Accounting chapter 5-9
Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? $800 $780 $784 $980
$1,000 - $200 = $800; $800 X 98% = $784.
Which of the following items in a cash drawer at November 30 is not cash? (a) Money orders. (b) Coins and currency. (c) An NSF check. (d) A customer check dated November 28.
(c) An NSF check.
The average collection period is computed by dividing 365 days by the accounts receivable turnover. the accounts receivable turnover by 365 days. net credit sales by average net accounts receivable. net credit sales by ending net accounts receivable.
365 days by the accounts receivable turnover.
An analysis and aging of the accounts receivable of Prince Company at December 31 reveals the following data: Accounts receivable$800,000 Allowance for doubtful accounts per books before adjustment50,000 Amounts expected to become uncollectible65,000 The cash realizable value of the accounts receivable at December 31, after adjustment, is $735,000. $685,000. $750,000. $800,000.
Accounts Receivable less the expected uncollectible amount equals the cash realizable value of $735,000 ($800,000 - $65,000).
Which of the following is the value at which loans and receivables should be reported under IFRS? Maturity value Amortized cost Cash realizable value Net of bad debt expense
Amortized cost
Which of the following statements correctly describes the reporting of cash? Restricted cash funds may be combined with Cash. Restricted cash funds cannot be reported as a current asset. Cash is listed first in the current assets section. Cash cannot be combined with cash equivalents.
Cash is listed first in the current assets section.
Which of the following accounts will normally appear in the ledger of a merchandising company that uses a perpetual inventory system? (a) Purchases. (b) Freight-In. (c) Cost of Goods Sold. (d) Purchase Discounts.
Cost of Goods Sold.
Which of the following items at November 30 is not cash or cash equivalent? Coins and currency. Money orders. Treasury bond. Money market funds.
Treasury bond.
Inventory turnover is calculated by dividing cost of goods sold by average inventory. ending inventory. beginning inventory. 365 days.
average inventory.
A gain on sale of a plant asset occurs when the proceeds of the sale exceed the book value of the asset sold. market value of the asset sold. accumulated depreciation on the asset sold. salvage value of the asset sold.
book value of the asset sold.
FOB shipping point means that the goods are placed free on board to the buyer's place of business. common carrier pays the freight. buyer pays the freight. seller pays the freight.
buyer pays the freight
A company writes a check to replenish a $100 petty cash fund when the fund contains receipts of $94 and $3 in cash. In recording the check, the company should debit Cash Over and Short for $3. debit Petty Cash for $94. credit Cash for $94. credit Petty Cash for $3.
debit Cash Over and Short for $3.
A company that maintains a perpetual inventory system has an inventory account balance of $50,000. The physical count of goods on hand totals $49,600. Which of the following adjusting entries is correct? debit Sales Discounts and credit Inventory. debit Purchases and credit Inventory. debit Inventory and credit Purchases. debit Cost of Goods Sold and credit Inventory.
debit Cost of Goods Sold and credit Inventory.
The control features of a bank account do not include safeguarding cash by using a bank as a depository. having bank auditors verify the correctness of the balance per books. providing a double record of all bank transactions. minimizing the amount of cash that must be kept on hand.
having bank auditors verify the correctness of the balance per books.
The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the percentage-of-sales basis. percentage-of-receivables basis. percentage-of-receivables and percentage-of-sales basis. direct write-off method.
percentage-of-receivables basis.
Factors that affect the selection of an inventory costing method do not include balance sheet effects. perpetual vs. periodic inventory system. tax effects. income statement effects.
perpetual vs. periodic inventory system.
Cash equivalents include each of the following except commercial paper. money market funds. U.S. Treasury bills. petty cash.
petty cash.
The gross profit method can be used for all of the following reasons, except testing the reasonableness of the physical inventory count. preparation of interim financial statements. preparation of annual financial statements. estimating inventory losses due to some casualty.
preparation of annual financial statements.
A bank may issue a credit memorandum for a bank service charge. an NSF (not sufficient funds) check from a customer. the cost of printing checks. the collection of a note receivable by the bank for the depository
the collection of a note receivable by the bank for the depository
Accounts receivable are reported in the current assets section of the balance sheet at the gross amount less allowance for doubtful accounts. lower-of-cost-or-market value. invoice cost. net book value.
the gross amount less allowance for doubtful accounts.
Short-term notes receivable have a related allowance account called Allowance for Doubtful Notes Receivable. present the same valuation problems as long-term notes receivable. are reported at their gross realizable value. use the same estimations and computations as accounts receivable to determine cash realizable value
use the same estimations and computations as accounts receivable to determine cash realizable value
Inventory items on an assembly line in various stages of production are classified as merchandise inventory. finished goods. work in process. raw materials.
work in process.
If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, cost of goods sold is $330,000. $370,000. $420,000. $390,000.
Beginning inventory $60,000 + cost of goods purchased $380,000 - ending inventory $50,000 = $390,000 cost of goods sold.
If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, cost of goods sold is: (a) $390,000. (b) $370,000. (c) $330,000. (d) $420,000.
Beginning inventory ($60,000) + Cost of goods purchased ($380,000) − Ending inventory ($50,000) = Cost of goods sold ($390,000)
The sales accounts that normally have a debit balance are: (a) Sales Discounts. (b) Sales Returns and Allowances. (c) Both (a) and (b). (d) Neither (a) nor (b).
Both (a) and (b)
Which of the following accounts may be found in the adjustment columns of a worksheet for a merchandiser but not a service company? Prepaid Insurance Accumulated Depreciation - Equipment Cost of Goods Sold Salaries and Wages Expense
Cost of Goods Sold
Which of the following accounts will normally appear in the ledger of a merchandising company that uses a perpetual inventory system? Purchase Discounts Purchases Cost of Goods Sold Freight-In
Cost of Goods Sold
Gudenas Company makes a credit card sale to a customer for $500. The credit card sale has a grace period of 30 days and then an interest charge of 18% per year or 1.5% per month is added to the balance. If the unpaid balance on the above sale is $300 at the end of the grace period, the interest charge is $7.50. $5.00. $3.00. $4.50.
$300 X 1.5% = $4.50 interest charge.
Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2, 2015. On July 31, 2015, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2015, should be $170,000. $185,000. $150,000. $35,000.
$35,000
Hughes has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. In this situation, the amount of bad debt expense that should be reported for the year is $55,000. $60,000. $65,000. $5,000.
$65,000
Ann Torbert purchased a truck for $11,000 on January 1, 2014. The truck will have an estimated salvage value of $1,000 at the end of 5 years. Using the units-of-activity method, the balance in accumulated depreciation at December 31, 2015, can be computed by the following formula: ($10,000 / Total estimated activity) X Units of activity for 2014 and 2015. ($10,000 / Total estimated activity) X Units of activity for 2015. ($11,000 / Total estimated activity) X Units of activity for 2015. ($11,000 / Total estimated activity) X Units of activity for 2014 and 2015.
($10,000 / Total estimated activity) X Units of activity for 2014 and 2015. - The units-of-activity method takes salvage into consideration; therefore the depreciable cost is $10,000. This amount is divided by total estimated activity. The resulting number is multiplied by the units of activity used in 2014 and 2015 to compute the accumulated depreciation at the end of 2015, the second year of the asset's use.
Blinka Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Blinka Retailers will include a credit to Sales Revenue of $50,000 and a debit(s) to: (a) Cash$48,000and Service Charge Expense$2,000 (b) Accounts Receivable$48,000and Service Charge Expense$2,000 (c) Cash$50,000 (d) Accounts Receivable$50,000
(a) Cash $48,000 and Service Charge Expense $2,000
Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2019. The machine was purchased for $80,000 on January 1, 2015, and was depreciated on a straight-line basis for 10 years assuming no salvage value. If the machine was sold for $26,000, what was the amount of the gain or loss recorded at the time of the sale? (a) $18,000. (b) $54,000. (c) $22,000. (d) $46,000.
(a) $18,000. First, the book value needs to be determined. The accumulated depreciation as of June 30, 2019, is $36,000 [($80,000/10) × 4.5 years]. Thus, the cost of the machine less accumulated depreciation equals $44,000 ($80,000 − $36,000). The loss recorded at the time of sale is $18,000 ($26,000 − $44,000)
Schopenhauer Company exchanged an old machine, with a book value of $39,000 and a fair value of $35,000, and paid $10,000 cash for a similar new machine. The transaction has commercial substance. At what amount should the machine acquired in the exchange be recorded on Schopenhauer's books? (a) $45,000. (b) $46,000. (c) $49,000. (d) $50,000.
(a) $45,000. When an exchange has commercial substance, the debit to the new asset is equal to the fair value of the old asset plus the cash paid ($35,000 + $10,000 = $45,000)
Accounts and notes receivable are reported in the current assets section of the balance sheet at: (a) cash (net) realizable value. (b) net book value. (c) lower-of-cost-or-market value. (d) invoice cost.
(a) cash (net) realizable value.
The control features of a bank account do not include: (a) having bank auditors verify the correctness of the bank balance per books. (b) minimizing the amount of cash that must be kept on hand. (c) providing a double record of all bank transactions. (d) safeguarding cash by using a bank as a depository.
(a) having bank auditors verify the correctness of the bank balance per books.
(LO 3) Foti Co. accepts a $1,000, 3-month, 6% promissory note in settlement of an account with Bartelt Co. The entry to record this transaction is as follows. (a) Notes Receivable1,015 Accounts Receivable 1,015 (b) Notes Receivable1,000 Accounts Receivable 1,000 (c) Notes Receivable1,000 Sales Revenue 1,000 (d) Notes Receivable1,030 Accounts Receivable 1,030
(b) Notes Receivable 1,000 Accounts Receivable 1,000 Notes Receivable is recorded at face value ($1,000). No interest on the note is recorded until it is earned. Accounts Receivable is credited because no new sales have been made.
Jefferson Company purchased a piece of equipment on January 1, 2019. The equipment cost $60,000 and has an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2020 under the double-declining-balance method? (a) $6,500. (b) $11,250. (c) $15,000. (d) $6,562.
(b) $11,250. For the double-declining method, the depreciation rate would be 25% or (1/8 × 2). For 2019, annual depreciation expense is $15,000 ($60,000 book value × 25%); for 2020, annual depreciation expense is $11,250 [($60,000 − $15,000) × 25%]
Santana Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Santana's days in inventory is: (a) 73 days. (b) 121.7 days. (c) 102.5 days. (d) 84.5 days.
(b) 121.7 days. Santana's days in inventory = 365/Inventory turnover = 365/[$285,000/($80,000 + $110,000)/2)] = 121.7 days
When there is a change in estimated depreciation: (a) previous depreciation should be corrected. (b) current and future years' depreciation should be revised. (c) only future years' depreciation should be revised. (d) None of the above.
(b) current and future years' depreciation should be revised. When there is a change in estimated depreciation, the current and future years' depreciation computation should reflect the new estimates.
Depreciation is a process of: (a) valuation. (b) cost allocation. (c) cash accumulation. (d) appraisal.
(b) cost allocation.
Buehler Company on June 15 sells merchandise on account to Chaz Co. for $1,000, terms 2/10, n/30. On June 20, Chaz Co. returns merchandise worth $300 to Buehler Company. On June 24, payment is received from Chaz Co. for the balance due. What is the amount of cash received? (a) $700. (b) $680. (c) $686. (d) None of the above.
(c) $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 − $300 return) minus the discount of $14 ($700 × 2%), for a cash amount of $686,
Prall Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of 7. What is its average college period (days)? (a) 2,555. (b) 30. (c) 52. (d) 210.
(c) 52. Average collection period = Number of days in the year (365) ÷ Accounts receivable turnover (7) = 52 days
Oliveras Company had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in accounts receivable at the beginning of the year was $100,000, and the end of the year it was $150,000. What were the accounts receivable turnover and the average collection period in days? (a) 4.0 and 91.3 days. (b) 5.3 and 68.9 days. (c) 6.4 and 57 days. (d) 8.0 and 45.6 days.
(c) 6.4 and 57 days. The accounts receivable turnover is 6.4 [$800,000/($100,000 + $150,000)/2]. The average collection period in days is 57 days (365/6.4)
Indicate which of the following statements is true. (a) Since intangible assets lack physical substance, they need be disclosed only in the notes to the financial statements. (b) Goodwill should be reported as a contra account in the stockholders' equity section. (c) Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements. (d) Intangible assets are typically combined with plant assets and natural resources, and shown in the property, plant, and equipment section.
(c) Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements. Reporting only totals of major classes of assets in the balance sheet is appropriate.
Which of the following statements about Visa credit card sales is incorrect? (a) The credit card issuer makes the credit investigation of the customer. (b) The retailer is not involved in the collection process. (c) Two parties are involved. (d) The retailer receives cash more quickly than it would from individual customers on account.
(c) Two parties are involved.
(LO 3) In a bank reconciliation, deposits in transit are: (a) deducted from the book balance. (b) added to the book balance. (c) added to the bank balance. (d) deducted from the bank balance.
(c) added to the bank balance.
A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is a(n): (a) account receivable. (b) trade receivable. (c) note receivable. (d) classified receivable
(c) note receivable.
Ginter Co. holds Kolar Inc.'s $10,000, 120-day, 9% note. The entry made by Ginter Co. when the note is collected, assuming no interest has been previously accrued, is: (a) Cash10,300 Notes Receivable 10,300 (b) Cash10,000 Notes Receivable 10,000 (c) Accounts Receivable10,300 Notes Receivable 10,000Interest Revenue 300 (d) Cash10,300 Notes Receivable 10,000Interest Revenue 300
(d) Cash 10,300 Notes Receivable 10,000 Interest Revenue 300 Cash is debited for its maturity value [$10,000 + interest earned ($10,000 × 1/3 × 9%)], Notes Receivable credited for its face value, and Interest Revenue credited for the amount of interest earned
Able Towing Company purchased a tow truck for $60,000 on January 1, 2017. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $12,000. On December 31, 2019, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2019) and the salvage value to $2,000. What was the depreciation expense for 2019? (a) $6,000. (b) $4,800. (c) $15,000. (d) $12,100.
(d) $12,100. First, calculate accumulated depreciation from January 1, 2017, through December 31, 2018, which is $9,600 {[($60,000 − $12,000)/10 years] × 2 years}. Next, calculate the revised depreciable cost, which is $48,400 ($60,000 − $9,600 − $2,000). Thus, the depreciation expense for 2019 is $12,100 ($48,400/4)
Micah Bartlett Company purchased equipment on January 1, 2018, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2019, if the straight-line method of depreciation is used, is: (a) $80,000. (b) $160,000. (c) $78,000. (d) $156,000.
(d) $156,000. Accumulated depreciation will be the sum of 2 years of depreciation expense. Annual depreciation for this asset is ($400,000 − $10,000)/5 = $78,000. The sum of 2 years' depreciation is therefore $156,000 ($78,000 + $78,000),
(LO 1) Erin Danielle Company purchased equipment and incurred the following costs.Cash price$24,000 Sales taxes1,200 Insurance during transit200 Installation and testing400 Total costs$25,800 What amount should be recorded as the cost of the equipment? (a) $24,000. (b) $25,200. (c) $25,400. (d) $25,800.
(d) $25,800. All of the costs ($1,200 + $200 + $400) in addition to the cash price ($24,000) should be included in the cost of the equipment because they were necessary expenditures to acquire the asset and make it ready for its intended use
Ann Torbert purchased a truck for $11,000 on January 1, 2018. The truck will have an estimated salvage value of $1,000 at the end of 5 years. Using the units-of-activity method, the balance in accumulated depreciation at December 31, 2019, can be computed by the following formula: (a) ($11,000 ÷ Total estimated activity) × Units of activity for 2019. (b) ($10,000 ÷ Total estimated activity) × Units of activity for 2019. (c) ($11,000 ÷ Total estimated activity) × Units of activity for 2018 and 2019. (d) ($10,000 ÷ Total estimated activity) × Units of activity for 2018 and 2019.
(d) ($10,000 ÷ Total estimated activity) × Units of activity for 2018 and 2019. The units-of-activity method takes salvage value into consideration; therefore, the depreciable cost is $10,000. This amount is divided by total estimated activity. The resulting number is multiplied by the units of activity used in 2018 and 2019 to compute the accumulated depreciation at the end of 2019, the second year of the asset's use.
Which of the following statements is false? (a) If an intangible asset has a finite life, it should be amortized. (b) The amortization period of an intangible asset can exceed 20 years. (c) Goodwill is recorded only when a business is purchased. (d) Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.
(d) Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent. Research and development (R&D) costs are expensed when incurred, regardless of whether the research and development expenditures result in a successful patent or not
In exchanges of assets in which the exchange has commercial substance: (a) neither gains nor losses are recognized immediately. (b) gains, but not losses, are recognized immediately. (c) losses, but not gains, are recognized immediately. (d) both gains and losses are recognized immediately.
(d) both gains and losses are recognized immediately. Both gains and losses are recognized immediately when an exchange of assets has commercial substance
The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: (a) outstanding checks. (b) deposit in transit. (c) a bank error. (d) bank service charges.
(d) bank service charges.
What approach does IFRS require when testing whether the value of loans and receivables are impaired? A company should write off those receivables that are impaired, and then attempt to collect those amounts. A company should estimate how much will not be collected, and then write off amounts not collected. A company should look at specific loans and receivables to determine if impaired, and then write those off. A company should look at specific loans and receivables to determine if impaired, and then evaluate as a group.
A company should look at specific loans and receivables to determine if impaired, and then evaluate as a group.
Which of the following statements about promissory notes is incorrect? The party making the promise to pay is called the maker. The party to whom payment is to be made is called the payee. A promissory note is often required from high-risk customers. A promissory note is not a negotiable instrument.
A promissory note is not a negotiable instrument.
The entry to record the dishonor of a note receivable assuming the payee expects eventual collection includes a debit to Accounts Receivable. Notes Receivable. Cash. Allowance for Doubtful Accounts.
Accounts Receivable.
Micah Bartlett Company purchased equipment on January 1, 2014, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2015, if the straight-line method of depreciation is used, is $78,000. $160,000. $156,000. $80,000.
Accumulated depreciation will be the sum of two years of depreciation expense. Annual depreciation for this asset is ($400,000 - $10,000)/5 = $78,000. The sum of two years depreciation is $156,000 ($78,000 + $78,000).
In 2019, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2019, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2019, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance was $200,000, what is the required adjustment to Allowance for Doubtful Accounts at December 31, 2019? (a) $20,000. (b) $75,000. (c) $32,000. (d) $30,000.
After the write-offs are recorded, Allowance for Doubtful Accounts will have a debit balance of $12,000 ($18,000 credit beginning balance combined with a $30,000 debit for the write-offs). The desired balance, using the percentage-of-receivables basis, is a credit balance of $20,000 ($200,000 × 10%). In order to have an ending balance of $20,000, the required adjustment to Allowance for Doubtful Accounts is $32,000,
Which of the following control activities is relevant when a company uses a computerized (rather than manual) accounting system? Establishment of responsibility Segregation of duties Independent internal verification All of these answer choices are correct
All of these answer choices are correct
Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover? 0.20 times 0.72 times 0.90 times 1.39 times
Asset turnover is Net Sales/Average Total Assets or 0.72 times or ($180,000/ [$200,000+$300,000/2]).
Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is $55,000. $65,000. $60,000. $5,000.
Correct! The amount of bad debt expense is $55,000. By crediting Allowance for Doubtful Accounts for $55,000, the new balance will be the required balance of $60,000. This adjusting entry debits Bad Debt Expense for $55,000 and credits Allowance for Doubtful Accounts for $55,000.
Which of the following appears on both a single-step and a multiple-step income statement? Inventory Gross profit Income from operations Cost of goods sold
Cost of goods sold
Which of the following appears on both a single-step and a multiple-step income statement? (a) Inventory. (b) Gross profit. (c) Income from operations. (d) Cost of goods sold.
Cost of goods sold.
In what respect does accounting for research and development costs differ under IFRS as compared to GAAP? There are two components that make up research and development under IFRS. Costs in the research phase are always recorded over a multiple year period under IFRS. Costs in the development phase are capitalized once technological feasibility is achieved under IFRS. The research phase is always expensed under IFRS.
Costs in the development phase are capitalized once technological feasibility is achieved under IFRS.
Which of the following is not part of the journal entries made when merchandise is sold on credit? Credit the Inventory account. Debit the Accounts Receivable account. Credit the Sales Revenue account. Credit the Cost of Goods Sold account.
Credit the Cost of Goods Sold account.
Songbird Company has sales of $150,000 and cost of goods available for sale of $135,000. If the gross profit rate is 30%, the estimated cost of the ending inventory under the gross profit method is $15,000. $30,000. $45,000. $75,000.
Estimated cost of ending inventory is computed as follows: Sales - Gross profit = COGS or $150,000 - ($150,000 X 30%) = $105,000. Cost of goods available for sale - COGS = Ending inventory or $135,000 - $105,000 = $30,000.
In a perpetual inventory system, LIFO cost of goods sold will be the same as in a periodic inventory system. FIFO cost of goods sold will be the same as in a periodic inventory system. average costs are based entirely on unit cost averages. a new average is computed under the moving-average method after each sale.
FIFO cost of goods sold will be the same as in a periodic inventory system.
In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the tax method. FIFO method. LIFO method. average-cost method.
FIFO method.
IFRS requires the use of the perpetual inventory system. True False
False
High-quality international accounting requires both high-quality accounting standards and high-quality controls standards. True False
False - High-quality international accounting requires both high-quality accounting standards and high-quality auditing standards, not high-quality control standards.
Jefferson Company purchased a piece of equipment on January 1, 2014. The equipment cost $60,000 and had an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2015 under the double-declining-balance method? $11,250. $15,000. $6,500. $6,562.
For the double-declining method, the depreciation rate would be 25% or (1/8 x 2). For 2014, annual depreciation expense is $15,000 = $60,000 (book value) x 25%; for 2015, annual depreciation expense is $11,250 = [($60,000 - $15,000) x 25%].
Which of the following should not be included in the physical inventory of a company? Goods held on consignment from another company Goods shipped on consignment to another company Goods in transit from another company shipped FOB shipping point None of these answer choices are correct
Goods held on consignment from another company
If net sales are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, the gross profit is: (a) $30,000. (b) $90,000. (c) $340,000. (d) $400,000.
Gross profit = Net sales ($400,000) − Cost of goods sold ($310,000) = $90,000
In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting Purchase Discounts. Inventory. Purchases. Purchase Returns and Allowances.
Inventory.
The following information is available for Tye Company at December 31: Beginning inventory $80,000; Ending inventory $120,000; Cost of goods sold $1,200,000; and Sales revenue $1,600,000. Tye's inventory turnover is 12 times. 10 times. 16 times. 15 times.
Inventory turnover is calculated by dividing cost of goods sold by average inventory ($1,200,000/(($80,000 + $120,000) /2) = 12 times).
Counting of daily cash receipts by a supervisor is an application of which internal control principle? Establishment of responsibility Independent internal verification Segregation of duties Documentation procedures
Independent internal verification
Which of the following accounts will appear in the trial balance of a merchandising company but not a service company? Dividends. Salaries and Wages Expense. Inventory. Accumulated Depreciation - Equipment.
Inventory.
Angus Company utilizes IFRS for accounting purposes. Angus has chosen to revalue its plant assets as of December 31, 2015. What is a key requirement of this revaluation? It must apply the revaluation to only one asset in an asset class per reporting period. A revaluation is mandatory every five years. It must apply the revaluation to all assets within the class that is selected for revaluation. Companies that chose to revalue may create a revaluation surplus that is considered part of regular earnings.
It must apply the revaluation to all assets within the class that is selected for revaluation.
A 60-day note receivable dated April 13 has a maturity date of June 13. June 10. June 11. June 12.
June 12.
Losses on an exchange of assets that has commercial substance are deferred. deducted from the cost of the new asset acquired. recognized immediately. not possible.
Losses are recognized immediately in an exchange of assets that has commercial substance.
Which of the following would not be included in the definition of inventory under IFRS? Office computer used by the accounting department of a company. Photocopy paper held for sale by an office supply store. Office furniture held for sale by an office furniture store. All of these answer choices are correct.
Office computer used by the accounting department of a company
The contra revenue account that normally has a debit balance is Purchase Discounts. Purchase Returns and Allowances. Sales Returns and Allowances. Freight-Out.
Sales Returns and Allowances.
On February 1, Kline Company received a $6,000, 10%, four-month note receivable. The cash to be received by Kline Company when the note becomes due is $6,000. $200. $6,200. $6,600.
Maturity value = face value + total interest. Interest = $6,000 X 10% X 4/12 = $200. Therefore maturity value = $6,000 + $200 = $6,200.
Which of the following is shown on both a multiple-step and a single-step income statement? Other expenses and losses Gross profit Net sales Income from operations
Net sales
Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sales basis. If the Allowance for Doubtful Accounts has a credit balance of $15,000 before adjustment, what is the balance after adjustment? $27,000 $15,000 $31,000 $23,000
Net sales times the percentage expected to default equals the amount of bad debt expense for the year ($800,000 X 1.5% = $12,000). Because this adjusting entry credits Allowance for Doubtful Accounts, the balance after adjustment is $27,000 ($15,000 + $12,000 = $27,000).
The Nansen Company uses the perpetual inventory system and the moving - average method to value inventories. In August, there were 10,000 units valued at $30,000 in the beginning inventory. On August 10, 20,000 units were purchased for $6 per unit. On August 15, 24,000 units were sold for $12 per unit. The amount charged to cost of goods sold on August 15 was $108,000. $120,000. $144,000. $80,000.
On August 10, the moving-average cost per unit is $5 ($150,000*/30,000 units). Cost of goods sold on August 15 is computed at $5 per unit times the 24,000 units sold or $120,000. * (20,000 x $6) + $30,000.
Which of the following would not be reported under the classification of Property, Plant, and Equipment? Buildings Land Patents Timberlands
Patents would be reported under the classification, Intangible Assets.
Which of the following statements is false? Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent. If an intangible asset has a finite life, it should be amortized. The amortization period of an intangible asset can exceed 20 years. Goodwill is recorded only when a business is purchased.
Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.
What term is used by IFRS that is equivalent to "salvage value" for GAAP? Residual value Depreciable cost Component value Waste value
Residual value
Which of the following is used to estimate the cost of ending inventory? Retail inventory method. Net profit method Wholesale inventory method Perpetual inventory method
Retail inventory method.
Gross profit is Net income less operating expenses. Sales revenue less cost of goods sold. Net income less cost of goods sold. Sales revenue less operating expenses.
Sales revenue less cost of goods sold.
Which of the following is not an element of the fraud triangle? Segregation of duties. Opportunity. Rationalization. Financial pressure.
Segregation of duties.
Maggie Sharrer Company expects to extract 20 million tons of coal from a mine that cost $12 million. If no salvage value is expected, and 2 million tons are mined and sold in the first year, the entry to record depletion will include a debit to Depletion Expense of $1,200,000. credit to Depletion Expense of $1,200,000. credit to Accumulated Depletion of $2,000,000. debit to Accumulated Depletion of $2,000,000.
The amount of depletion expense is determined by computing the depletion per unit ($12 million/20 million tons = $0.60 per ton) and then multiplying that amount times the number of units extracted during the year (2 million tons x $0.60 = $1,200,000). This amount is debited to Depletion Expense and credited to Accumulated Depletion.
Miles Co. earned $250,000 net income last year and their net sales were $4,900,000. Beginning total assets were $12,250,000 and ending total assets $15,750,000. The asset turnover is 0.31 times. 0.40 times. 1.8 times. 0.35 times.
The asset turnover is $4,900,000/[($12,250,000 + $15,750,000)/2] = 0.35 times.
Wells Company's delivery truck, with a cost of $56,000 was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $38,000. The company received $32,000 reimbursement from its insurance company. The gain or loss as a result of the fire was $24,000 gain. $14,000 gain. $24,000 loss. $14,000 loss.
The book value of the truck is $56,000 - $38,000 = $18,000. The cash proceeds from the insurance company are $32,000. $32,000 - $18,000 = $14,000 gain.
A company purchased land for $100,000 cash. Accrued real estate taxes on the land, $2,000, and real estate taxes on the land for the current year, $3,000, were also paid in cash. Real estate brokers' commission was $8,000 and $10,000 was spent on demolishing the building that was on the property before construction of a new building could begin. The company was able to sell some of the salvaged materials from the demolished building for $2,000 cash. Under the historical cost principle, the cost of the land would be recorded at $123,000. $121,000. $100,000. $118,000.
The correct cost of Land to be recorded = Land ($100,000) + accrued real estate taxes ($2,000) + real estate brokers' commission ($8,000) + cost of demolishing building ($10,000) - proceeds from sale of salvaged materials ($2,000), or $118,000.
A company decides to exchange its old machine and $55,000 for a new machine. The old machine has a book value of $45,000 and a fair value of $50,000 on the date of the exchange. The exchange has commercial substance. The cost of the new machine would be recorded at $100,000. $105,000. $95,000. None of these answer choices are correct.
The cost of the new machine equals the cash paid plus the fair value of the old machine ($55,000 + $50,000 = $105,000).
Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage-of-receivables basis. If Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment? (a) $12,000. (b) $7,000. (c) $17,000. (d) $31,000.
The ending balance required in the allowance account is 7.5% × $160,000, or $12,000. Since there is already a balance of $5,000 in Allowance for Doubtful Accounts, the difference of $7,000 should be added, resulting in a balance of $12,000
Cash is the asset most susceptible to fraudulent activities. True False
True
IFRS prohibits the use of the LIFO cost flow assumption in accounting and reporting for inventories. True False
True
Loans and receivables include amounts resulting from transactions with customers. True False
True
The Sarbanes Oxley Act (SOX) internal control standards apply only to companies listed on the U.S. exchanges. True False
True
Tinker Bell Company has the following: If Tinker Bell has 9,000 units on hand at December 31, the cost of the ending inventory under FIFO is $99,000. $108,000. $113,000. $117,000.
Under FIFO, ending inventory will consist of 5,000 units from the Nov. 8 purchase and 4,000 units from the June 19 purchase. Therefore, ending inventory is (5,000 X $13) + (4,000 X $12), or $113,000.
Which of the following statements is true? IFRS requires the use of the perpetual inventory method. Under IFRS, companies must classify expenses by either nature or function. Under IFRS, revaluation of land, buildings and intangible assets is prohibited. IFRS specifically prohibits the use of the multi-step income statement.
Under IFRS, companies must classify expenses by either nature or function.
Schopenhauer Company exchanged an old machine, with a book value of $39,000 and a fair value of $35,000, and paid $10,000 cash for a similar new machine. The transaction has commercial substance. At what amount should the machine acquired in the exchange be recorded on Schopenhauer's books? $49,000 $50,000 $45,000 $46,000
When an exchange has commercial substance, the debit to the new asset is equal to the fair value of the old asset plus the cash paid ($35,000 + $10,000 = $45,000).
Rickety Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower-of-cost-or-market is $91,000. $16,000. $80,000. $18,200.
When the value of inventory is lower than its cost, the inventory is written down to its market value. Therefore, market would be 200 widgets x $80 each, or $16,000.
When a note is accepted to settle an open account, Notes Receivable is debited for the maturity value. net realizable value. accounts receivable balance. face value plus interest.
accounts receivable balance.
Receivables are frequently classified as accounts receivable, company receivables, and other receivables. accounts receivable, notes receivable, and employee receivables. accounts receivable, notes receivable, and other receivables. accounts receivable and general receivables.
accounts receivable, notes receivable, and other receivables.
Under IFRS, inventory is defined as assets held-for-sale in the ordinary course of business. assets in the process of production for sale. assets to be consumed in the production of goods or services. all of these answer choices are correct.
all of these answer choices are correct.
The balance in the Accumulated Depreciation account represents the amount to be deducted from the cost of the plant asset to arrive at its fair value. amount charged to expense since the acquisition of the plant asset. cash fund to be used to replace plant assets. amount charged to expense in the current period.
amount charged to expense since the acquisition of the plant asset.
The steps in the accounting cycle for a merchandising company are the same as those in a service company except an additional adjusting journal entry for inventory may be needed in a merchandising company. a multiple-step income statement is required for a merchandising company. closing journal entries are not required for a merchandising company. a post-closing trial balance is not required for a merchandising company.
an additional adjusting journal entry for inventory may be needed in a merchandising company.
Accounting issues associated with accounts receivable include all of the following except recognizing accounts receivable. valuing accounts receivable. disposing of accounts receivable. analyzing accounts receivable.
analyzing accounts receivable.
For inventory valuation, IFRS permits the use of the FIFO cost flow assumption only. the average-cost flow assumption only. both the FIFO and average-cost flow assumptions. the LIFO cost flow assumption only.
both the FIFO and average-cost flow assumptions.
Additions to plant assets are revenue expenditures. debited to the Purchases account. capital expenditures. debited to a Maintenance and Repairs account.
capital expenditures.
An employee authorized to sign checks should not record issuing stock transactions. . mail receipts. cash disbursement transactions. sales transactions.
cash disbursement transactions.
Understating ending inventory will overstate stockholders' equity. assets. cost of goods sold. net income.
cost of goods sold.
A truck which had an original cost of $72,000 and accumulated depreciation of $11,000 was sold for $57,000. The journal entry to record the sale will include a credit to Loss on Disposal for $4,000. credit to Equipment for $57,000. debit to Loss on Disposal for $15,000. debit to Loss on Disposal for $4,000.
debit to Loss on Disposal for $4,000.
The entry to record depletion expense decreases stockholders' equity and assets. decreases assets and increases liabilities. decreases net income and increases liabilities. decreases assets and liabilities.
decreases stockholders' equity and assets.
The use of pre-numbered checks in disbursing cash is an application of the principle of establishment of responsibility. segregation of duties. physical controls. documentation procedures.
documentation procedures.
Factors that affect the computation of depreciation include all of the following except cost. salvage value. fair value. useful life.
fair value.
In determining cost of goods sold purchase discounts are deducted from net purchases. freight-in is added to net purchases. freight-out is added to net purchases. purchase returns and allowances are deducted from net purchases.
freight-in is added to net purchases.
All of the following would involve a debit memorandum except an NSF check. the cost of printing checks. interest earned. a bank service charge.
interest earned.
The principles of internal control do not include establishment of responsibility. documentation procedures. independent internal verification. management responsibility.
management responsibility.
When the current replacement cost of inventory is less than its cost, it is written down to average-cost value. FIFO value. LIFO value. market value.
market value.
A new average cost is computed each time a purchase is made in the weighted-average cost method. moving-average method. all of these methods. average-cost method.
moving-average method.
Gross profit will result if: (a) operating expenses are less than net income. (b) net sales are greater than operating expenses. (c) net sales are greater than cost of goods sold. (d) operating expenses are greater than cost of goods sold.
net sales are greater than cost of goods sold.
A seller may encourage early payment by reducing the balance due. offering a discount for early payment. offering free merchandise. all of these answer choices are correct.
offering a discount for early payment.
Net income is gross profit less administrative expenses. operating expenses. selling expenses. other gains and losses.
operating expenses.
Atlantis Company's ending inventory is understated $4,000. The effects of this error on the current year's cost of goods sold and net income, respectively, are understated, overstated. understated, understated. overstated, overstated. overstated, understated.
overstated, understated.
The cost of land includes all of the following except parking lots. closing costs. real estate brokers' commissions. accrued property taxes.
parking lots.
All of the following would be classified as inventory except raw materials. supplies. finished goods. work in process.
supplies.
Harold Company overstated its inventory by $15,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Harold's stockholders' equity was overstated at December 31, 2014, and overstated at December 31, 2015. overstated at December 31, 2014, and understated at December 31, 2015. overstated at December 31, 2014, and properly stated at December 31, 2015. understated at December 31, 2014, and understated at December 31, 2015.
overstated at December 31, 2014, and properly stated at December 31, 2015.
Under a perpetual inventory system freight costs are debited to Freight-Out. purchases on account are debited to Purchases. purchases on account are debited to Inventory. purchase returns are debited to Purchase Returns and Allowances.
purchases on account are debited to Inventory.
Under a perpetual inventory system, when goods are purchased for resale by a company: (a) purchases on account are debited to Inventory. (b) purchases on account are debited to Purchases. (c) purchase returns are debited to Purchase Returns and Allowances. (d) freight costs are debited to Freight-Out.
purchases on account are debited to Inventory.
When goods are purchased for resale by a company using a periodic inventory system freight costs are debited to Purchases. purchases on account are debited to Inventory. purchases on account are debited to Purchases. purchase returns are debited to Purchase Returns and Allowances.
purchases on account are debited to Purchases.
A single-step income statement reports income from operations separately. reports gross profit. does not report cost of goods sold. reports sales revenues and other revenues and gains in the revenues section of the income statement.
reports sales revenues and other revenues and gains in the revenues section of the income statement.
A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on June 16. The amount received as payment in full on June 23 is $700. $686. $650. $685.
$686 - This amount is accurate because the full amount is paid within 10 days of the purchase {($750 - $50) - [($750 - $50) X 2%]}.
(LO 2) A company writes a check to replenish a $100 petty cash fund when the fund contains receipts of $94 and $4 in cash. In recording the check, the company should: (a) debit Cash Over and Short for $2. (b) debit Petty Cash for $94. (c) credit Cash for $94. (d) credit Petty Cash for $2.
(a) debit Cash Over and Short for $2. When this check is recorded, the company should debit Cash Over and Short for the shortage of $2 (total of the receipts plus cash in the drawer ($98) versus $100)
(LO 1) An organization uses internal control to enhance the accuracy and reliability of accounting records and to: (a) safeguard assets. (b) prevent fraud. (c) produce correct financial statements. (d) deter employee dishonesty.
(a) safeguard assets.
The lower-of-cost-or-net realizable value rule for inventory is an example of the application of: (a) the conservatism convention. (b) the historical cost principle. (c) the materiality concept. (d) the economics entity assumption.
(a) the conservatism convention. Conservatism means to use the lowest value for assets and revenues when in doubt.
Which of the following was not a result of the Sarbanes-Oxley Act? (a) Companies must file financial statements with the Internal Revenue Service. (b) All publicly traded companies must maintain adequate internal controls. (c) The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity. (d) Corporate executives and board of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so.
(a) Companies must file financial statements with the Internal Revenue Service.
In a worksheet using a perpetual inventory system, Inventory is shown in the following columns: (a) adjusted trial balance debit and balance sheet debit. (b) income statement debit and balance sheet debit. (c) income statement credit and balance sheet debit. (d) income statement credit and adjusted trial balance debit.
(a) adjusted trial balance debit and balance sheet debit.
As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2019. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report. (a) $230,000. (b) $215,000. (c) $228,000. (d) $193,000.
(b) $215,000. The inventory held on consignment by Rogers should be included in Railway's inventory balance at cost ($35,000). The purchased goods of $13,000 should not be included in inventory until January 3 because the goods are shipped FOB destination. Therefore, the correct amount of inventory is $215,000 ($180,000 + $35,000),
Pauline Company overstated its inventory by $15,000 at December 31, 2018. It did not correct the error in 2018 or 2019. As a result, Pauline's stockholders' equity was: (a) overstated at December 31, 2018, and understated at December 31, 2019. (b) overstated at December 31, 2018, and properly stated at December 31, 2019. (c) understated at December 31, 2018, and understated at December 31, 2019. (d) overstated at December 31, 2018, and overstated at December 31, 2019.
(b) overstated at December 31, 2018, and properly stated at December 31, 2019.
Falk Company's ending inventory is understated $4,000. The effects of this error on the current year's cost of goods sold and net income, respectively, are: (a) understated, overstated. (b) overstated, understated. (c) overstated, overstated. (d) understated, understated.
(b) overstated, understated. Because ending inventory is too low, cost of goods sold will be too high (overstated) and since cost of goods sold (an expense) is too high, net income will be too low (understated)
Cost of goods available for sale consists of two elements: beginning inventory and: (a) ending inventory. (b) cost of goods purchased. (c) cost of goods sold. (d) All of the answer choices are correct.
(b) cost of goods purchased.
Permitting only designated personnel to handle cash receipts is an application of the principle of: (a) segregation of duties. (b) establishment of responsibility. (c) independent internal verification. (d) human resource controls.
(b) establishment of responsibility.
When goods are purchased for resale by a company using a periodic inventory system: (a) purchases on account are debited to Inventory. (b) purchases on account are debited to Purchases. (c) purchase returns are debited to Purchase Returns and Allowances. (d) freight costs are debited to Purchases.
(b) purchases on account are debited to Purchases.
To record the sale of goods for cash in a perpetual inventory system: (a) only one journal entry is necessary to record cost of goods sold and reduction of inventory. (b) only one journal entry is necessary to record the receipt of cash and the sales revenue. (c) two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory. (d) two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the cost of goods sold and sales revenue.
(c) two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.
In periods of rising prices, LIFO will produce: (a) higher net income than FIFO. (b) the same net income as FIFO. (c) lower net income than FIFO. (d) higher net income than average-cost.
(c) lower net income than FIFO.
The principles of internal control do not include: (a) establishment of responsibility. (b) documentation procedures. (c) management responsibility. (d) independent internal verification.
(c) management responsibility.
A single-step income statement: (a) reports gross profit. (b) does not report cost of goods sold. (c) reports sales revenue and "Other revenues and gains" in the revenues section of the income statement. (d) reports operating income separately.
(c) reports sales revenue and "Other revenues and gains" in the revenues section of the income statement.
If Hansel has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is: (a) $84,000. (b) $70,000. (c) $56,000. (d) $75,250.
(d) $75,250. Under the average-cost method, total cost of goods available for sale needs to be calculated in order to determine average cost per unit. The total cost of goods available is $430,000 = (5,000 × $8) + (15,000 × $10) + (20,000 × $12). The average cost per unit = ($430,000/40,000 total units available for sale) = $10.75. Therefore, ending inventory is ($10.75 × 7,000) = $75,250, not (a) $84,000, (b) $70,000, or (c) $56,000.
Which of these would cause the inventory turnover to increase the most? (a) Increasing the amount of inventory on hand. (b) Keeping the amount of inventory on hand constant but increasing sales. (c) Keeping the amount of inventory on hand constant but decreasing sales. (d) Decreasing the amount of inventory on hand and increasing sales.
(d) Decreasing the amount of inventory on hand and increasing sales. Decreasing the amount of inventory on hand will cause the denominator to decrease, causing inventory turnover to increase. Increasing sales will cause the numerator of the ratio to increase (higher sales means higher COGS), thus causing inventory turnover to increase even more.
In a perpetual inventory system: (a) LIFO cost of goods sold will be the same as in a periodic inventory system. (b) average costs are a simple average of unit costs incurred. (c) a new average is computed under the average-cost method after each sale. (d) FIFO cost of goods sold will be the same as in a periodic inventory system.
(d) FIFO cost of goods sold will be the same as in a periodic inventory system. FIFO cost of goods sold is the same under both a periodic and a perpetual inventory system
Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system? (a) Establishment of responsibility. (b) Segregation of duties. (c) Independent internal verification. (d) All of these control activities are relevant to a computerized system.
(d) All of these control activities are relevant to a computerized system.
When is a physical inventory usually taken? (a) When the company has its greatest amount of inventory. (b) When a limited number of goods are being sold or received. (c) At the end of the company's fiscal year. (d) Both (b) and (c).
(d) Both (b) and (c).
The multiple-step income statement for a merchandising company shows each of the following features except: (a) gross profit. (b) cost of goods sold. (c) a sales section. (d) an investing activities section.
(d) an investing activities section.
In determining cost of goods sold in a periodic system: (a) purchase discounts are deducted from net purchases. (b) freight-out is added to net purchases. (c) purchase returns and allowances are deducted from net purchases. (d) freight-in is added to net purchases.
(d) freight-in is added to net purchases.
Considerations that affect the selection of an inventory costing method do not include: (a) tax effects. (b) balance sheet effects. (c) income statement effects. (d) perpetual vs. periodic inventory system.
(d) perpetual vs. periodic inventory system.
Which of the following statements is true under IFRS? IFRS defines cash as cash on hand and demand deposits. IFRS defines cash equivalents as short-term, highly liquid investments that are readily convertible to known amounts of cash. IFRS reports cash and cash equivalents in the statement of financial position. All of these answer choices are correct.
All of these answer choices are correct.
In a periodic inventory system, companies keep detailed inventory records of the goods on hand throughout the period. True False
False
When the terms of sale are FOB shipping point, ownership of the goods remains with the seller until the goods reach the buyer. True False
False
Which of the following accounts is not closed to Income Summary? Sales Revenue. Cost of Goods Sold. Sales Discounts. Inventory.
Inventory.
Income from operations appears on both a multiple-step and a single-step income statement. neither a multiple-step nor a single-step income statement. a multiple-step income statement only. a single-step income statement only.
a multiple-step income statement only.
Entries are made to the Petty Cash account when establishing the fund. recording shortages in the fund. replenishing the Petty Cash fund. making payments out of the fund.
establishing the fund.
Physical controls do not include locked warehouses for inventories. independent bank reconciliations. safes and vaults to store cash. bank safety deposit boxes for important papers.
independent bank reconciliations.
On a bank reconciliation, deposits in transit are deducted from the book balance. deducted from the bank balance. added to the book balance. added to the bank balance.
added to the bank balance.
