acc 302 chapter 7,8,9

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $1,800 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.15 each. Group 2 consists of 5,500 pieces that are expected to sell for $0.36 each. Group 3 consists of 500 pieces that are expected to sell for $0.72 each. Using the relative sales value method, what is the cost per item in Group 3? $0.72. $0.23. $0.54. $0.48.

$0.48. (2,500 × $0.15) + (5,500 × $0.36) + (500 × $0.72) = $2,715; [(500 × $0.72) ÷ $2,715] × $1,800 = $239 ÷ 500 = $0.48.

Niles Co. has the following data related to an item of inventory: Inventory, March 1 400 units @ $2.10 Purchase, March 7 1,400 units @ $2.20 Purchase, March 16 280 units @ $2.25 Inventory, March 31 520 units The value assigned to ending inventory if Niles uses LIFO is $1,104. $1,092. $1,168. $1,160.

$1,104. (400 × $2.10) + (120 × $2.20) = $1,104.

Winsor Co. records purchases at net amounts. On May 5 Winsor purchased merchandise on account, $80,000, terms 2/10, n/30. Winsor returned $6,000 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid. By how much should the account payable be adjusted on May 31? $1,720. $ 0. $1,600. $1,480.

$1,480. ($80,000 - $6,000) × .02 = $1,480.

Plank Co. uses the retail inventory method. The following information is available for the current year. Cost Retail Beginning inventory $ 312,000 $488,000 Purchases 1,180,000 1,660,000 Freight-in 20,000 — Employee discounts — 8,000 Net markups — 60,000 Net markdowns — 80,000 Sales revenue — 1,560,000 If the ending inventory is to be valued at approximately lower of average cost or market, the calculation of the cost ratio should be based on cost and retail of $1,200,000 and $1,712,000. $1,492,000 and $2,200,000. $1,512,000 and $2,208,000. $1,200,000 and $1,720,000.

$1,512,000 and $2,208,000. Cost: $312,000 + $1,180,000 + $20,000 = $1,512,000. Retail: $488,000 + $1,660,000 + $60,000 = $2,208,000.

David Company uses the gross method to record sales made on credit. On June 10, 2017, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2017, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2017. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.? $125,000. $250,000. $245,000. $122,500.

$125,000.

Transactions for the month of June were: Purchases Sales June 1 (balance) 3,200 @ $3.20 June 2 2,400 @ $5.50 3 8,800 @ 3.10 6 6,400 @ 5.50 7 4,800 @ 3.30 9 4,000 @ 5.50 15 7,200 @ 3.40 10 1,600 @ 6.00 22 2,000 @ 3.50 18 5,600 @ 6.00 25 800 @ 6.00 Assuming that perpetual inventory records are kept in dollars, the ending inventory on a LIFO basis is Entry field with correct answer $16,440. $17,160. $16,640. $17,880.

$17,160. (800 × $3.2) + (1,600 × $3.1) + (1,600 × $3.4) + (1,200 × $3.5) = $17,160.

The following information is available for Murphy Company: Allowance for doubtful accounts at December 31, 2016 $24,000 Credit sales during 2017 1,200,000 Accounts receivable deemed worthless and written off during 2017 27,000 As a result of a review and aging of accounts receivable in early January 2018, it has been determined that an allowance for doubtful accounts of $16,000 is needed at December 31, 2017. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2017? $19,000 $40,000 $16,000 $13,000

$19,000 $24,000 - $27,000 + X = $16,000; X = $19,000.

he following information is available for Naab Company for 2017: Freight-in $ 60,000 Purchase returns 150,000 Selling expenses 460,000 Ending inventory 520,000 The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods available for sale? $2,300,000. $2,360,000. $1,840,000. $2,370,000.

$2,360,000. $520,000 + (4 × $460,000) = $2,360,000.

Kennison Company has cash in bank of $20,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of $20,000. 23,000 $22,000. $19,000.

$20,000.

RF Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $430,080, and the price index was 112. What is RF Company's ending inventory? $300,000. $384,000. $394,080. $430,080.

$430,080 ÷ 1.12 = $384,000 - $300,000 = $84,000. $300,000 + ($84,000 × 1.12) = $394,080.

Black Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $21,000. During 2017, it wrote off $15,120 of accounts and collected $4,410 on accounts previously written off. The balance in Accounts Receivable was $420,000 at 1/1 and $504,000 at 12/31. At 12/31/17, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/17? $14,490. $10,290. $25,200. $10,080.

$504,000 × .05 = $25,200.

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $1,800 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.15 each. Group 2 consists of 5,500 pieces that are expected to sell for $0.36 each. Group 3 consists of 500 pieces that are expected to sell for $0.72 each. Using the relative sales value method, what is the cost per item in Group 1? $0.12. $0.23. $0.16. $0.10.

(2,500 × $0.15) + (5,500 × $0.36) + (500 × $0.72) = $2,715; [(2,500 × $0.15) ÷ $2,715] × $1,800 = $249 ÷ 2,500 = $0.10.

If a company purchases merchandise on terms of 2/10, n/30, the cash discount available (assuming a 360-day year) is equivalent to an effective annual interest rate of 60%. 2%. 24%. 36%.

36%. .02 × 360 ÷ 20 = 36%.

Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense? A percentage of accounts receivable adjusted for the balance in the allowance. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance. A percentage of accounts receivable not adjusted for the balance in the allowance. Actual losses from uncollectible accounts.

A percentage of accounts receivable not adjusted for the balance in the allowance.

What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? By means of footnotes only. As assets but separately from other receivables. As trade notes and accounts receivable if they otherwise qualify as current assets. As offsets to capital.

As assets but separately from other receivables.

On July 22, Peter sold $23,500 of inventory items on credit with the terms 2/15, net 30. Payment on $15,000 sales was received on August 1 and the remaining payment was received on August 12. Assuming Peter uses the gross method of accounting for sales discounts, which one of the following entries was made on August 1 to record the cash received? Accounts Receivable 300 Sales Discount Forfeited 300 Cash 14,700 Sales Discount 300 Accounts Receivable 15,000 Cash 15,000 Accounts Receivable 15,000 Cash 14,700 Accounts Receivable 14,700

Cash 14,700 Sales Discount 300 Accounts Receivable 15,000

How can accounting for bad debts be used for earnings management? Changing the percentage of receivables recorded as bad debt expense. Using an aging of the accounts receivable balance to determine bad debt expense. Reversing previous write-offs. Determining which accounts to write-off.

Changing the percentage of receivables recorded as bad debt expense.

Which of the following is a characteristic of a perpetual inventory system? Inventory purchases are debited to a Purchases account. Cost of goods sold is recorded with each sale. Cost of goods sold is determined as the amount of purchases less the change in inventory. Inventory records are not kept for every item.

Cost of goods sold is recorded with each sale.

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? Debit Accounts Receivable for $25,000. Debit Accounts Receivable for $24,750. Debit Accounts Receivable for $25,000 and Sales Discounts for $250. Debit Accounts Receivable for $24,750 and Sales Discounts for $250.

Debit Accounts Receivable for $25,000.

What is the normal journal entry for recording bad debt expense under the allowance method? Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

What is the effect of net markups on the cost-retail ratio when using the conventional retail method? Depends on the amount of the net markdowns. Decreases the cost-to-retail ratio. No effect on the cost-to-retail ratio. Increases the cost-to-retail ratio.

Decreases the cost-to-retail ratio.

Why is the allowance method preferred over the direct write-off method of accounting for bad debts? Allowance method is used for tax purposes. Estimates are used. Determining worthless accounts under direct write-off method is difficult to do. Improved matching of bad debt expense with revenue.

Improved matching of bad debt expense with revenue.

An item of inventory purchased this period for $15.00 has been incorrectly written down to its current replacement cost of $10.00. It sells during the following period for $30.00, its normal selling price, with disposal costs of $3.00 and normal profit of $12.00. Which of the following statements is not true? The closing inventory of the current year is understated. Income of the following year will be understated. The cost of sales of the following year will be understated. The current year's income is understated.

Income of the following year will be understated.

Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet? Accounts payable. Inventory. Equipment. Not on the balance sheet.

Not on the balance sheet.

At the beginning of 2016, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2016 year-end statement of financial position and $1,000 as sales revenue for 2016. What effect did this accounting for the note have on Gannon's net earnings for 2016, 2017, 2018, and its retained earnings at the end of 2018, respectively? Overstate, understate, understate, zero. Overstate, overstate, overstate, overstate Overstate, understate, understate, understate Overstate, overstate, understate, zero

Overstate, understate, understate, zero.

At the end of the fiscal year, Apha Airlines has an outstanding purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.60 per gallon for delivery during the coming summer. The company prices its inventory at the lower of cost or market. If the market price for jet fuel at the end of the year is $4.25, how would this situation be reflected in the annual financial statements? Record unrealized losses of $350,000 and disclose the existence of the purchase commitment. Only disclose the existence of the purchase commitment. Record unrealized gains of $350,000 and disclose the existence of the purchase commitment. No impact.

Record unrealized losses of $350,000 and disclose the existence of the purchase commitment.

Which of the following statements is false regarding an assumption of inventory cost flow? The FIFO assumption uses the earliest acquired prices to cost the items sold during a period. The LIFO assumption uses the earliest acquired prices to cost the items on hand at the end of an accounting period. The cost flow assumption need not correspond to the actual physical flow of goods. The assumption selected may be changed each accounting period.

The assumption selected may be changed each accounting period.

Which of the following is true when accounts receivable are factored without recourse? The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction. The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables. The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.

The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.

When should a transfer of receivables be recorded as a sale? The transferor maintains effective control over the transferred assets through an agreement to repurchase or redeem them prior to their maturity. The buyer surrenders control of the receivables to the seller. The transferee cannot pledge or exchange the transferred assets. The transferred assets are isolated from the transferor.

The transferred assets are isolated from the transferor.

Why would a company sell receivables to another company? To limit its legal liability. To comply with customer agreements. To accelerate access to amounts collected. To improve the quality of its credit granting process.

To accelerate access to amounts collected.

Which of the following statements is not true of fair value option? Unrealized holding gains and losses from fair value adjustments are reported as a component of comprehensive income. The International Accounting Standards Board believes that fair value measurement for financial instruments provides more relevant and understandable information than historical cost. An unrealized holding gain or loss is the net change in the fair value of the receivable from one period to another, exclusive of interest revenue. Receivables are recorded at fair value in the financial statements.

Unrealized holding gains and losses from fair value adjustments are reported as a component of comprehensive income.

Elkins Corporation uses the perpetual inventory and the gross method. On March 1, it purchased $50,000 of inventory, terms 2/10, n/30. On March 3, Elkins returned goods that cost $5,000. On March 9, Elkins paid the supplier. On March 9, Elkins should credit purchase discounts for $1,000. inventory for $1,000. purchase discounts for $900. inventory for $900.

[($50,000 - $5,000) × .02] = $900. inventory

The category "trade receivables" includes claims against insurance companies for casualties sustained. advances to officers and employees. amounts owed by customers for goods bought or services rendered. income tax refunds receivable.

amounts owed by customers for goods bought or services rendered.

A Cash Over and Short account is debited when the petty cash fund proves out short. is a contra account to Cash. is not generally accepted. is debited when the petty cash fund proves out over.

is debited when the petty cash fund proves out short.

In 2017, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2018 for $700,000. Before the December 31, 2017 balance sheet date, the market price for these materials dropped to $510,000. The journal entry to record this situation at December 31, 2017 will result in a credit that should be reported

on the income statement.

The accountant for the Pryor Sales Company is preparing the income statement for 2017 and the balance sheet at December 31, 2017. Pryor uses the periodic inventory system. The January 1, 2017 merchandise inventory balance will appear only in the cost of goods sold section of the income statement. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. only as an asset on the balance sheet. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

only in the cost of goods sold section of the income statement.

During 2017 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2018. Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne. In 2018 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan. This transaction is known as a(n) installment sale. product financing arrangement. assignment for the benefit of creditors. consignment.

product financing arrangement. ?

Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and the ending inventory is determined by a physical inventory count. a normal profit is not anticipated. there is a controlled market with a quoted price applicable to all quantities. the internal revenue service is assured that the practice is not used only to distort reported net income

there is a controlled market with a quoted price applicable to all quantities.