ACCT EXAM 2

A company has beginning inventory for the year of $19,200. During the year, the company purchases inventory for $232,000 and has cost of goods sold equal to $236,000. Ending inventory equals:

$15,200 Explanation Ending inventory = beginning inventory ($19,200) + purchases ($232,000) − cost of goods sold ($236,000) = $15,200.

Inventory records for Eliza Company revealed the following: Eliza sold 1,890 units of inventory during the month. Ending inventory assuming FIFO would be:

$5,412 Explanation Ending inventory = (102 × $8.26) + (510 × $8.96) = $5,412.

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $311,000 and in Allowance for Uncollectible Accounts of $660 (credit) before adjustment. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should be:

$5,560 Explanation ($311,000 × 2%) − $660 = $5,560

Inventory records for Capetown, Incorporated revealed the following: Capetown sold 620 units of inventory during the month. What is the amount of ending inventory assuming weighted-average cost?

$700 Explanation Weighted-average cost = [(500 × $2.44) + (390 × $2.79)] / 890 = 2.5934.Ending inventory = 270 × $2.5934 = $700 (rounded).

A company has the following information: Total revenues $860,000 Sales returns and allowances 50,000 Sales discounts 30,000 Ending inventory 100,000 What is the amount of net revenues for the company?

$780,000 Explanation Net revenues = $860,000 − $50,000 − $30,000 = $780,000

The following information pertains to inventory for a company: March 1 Beginning inventory = 35 units @ $5.40 March 3 Purchased 13 units @ 3.60 March 9 Sold 20 units @ 8.50 What is the cost of goods sold, assuming the company uses LIFO?

$85 Explanation Cost of goods sold = (13 × $3.60) + (7 × $5.40) = $85.

1. At the beginning of the year, Mitchum Enterprises allows for estimated uncollectible accounts of $18,200. By the end of the year, actual bad debts total $21,000. Required: 1. Record the write-off to uncollectible accounts. 2. What is the balance of Allowance for Uncollectible Accounts?

1. Allowance for Uncollectible accounts - 2,800 Bad debt expense - 2,800 2. Allowance for uncollectible accounts $2,800, debit Explanation 2.Allowance for Uncollectible Accounts = $18,200 (beginning) − $21,000 (write-off) = −$2,800 or $2,800 debit

On October 1, 2024, Green Corporation loans one of its employees $31,000 and accepts a 12-month, 10% note receivable. Calculate the amount of interest revenue Green will recognize in 2024 and 2025.

2024 - $775 2025 - $2,325 Explanation Interest Revenue 2024: $31,000 × 10% × 3/12 = $775 2025: $31,000 × 10% × 9/12 = $2,325

At the beginning of the year, Meyer Incorporated reports inventory of $6,200. During the year, the company purchases additional inventory for $21,200. At the end of the year, the cost of inventory remaining is $8,200. Calculate cost of goods sold for the year.

Beginning inventory- $6,200 Add: Purchases selected- 21,200 Cost of goods available for sale-27,400 Less: Ending inventory - 8,200 Cost of goods sold- $19,200

A company uses the aging of receivables method. During the year, the company recorded credit sales of $570,000. Before adjusting entries at year-end, the company has accounts receivable of $380,000, of which $52,000 is past due, and the allowance account had a credit balance of $2,800. The company expects it will not collect 6% of the amount not yet past due and 30% of the past due accounts. Which of the following adjusting entries will the company record at year-end? Transaction A: Bad Debt Expense 35,280 ; Allowance for Uncollectible Accounts 35,280 Transaction B: Bad Debt Expense 38,080 ; Allowance for Uncollectible Accounts 38,080 Transaction C: Bad Debt Expense 32,480 ; Allowance for Uncollectible Accounts 32,480 Transaction D: Allowance for Uncollectible Accounts 32,480 ; Bad Debt Expense 32,480

C. Explanation ($328,000 × 6%) + ($52,000 × 30%) − $2,800 = $32,480

Using a perpetual inventory system, the entry to record the return of inventory previously purchased on account includes a:

Debit to accounts payable

A company offers a 30% trade discount when providing services of $5,000 or more to its customers. Record the transaction when the company provides services of $5,200 (not including the trade discount) on account.

Debit: accounts rec. - 3,640 Credit: service rev. - 3,640

At the end of the year, Mercy Cosmetics' balance of Allowance for Uncollectible Accounts is $430 (credit) before adjustment. The balance of Accounts Receivable is $16,500. The company estimates that 10% of accounts will not be collected over the next year. What adjusting entry would Mercy Cosmetics record for Allowance for Uncollectible Accounts?

Debit: bad debt expense - 1,220 Credit: allowance for uncollectible accounts - 1,220 Explanation Bad Debt Expense = $16,500 × 10% − $430 = $1,220

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $37,000 and then sells this inventory on account on March 17 for $57,000. Record transactions for (a) the purchase of inventory on account and (b) the sale of inventory on account.

Feb 2: debit: inventory - 37,000 credit: accounts payable - 37,00 March 17: debit: accounts receivable - 57,000 credit: sales revenue - 57,000 March 17: credit: cost of goods sold - 37,000 debit: inventory - 37,000

On February 3, a company provides services on account for $31,500, terms 3/10, n/30. On February 9, the company receives payment from the customer for those services on February 3. Record the service on account on February 3 and the collection of cash on February 9.

Feb 3: Debit: accounts rec. - 31,500 Credit: service rev. - 31,500 Feb 9: Debit: Cash - 30,555 Debit: sales discounts - 945 Credit: Accounts rec. - 31,500

A company reports the following amounts at the end of the year: Sales revenue 330,000 Cost of goods sold 220,000 Net income 54,000 Compute the company's gross profit ratio.

Gross profit ratio: 33% Explanation Gross profit ratio = ($330,000 − $220,000) / $330,000 = 33%.

Using a perpetual inventory system, the purchase of inventory on account increases the balance of which of the following accounts?

Inventory

Which inventory cost flow assumption generally results in the lowest reported amount for inventory when inventory costs are rising?

Last in, first out (LIFO)

A company accounts for possible bad debts using the allowance method. When an actual bad debt occurs, what effect does it have on the balance sheet?

No effect on the balance sheet

A company uses a perpetual inventory system. How should the company record the return of inventory previously purchased on account for $200?

Option 2: Debit: accounts payable -200 Credit: inventory -200

Schoepfle Agency separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. In addition, the balance of Allowance for Uncollectible Accounts before adjustment is $12,500 (credit). 1. Accounts not yet due = $48,000; estimated uncollectible = 4%. 2. Accounts 1 to 60 days past due = $33,000; estimated uncollectible = 25%. 3. Accounts more than 60 days past due = $28,000; estimated uncollectible = 50%.

Req. 1.- Not yet due- $1,920 1 to 60 days past due- 8,250 More than 60 days past due - 14,000 Total-$24,170 Req. 2.- Debit: bad debit ex. - 11,670 Credit: Allowance for uncollectible accounts - 11,670

When a company provides services on account, which of the following accounts is debited?

accounts receivable

The cost of the goods that a company sold during a period is shown in its financial statements as ___________ and the cost of the goods that a company still has on hand at the end of the year is shown in the financial statements as ____________.

cost of goods sold; inventory

A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances.

false Explanation A sales allowance is recorded as a debit to Sales Allowances and a credit to Accounts Receivable.

Trade discounts, sales returns, sales allowances, and sales discounts are recorded in separate contra revenue accounts and subtracted when calculating net revenues.

false Explanation Trade discounts reduce revenue directly, while sales returns, sales allowances, and sales discounts are recorded in separate contra revenue accounts and subtracted when calculating net revenues.

Which of the following levels of profitability in a multiple-step income statement best represents profitability from primary activities of the company?

operating income