Accounting Final (set 2)
The following information is related to December 31, 2013 balances. During 2014 sales on account were $580,000 and collections on account were $344,000. Also during 2014 the company wrote off $32,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $216,000. Bad debt expense for 2014 is? a. $ 68,000 b. $ 36,000 c. $216,000 d. $ 4,000
a. $ 68,000
following credit sales are budgeted by Gonzalez Company: January 102,000 February 150,000 March 210,000 The company's past experience indicates that 80% of the accounts receivable are collected in the month of sale, 20% in the month following the sale. The anticipated cash inflow for the month of March is? a. $198,000 b. $168,000 c. $210,000 d. $204,000
a. $198,000
Which of the following should not be included in the physical inventory of a company? a. Goods held on consignment from another company. b. Goods in transit from another company shipped FOB shipping point. c. Goods shipped on consignment to another company. d. All of these answer choices should be included.
a. Goods held on consignment from another company.
Which of the following is an example of a bank reconciliation item that requires an adjusting entry? Selected Answer: Incorrect None of these items requires an adjusting entry? a. NSF check. b. Deposit in transit. c. Bank error. d. None of these items requires an adjusting entry.
a. NSF check.
Generally, the revenue account for a merchandising enterprise is called? a. Sales Revenue or Sales. b. Investment Income. c. Gross Profit. d. Net Sales.
a. Sales revenue or sales.
The term "receivables" refers to a. amounts due from individuals or companies. b. merchandise to be collected from individuals or companies. c. cash to be paid to creditors. d. cash to be paid to debtors.
a. amounts due from individuals or companies.
The percentage of receivables basis for estimating uncollectible accounts emphasizes? a. cash realizable value. b. the relationship between accounts receivable and bad debts expense. c. income statement relationships. d. the relationship between sales and accounts receivable.
a. cash realizable value
The use of prenumbered checks is an example of a. documentation procedures. b. independent internal verification. c. establishment of responsibility. d. segregation of duties.
a. documentation procedures
Assume Grammar Company uses the periodic inventory system and has a beginning inventory balance of $5,000, purchases of $75,000, and sales of $125,000. Grammar closes its records once a year on December 31. In the accounting records, the inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was? a. equal to $5,000. b. more than $5,000. c. less than $5,000. d. indeterminate.
a. equal to $5,000.
The term "FOB" denotes a. free on board. b. freight on board. c. free only (to) buyer. d. freight charge on buyer.
a. free on board
Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them? a. increases the potential for errors and fraud. b. decreases the potential for errors and fraud. c. is an example of good internal control. d. is a good example of safeguarding the company's assets.
a. increases the potential for errors and fraud.
The periodic inventory system is used most commonly by companies that sell? a. low-priced, high-volume merchandise. b. high-priced, high-volume merchandise. c. high-priced, low-volume merchandise. d. high-priced, low and high-volume merchandise.
a. low-priced, high-volume merchandise.
Blank checks a. should be safeguarded. b. should be pre-signed. c. do not need to be safeguarded since they must be signed to be valid. d. should not be pre-numbered.
a. should be safeguarded.
Selection of an inventory costing method by management does not usually depend on a. the fiscal year end. b. income statement effects. c. balance sheet effects. d. tax effects.
a. the fiscal year end.
Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts a. total assets decrease. b. total assets are unchanged. c. net income is unchanged. d. liabilities decrease.
a. total assets decrease
During 2014 Sedgewick Inc. had sales on account of $264,000, cash sales of $108,000, and collections on account of $168,000. In addition, they collected $2,900 which had been written off as uncollectible in 2013. As a result of these transactions the change in the accounts receivable balance indicates a? a. $201,100 increase. b. $ 96,000 increase. c. $ 93,100 increase. d. $204,000 increase.
b. $ 96,000 increase
Financial information is presented below: Operating expenses $28,000 Sales returns and allowances 7,000 Sales discounts 3,000 Sales revenue 150,000 Cost of goods sold 91,000 Gross profit would be? a. $56,000 b. $49,000 c.. $52,000 d. $59,000
b. $49,000
The following information was available for Bowyer Company at December 31, 2014: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Bowyer's inventory turnover in 2014 was? a. 15.0 times. b. 11.0 times. c. 12.6 times. d. 9.8 times.
b. 11.0 times.
Which of the following is not a basic principle of cash management? a. Increase the speed of collection on receivables. b. Maintain idle cash. c. Keep inventory levels low. d. Delay payment of liabilities.
b. Maintain idle cash
Under the perpetual inventory system, which of the following accounts would not be used? a. Sales Revenue b. Purchases c. Cost of Goods Sold d. Inventory
b. Purchases
An alternative name for Bad Debt Expense is a. Deadbeat Expense. b. Uncollectible Accounts Expense. c. Collection Expense. d. Credit Loss Expense.
b. Uncollectible Accounts Expense
A company maintains the asset account, Cash in Bank, on its books, while the bank maintains a reciprocal account that is? a. a contra asset account. b. a liability account. c. also an asset account. d. a stockholders' equity account.
b. a liability account
Petersen Company is preparing a cash budget for September. The company's cash balance on September 1 is $17,400. The company anticipates cash receipts of $83,850 and cash disbursements of $87,990. If Petersen desires a cash balance of $18,000, it must? a. acquire financing of $600. b. acquire financing of $4,740. c. acquire financing of $3,540. d. acquire financing of $13,860.
b. acquire financing of $4,740.
A note receivable is a negotiable instrument which? a. eliminates the need for a bad debts allowance. b. can be transferred to another party by endorsement. c. takes the place of checks in a business firm. d. can only be collected by a bank.
b. can be transferred to another party by endorsement
Receivables are a. one of the most liquid assets and thus are always considered current assets. b. claims that are expected to be collected in cash. c. shown on the income statement at cash realizable value. d. always the result of revenue recognition.
b. claims that are expected to be collected in cash.
Inventory costing methods place primary reliance on assumptions about the flow of? a. good b. costs c. resale prices d. values
b. costs
A deposit made by a company will appear on the bank statement as a a. debit b. credit c. debit memorandum d. credit memorandum
b. credit
A problem with the specific identification method is that? a. inventories can be reported at actual costs. b. management can manipulate income. c. matching is not achieved. d. the lower of cost or market basis cannot be applied.
b. management can manipulate income.
The expense recognition a. requires that all credit losses be recorded when an individual customer cannot pay. b. necessitates the recording of an estimated amount for bad debts. c. results in the recording of a known amount for bad debt losses. d. is not involved in the decision of when to expense a credit loss.
b. necessitates the recording of an estimated amount for bad debts
Using the allowance method, the uncollectible accounts for the year are estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment? a. $9,000 b. $31,000 c. $40,000 d. $49,000
c. $40,000
The interest on a $9,000, 10%, 1-year note receivable is a. $9,000 b. $75 c. $900 d. $9,900
c. $900
Andrea's Fashions sold merchandise for $95,000 cash during the month of July. Returns that month totaled $2,000. If the company's gross profit rate is 40%, Andrea's will report monthly net sales revenue and cost of goods sold of a. $95,000 and $57,000. b. $93,000 and $37,200. c. $93,000 and $55,800. d. $95,000 and $55,800.
c. $93,000 and $55,800
Farwell Company purchased merchandise with an invoice price of $2,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms? a. 2% b. 12% c. 18% d. 36%
c. 18%
Which one of the following is not an objective of a system of internal controls? a. Safeguard company assets. b. Enhance the accuracy and reliability of accounting records. c. Fairness of the financial statements. d. Reduce the risks of errors.
c. Fairness of the financial statements.
Reporting which one of the following allows analysts to make adjustments to compare companies using different cost flow methods? a. FIFO reserve b. Inventory turnover c. LIFO reserve d. Current replacement cost
c. LIFO reserve
Which of the following statements is correct with respect to inventories? a. The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. b. It is generally good business management to sell the most recently acquired goods first. c. Under FIFO, the ending inventory is based on the latest units purchased. d. FIFO seldom coincides with the actual physical flow of inventory.
c. Under FIFO, the ending inventory is based on the latest units purchased.
Which of the following would probably be the most significant type of a claim held by a company? a. notes receivable b. non-trade receivable c. accounts receivable d. interest receivable
c. accounts receivable
Bank errors a. occur because of time lags. b. must be corrected by debits. c. are infrequent in occurrence. d. are corrected by making an adjusting entry on the depositor's books.
c. are infrequent in occurrence.
Multiple-step income statements show? a. gross profit but not income from operations. b. neither gross profit nor income from operations. c. both income from operations and gross profit. d. income from operations but not gross profit.
c. both income from operations and gross profit.
When using the periodic system the physical inventory count is used to determine? a. only the sales value of goods in the ending inventory. b. both the cost of the goods in ending inventory and the sales value of goods sold during the period. c. both the cost of the goods sold and the cost of ending inventory. d. only the cost of merchandise sold during the period.
c. both the cost of the goods sold and the cost of ending inventory.
An employee authorized to sign checks should not record a. owner cash contributions. b. mail receipts. c. cash disbursement transactions. d. sales transactions.
c. cash disbursement transactions.
The entry to record the receipt of payment within the discount period on a sale of $700 with terms of 2/10, n/30 will include a a. credit to Sales Discounts for $14. b. debit to Sales Revenue for $686. c. credit to Accounts Receivable for $700. d. credit to Sales Revenue for $700.
c. credit to Accounts Receivable for $700.
The direct write-off method of accounting for bad debts a. uses an allowance account. b. uses a contra asset account. c. does not require estimates of bad debt losses. d. is the preferred method under generally accepted accounting principles.
c. does not require estimates of bad debt losses
Under the allowance method, Bad Debt Expense is recorded? a. when an individual account is written off. b. when the loss amount is known. c. for an amount that the company estimates it will not collect. d. several times during the accounting period.
c. for an amount that the company estimates it will not collect.
Each of the following companies is a merchandising company except a? a. wholesale parts company. b. candy store. c. moving company. d. furniture store.
c. moving company.
The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is? a. called the matching principle. b. called the consistency principle. c. nonexistent; that is, there is no such accounting requirement. d. called the physical flow assumption.
c. nonexistent; that is, there is no such accounting requirement
A decline in a company's gross profit could be caused by all of the following except? a. selling products with a lower markup. b. clearance of discontinued inventory. c. paying lower prices to its suppliers. d. increasing competition resulting in a lower selling price.
c. paying lower prices to its suppliers.
Inventory becomes part of cost of goods sold when a company a. pays for the inventory. b. purchases the inventory. c. sells the inventory. d. receives payment from the customer.
c. sells the inventory.
Restricted cash should be reported? a. always as a noncurrent asset. b. separately on the income statement. c. separately on the balance sheet. d. always as a current asset.
c. separately on the balance sheet.
Merchandising companies that sell to retailers are known as a. brokers. b. corporations. c. wholesalers. d. service firms.
c. wholesalers.
The following credit sales are budgeted by Gonzalez Company: February 150,000 March 210,000 April 180,000 The company's past experience indicates that 80% of the accounts receivable are collected in the month of sale, 20% in the month following the sale. The anticipated cash inflow for the month of April is? a. $144,000 b. $168,000 c. $180,000 d. $186,000
d. $186,000
Sampson Company's accounting records show the following for the year ending on December 31, 2014. Purchase discounts $5,600 Freight-in 7,800 Purchases 350,010 Beginning inventory 23,500 Ending Inventory 28,800 Purchases Returns and Allowances 6,400 Using the periodic system, the cost of goods purchased is a. $330,210. b. $354,210. c. $358,610. d. $345,810.
d. $345,810
At December 31, 2014 Mohling Company's inventory records indicated a balance of $602,000. Upon further investigation it was determined that this amount included the following: $112,000 in inventory purchases made by Mohling shipped from the seller 12/27/14 terms FOB destination, but not due to be received until January 2nd $74,000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th. $6,000 of goods received on consignment from Dollywood Company What is Mohling's correct ending inventory balance at December 31, 2014? a. $490,000 b. $596,000 c. $410,000 d. $484,000
d. $484,000
The interest on a $7,000, 6%, 60-day note receivable is a. $35 b. $420 c. $210 d. $70
d. $70
Financial information is presented below: Operating expenses $45,o00 Sales returns and allowances 4,000 Sales discounts 6,000 Cost of goods sold 90,000 Sales Revenue 160,000 The profit margin would be a. .40 b. .09 c. .16 d. .10
d. .10
Which of these would cause the inventory turnover ratio 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
Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants the most realistic ending inventory. Which inventory costing method should Ace consider using? a. Average because all inventory costs will then represent an average amount. b. Specific identification is the most realistic method because it involves the actual costs. c. LIFO because ending inventory represents the earliest costs. d. FIFO because ending inventory represents the latest costs.
d. FIFO because ending inventory represents the latest costs.
A low number of days in inventory may indicate all of the following except? a Sales opportunities may be lost because of inventory shortages. b. There is less chance of having obsolete inventory items. c. The company has fewer funds tied up in inventory. d. Management has achieved the best balance between too much and too little inventory levels.
d. Management has achieved the best balance between too much and too little inventory levels.
Which of the following expressions is incorrect? a. Gross profit - Operating expenses = Net income b. Sales revenue - cost of goods sold - Operating expenses = Net income c. Net income + Operating expenses = Gross profit d. Operating expenses - Cost of goods sold = Gross profit
d. Operating expenses - Cost of goods sold = Gross profit
Electronic funds transfer (EFT) is a disbursement system that transfers cash from one location to another using? a. a telephone. b. a telegraph. c. a computer. d. a telephone, telegraph, or computer.
d. a telephone, telegraph, or computer.
The Sales Returns and Allowances account is classified as a(n)? a. asset account. b. contra asset account. c. expense account. d. contra revenue account.
d. contra revenue account.
When an account is written off using the allowance method, the? a. cash realizable value of total accounts receivable will increase. b. net accounts receivable will decrease. c. allowance account will increase. d. net accounts receivable will stay the same.
d. net accounts receivable will stay the same
A bank statement? a. lets a depositor know the financial position of the bank as of a certain date. b. is a credit reference letter written by the depositor's bank. c. is a bill from the bank for services rendered. d. shows the activities that increased or decreased the depositor's account balance.
d. shows the activities that increased or decreased the depositor's account balance.
The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a? a. multiple-step statement. b. revenue statement. c. report-form statement. d. single-step statement.
d. single-step statement.
Days in inventory is calculated by dividing 365 days by? a. average inventory b. beginning inventory c. ending inventory d. the inventory turnover
d. the inventory turnover
If an account is collected after having been previously written off a. the allowance account should be debited. b. only the control account needs to be credited. c. both income statement and balance sheet accounts will be affected. d. there will be both a debit and a credit to accounts receivable.
d. there will be both a debit and a credit to accounts receivable.