Accounting test 2

A credit sale of $5200 is made on April 25, terms 2/17, net/30, on which a return of $200 is granted on April 28. What amount is received as payment in full on May 4? - $4900 - $5096 - $5000 - $520

$4900

Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination (2) FOB shipping point and purchases made (3) FOB destination (4) FOB shipping point. Which items should be included in Tidwell's inventory at December 31? (2) and (4) (1) and (3) (2) and (3) (1) and (4)

(1) and (4)

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: - (Cash, Accounts Receivable) - (Accounts Receivable, Cash) - (Miscellaneous Expense, Accounts Receivable) - (No adjusting entry is necessary)

(Accounts Receivable, Cash)

All of the following are items that would most likely be paid from a petty cash fund except: - postage due. - administrative wages. - taxi fares. - freight-out.

- administrative wages.

The term "receivables" refers to: - merchandise to be collected from individuals or companies. - cash to be paid to creditors. - cash to be paid to debtors. - amounts due from individuals or companies.

- amounts due from individuals or companies.

The Allowance for Doubtful Accounts is necessary because - when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay. - a liability results when a credit sale is made. - management needs to accumulate all the credit losses over the years. -uncollectible accounts that are written off must be accumulated in a separate account.

- when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.

Financial information is presented below: Operating expenses . $ 26000 Sales revenue 250000 Cost of goods sold 171000 The gross profit rate would be -0.21. -0.32. -0.68. -0.10.

.32 (Revenue - Cost of goods sold) / Revenue

Financial information is presented below: Operating expenses . $ 49000 Sales revenue 217000 Cost of goods sold 149000 The profit margin ratio would be -0.69. -0.09. -0.91. -0.31

0.09 (Net income/ Net Sales)

As an incentive for customers to pay their accounts promptly, a business may offer its customers - a sales allowance. - a sales return. - free delivery. - a sales discount.

A sales discount

In periods of rising prices, which is an advantage of using the LIFO inventory costing method? - Cost of goods sold will include latest (most recent) costs and thus will be more realistic. - Ending inventory will include latest (most recent) costs and thus be more realistic. -Phantom profits are reported. - Net income will be the highest and thus reflect the prosperity of the company.

Cost of goods sold will include latest (most recent) costs and thus will be more realistic.

Inventory costing methods place primary reliance on assumptions about the flow of - values. - resale prices. - goods. - costs.

Costs

Sam's Grocery Store has the following policy. 'Only one cashier can have access to a cash drawer.' Which internal control principle supports this policy? - Documentation procedures. - Physical controls. - Segregation of duties. - Establishment of responsibilities.

Establishment of responsibilities.

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using -LIFO will have the highest ending inventory. - FIFO will have the highest cost of goods sold. - FIFO will have the highest ending inventory. - LIFO will have the lowest cost of goods sold

FIFO will have the highest ending inventory.

The purchaser's journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit -Accounts Payable. -Inventory. -Purchase Returns and Allowances. - Sales Revenue.

Inventory

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? - Average cost method - Income tax expense for the period will be the same - under all assumptions - FIFO - LIFO

LIFO

Which of the following is an example of a bank reconciliation item that requires an adjusting entry? - None of these items requires an adjusting entry. - Deposit in transit. - NSF check. - Bank error.

NSF Check

Which of the following accounts is classified as a contra revenue account? - Sales Returns and Allowances -Purchase Discounts -Sales Revenue -Cost of Goods Sold

Sales Returns and Allowances

The control principle related to not having the same person authorize and pay for goods is known as: - independent internal verification. - establishment of responsibility. - rotation of duties. - separation of duties.

Separation of duties

Which statement regarding negative cash balances is true? - The negative cash balance is included as a current asset and discussed in a footnote to the financial statements. - The amount is shown as a current liability because a company cannot have a cash balance below zero. - The company must obtain a loan to bring the cash balance to zero before financial statements are prepared. - The amount is offset against other current assets because users need to know net current assets.

The amount is shown as a current liability because a company cannot have a cash balance below zero.

Electronic funds transfer (EFT) is a disbursement system that transfers cash from one location to another using - a telephone, telegraph, or computer. - a computer. - a telegraph. - a telephone.

a telephone, telegraph, or computer.

Two individuals at a retail store work the same cash register. You evaluate this situation as: - supporting internal independent verification. - supporting the establishment of responsibility. - a violation of separation of duties. - a violation of establishment of responsibility.

a violation of establishment of responsibility.

A check written by the company for $147 is incorrectly recorded by a company as $174. On the bank reconciliation, the $27 error should be - added to the balance per books. - added to the balance per bank. - deducted from the balance per bank. - deducted from the balance per books.

added to the balance per books.

An overstatement of the beginning inventory results in - no effect on the period's net income. -an understatement of net income. - an overstatement of net income. -a need to adjust purchases.

an understatement of net income.

An employee authorized to sign checks should not record - mail receipts. - sales transactions. - cash disbursement transactions. - owner cash contributions.

cash disbursement transactions.

When two or more people get together for the purpose of circumventing prescribed controls, it is called: - a fraud committee. - bonding of employees. - a division of duties. - collusion

collusion

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would - debit Cost of Goods sold and credit Inventory. - make no additional entry until the end of the period. - debit Inventory and credit Cost of Goods Sold. - debit Cost of Goods Sold and credit Purchases.

debit Cost of Goods sold and credit Inventory.

In a perpetual inventory system, cost of goods sold is recorded - each time a sale occurs. - on a daily basis. - on a monthly basis. - on an annual basis.

each time a sale occurs.

Internal auditors: - evaluate the system of internal controls for the companies that employ them. - are employees of the IRS who evaluate the internal controls of companies filing tax returns. - cannot evaluate the system of internal controls of the company that employs them because they are not independent. - are hired by CPA firms to audit business firms.

evaluate the system of internal controls for the companies that employ them.

Under the allowance method, Bad Debt Expense is recorded: -when an individual account is written off. -when the loss amount is known. -for an amount that the company estimates it will not collect. -several times during the accounting period.

for an amount that the company estimates it will not collect.

Operating expenses would include - freight-out. - freight-out and interest. - interest expense. - income tax expense

freight-out.

Supervisors counting cash receipts daily is an example of - segregation of duties. - independent internal verification. - establishment of responsibility. - human resource controls.

independent internal verification.

The direct write-off method of accounting for uncollectible accounts - emphasizes cash realizable value. - emphasizes balance sheet relationships. - emphasizes the matching of expenses with revenues. - is not generally accepted as a basis for estimating bad debts.

is not generally accepted as a basis for estimating bad debts.

The periodic inventory system is used most commonly by companies that sell - high-priced, low-volume merchandise. - low-priced, high-volume merchandise. - high-priced, low and high-volume merchandise. - high-priced, high-volume merchandise.

low-priced, high-volume merchandise.

The two key parties to a promissory note are the - sender and the receiver. - maker and a bank. - debtor and the payee. - maker and the payee.

maker and the payee.

Internal controls are concerned with: - safeguarding assets. - preparing income tax returns. - only manual systems of accounting. - the extent of government regulations.

safeguarding assets.

Gross profit equals the difference between - net income and operating expenses. - sales revenue and operating expenses. - sales revenue and cost of goods sold plus operating expenses. - sales revenue and cost of goods sold.

sales revenue and cost of goods sold.

The LIFO reserve is - the difference between the value of the inventory under LIFO and the value under FIFO. - the difference between the value of the inventory under LIFO and the value under average cost. - the amount used to adjust inventory to historical cost. -an amount used to adjust inventory to the lower of cost or market.

the difference between the value of the inventory under LIFO and the value under FIFO.

If goods in transit are shipped FOB destination - the seller has legal title to the goods until they are delivered. - the buyer has legal title to the goods until they are delivered. - the transportation company has legal title to the goods while the goods are in transit. - no one has legal title to the goods until they are delivered.

the seller has legal title to the goods until they are delivered.