 worth of merchandise. On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:

$3,141.

20. A company uses the periodic inventory system and had the following activity during the current monthly period. November 1:Beginning inventory110 Units @ $10 November 5:Purchased110 Units @ $26 November 8:Purchased60 Units @ $25 November 16:Sold166 Units @ $95 November 19:Purchased65 Units @ $20 Using the weighted-average inventory method, the company's ending inventory would be:

$3,507

3. Lucia Company reported cost of goods sold for Year 1 and Year 2 as follows: Year 1: Beginning inventory $126,500 Cost of goods purchased 251,300 Cost of goods available for sale 377,800 Ending inventory 131,300 Cost of goods sold$246,500 Year 2: Beginning inventory $131,300 Cost of goods purchased 281,500 Cost of goods available for sale 412,800 Ending inventory 136,300 Cost of goods sold $276,500 Lucia Company made two errors: 1) ending inventory at the end of Year 1 was understated by $16,300 and 2) ending inventory at the end of Year 2 was overstated by $7,300. Given this information, the correct cost of goods sold figure for Year 2 would be:

$300,100

22. On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,000 Net sales: $40,000 Net purchases: $41,000 The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be:

$34,000.

1. The following information is available for Birch Company at December 31: Money market fund balance $2,940 Certificate of deposit maturing June 30 of next year $16,500 Postdated checks from customers $1,850 Cash in bank account $23,931 NSF checks from customers returned by bank $800 Cash in petty cash fund $350 Inventory of postage stamps $33 U.S. Treasury bill purchased on December 15 and maturing on February 28 of following year $11,500 Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of:

$38,721....... (23,931+11,500+2940+350)

2. Bedrock Company reported a December 31 ending inventory balance of $413,000. The following additional information is also available: The ending inventory balance of $413,000 included $73,400 of consigned inventory for which Bedrock was the consignor. The ending inventory balance of $413,000 included $24,800 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. Based on this information, the correct balance for ending inventory on December 31 is:

$388,200

12. A company purchased $4,200 worth of merchandise. Transportation costs were an additional $370. The company returned $290 worth of merchandise and then paid the invoice within the 3% cash discount period. The total cost of this merchandise is:

$4,162.70.

17. In the process of reconciling its bank statement for January, Maxi's Clothing's accountant compiles the following information: Cash balance per company books on January 30 $5,725 Deposits in transit at month-end $2,000 Outstanding checks at month-end $620 Bank service charges $35 EFT automatically deducted monthly, not yet recorded by Maxi $580 An NSF check returned on a customer account $365 The adjusted cash balance per the books on January 31 is:

$4,745..... (5,725-2,000+620+365+35)

8. On December 31, there were 33 units remaining in ending inventory. Using the perpetual LIFO inventory costing method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

$5,940.

25. Jefferson Company has sales of $308,000 and cost of goods available for sale of $270,800. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

$55,200

16. In the process of reconciling its bank statement for April, Donahue Enterprises' accountant compiles the following information: Cash balance per company books on April 30 $6,265 Deposits in transit at month-end $1,320 Outstanding checks at month-end $640 Bank charge for printing new checks $55 Note receivable and interest collected by bank on Donahue's behalf $750 A check paid to Donahue during the month by a customer is returned by the bank as NSF$500 The adjusted cash balance per the books on April 30 is:

$6,460

21. Easton Co. deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on June 30, its Cash account shows a debit balance of $71,709. Easton's June bank statement shows $67,549 on deposit in the bank. Determine the adjusted cash balance using the following information: Deposit in transit $7,250 Outstanding checks $3,075 Check printing fee, not yet recorded by company $38 Interest earned on account, not yet recorded by the company $53 The adjusted cash balance should be:

$71,724

21. A flood destroyed a company's warehouse contents on September 12. The following information was the only information that was salvaged: Inventory, beginning: $29,000 Purchases for the period: $18,000 Sales for the period: $56,000 Sales returns for the period: $800 The company's average gross profit ratio is 30%. What is the estimated cost of the lost inventory using the gross profit method?

$8,360.00.

36. On September 1 of the current year, Scots Company experienced a flood that destroyed the company's entire inventory. Because the company had not completed its month end reporting for August, it must estimate the amount of inventory lost using the gross profit method. At the beginning of August, the company reported beginning inventory of $216,050. Inventory purchased during August was $192,770. Sales for the month of August were $543,700. Assuming the company's typical gross profit ratio is 40%, estimate the amount of inventory destroyed in the flood.

$82,600

3. KLM Corporation's quick assets are $6,037,000, its current assets are $12,855,000 and its current liabilities are $8,093,000. Its acid-test ratio equals:

0.75...... $6,037,000/$8,093,000

5. Using the following year-end information for Calvin's Clothing, calculate the current ratio and acid-test ratio for the business: Cash$52,070 Short-term investments 8,500 Accounts receivable 47,000 Inventory 160,000 Prepaid expenses 11,310 Accounts payable 102,500 Other current payables 30,300

2.10 and 0.81

27. Sandoval needs to determine its year-end inventory. The warehouse contains 20,000 units, of which 3,000 were damaged by flood and are not sellable. Another 2,000 units were purchased from Markor Company, FOB shipping point, and are currently in transit. The company also consigns goods and has 4,000 units at a consignee's location. How many units should Sandoval include in its year-end inventory?

23,000

6. A company's gross profit (or gross margin) was $107,340 and its net sales were $429,700. Its gross margin ratio is:

25.0%....... $107,340/$429,700

24. Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: Cash $66,400 Short-term investments 12,400 Accounts receivable 48,500 Inventory 240,000 Prepaid expenses 20,200 Accounts payable 99,100 Other current payables 27,400

3.06 and 1.01.

37. Use the following information for Shafer Company to compute inventory turnover for year 2. Year 2 Year 1 Net sales $654,000 $584,200 Cost of goods sold 389,800 360,970 Ending inventory 79,000 80,680

4.88

3. A company had net sales of $30,800 and ending accounts receivable of $3,400 for the current period. Its days' sales uncollected equals: (Use 365 days a year.)

40.29 days.......(3,400/30,800=.....X 365)

6. Beckenworth had cost of goods sold of $9,721 million, ending inventory of $2,389 million, and average inventory of $1,995 million. Its days' sales in inventory equals: (Use 365 days a year.)

89.7 days.......( end inv/cogs. x 365 )

8. Assume that the custodian of a $450 petty cash fund has $54.30 in coins and currency plus $391.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

A credit to Cash for $395.70.

12. Childers Company, which uses a perpetual inventory system, has an established petty cash fund in the amount of $500. The fund was last reimbursed on November 30. At the end of December, the fund contained the following petty cash receipts: December 4 Freight charge for merchandise purchased $42 December 7 Delivery charge for shipping to customer $66 December 12 Purchase of office supplies $31 December 18 Donation to charitable organization $50 If, in addition to these receipts, the petty cash fund contains $301.00 of cash, the journal entry to reimburse the fund on December 31 will include:

A credit to Cash of $199.00.

9. Assume that the custodian of a $600 petty cash fund has $112.50 in coins and currency plus $472.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

A debit to Cash Over and Short for $15.00.

13. If a check correctly written and paid by the bank for $236 is incorrectly recorded in the company's books for $263, how should this error be treated on the bank reconciliation?

Add $27 to the book balance.

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7. Spencer Co. has a $270 petty cash fund. At the end of the first month the accumulated receipts represent $50 for delivery expenses, $155 for merchandise inventory, and $19 for miscellaneous expenses. The fund has a balance of $46. The journal entry to record the reimbursement of the account includes a:

Credit to Cash for $224

11. A company purchased $3,100 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $850 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:

Debit Accounts Payable $2,250; credit Merchandise Inventory $45; credit Cash $2,205.

6. At the end of the day, the cash register tape shows $1,160 in cash sales, but the count of cash in the register is $1,210. The proper entry to account for this excess is:

Debit Cash $1,210; credit Sales $1,160; credit Cash Over and Short $50.

5. At the end of the day, the cash register's record shows $1,266, but the count of cash in the cash register is $1,253. The correct entry to record the cash sales is

Debit Cash $1,253; debit Cash Over and Short $13; credit Sales $1,266.

11. A company had $51 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Debit Cash Over and Short for $51.

22. Havermill Co. establishes a $450 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $93 for Office Supplies, $177 for merchandise inventory, and $42 for miscellaneous expenses. The fund has a balance of $138. On October 1, the accountant determines that the fund should be increased by $90. The journal entry to record the establishment of the fund on September 1 is:

Debit Petty Cash $450; credit Cash $450.

10. A company wants to decrease its $200.00 petty cash fund to $125.00. The entry to reduce the fund is:

Debit to Cash $75.00; credit Petty Cash $75.00.

23. Havermill Co. establishes a $340 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $82 for Office Supplies, $155 for merchandise inventory, and $31 for miscellaneous expenses. The fund has a balance of $72. On October 1, the accountant determines that the fund should be increased by $68. The journal entry to record the reimbursement of the fund on September 30 includes a:

Debit to Office Supplies for $82.

15. On February 3, Smart Company sold merchandise in the amount of $4,500 to Truman Company, with credit terms of 1/10, n/30. The cost of the items sold is $3,100. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Debit: Cash 4,455 Sales discounts 45 Credit: Accounts receivable 4,500

15. During the month of July, Clanton Industries issued a check in the amount of $856 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Deduct the check amount from the bank balance.

14. If a check correctly written and paid by the bank for $352 is incorrectly recorded in the company's books for $299, how should this error be treated on the bank reconciliation?

Subtract $53 from the book balance.