acct test 6,7,8

The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments. This item:

Indicates that Baxter's marketable securities have a current market value higher than cost.

Which of the following factors would suggest the use of a perpetual inventory system?

Inventory items with a high per-unit cost.

An Unrealized Holding Gain (or Loss) on Investments classified as "available-for-sale" securities:

Is reported in the stockholders' equity section of the balance sheet, as either an increase or decrease in total stockholders' equity.

The lower-of-cost-or-market rule:

Is used in conjunction with any inventory cost flow assumptions.

Many companies state in their annual reports that inventory is shown at the lower of its cost or market value. This means that the inventory:

Is valued at current replacement cost or historical cost, whichever is less.

Which of the four inventory approaches transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs?

LIFO

During periods of inflation, when comparing LIFO with FIFO:

LIFO inventory would be lower and cost of sales would be higher.

The Sales Returns and Allowances account is debited when:

Merchandise is returned by a customer

In a perpetual inventory system:

Merchandising transactions are recorded as they occur.

If the ending inventory is overstated in the current year:

Next year's beginning inventory will also be overstated.

When the account Allowance for Doubtful Accounts is used, writing off of an uncollectible accounts receivable will:

Not change income or total assets.

In a perpetual inventory system, two entries usually are made to record each sales transaction. The purposes of these entries are best described as follows:

One entry recognizes the sales revenue, and the other recognizes the cost of goods sold.

Companies with periodic inventory systems often use techniques such as the gross profit method and the retail method to:

Prepare interim financial statements without taking a complete physical inventory.

Inventory shrinkage is not caused by:

Price reductions by competitors.

Hicksville's Department Store uses a perpetual inventory system. At year-end, the balance in the Inventory control account is $1,200,000. Assuming that the inventory records have been maintained properly, a year-end physical inventory:

Probably will indicate less than $1,200,000 in merchandise on hand.

The basic purpose of a subsidiary ledger is to:

Provide details about the individual items comprising the balance of a general ledger account.

Jayson Products uses a perpetual inventory system. At year-end, the Inventory account had a balance of $280,000, but a complete year-end physical inventory indicated goods on hand costing only $273,000. Jayson should:

Reduce the balance in its Inventory control account and inventory subsidiary ledger by $7,000.

Which account listed below is classified as a contra-revenue account?

Sales Discounts.

Periodic inventory systems are used primarily by:

Small businesses with manual accounting systems.

A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using:

Specific identification

In which of these inventory approaches is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?

Specific identification

Which of the following methods of measuring the cost of goods sold most closely parallels the actual physical flow of the merchandise?

Specific identification

to arrive at net sales:

Subtract sales returns and sales discounts from sales.

The credit term 2/10, n/30 means:

That there is a 2% discount if payment is received within 10 days, otherwise, full payment is due within 30 days.

In handling of daily cash transactions, a few minor errors inevitably will occur. Which of the following is used to adjust the accounting records for these small errors?

The Cash Over and Short account

Which of the following statements about a periodic inventory system is not correct?

The Cost of Goods Sold account is updated as sales transactions occur.

The adjustment of available for sale marketable securities to their current market value affects:

The balance sheet.

Sales discounts and allowances:

Will reduce net profit when properly recorded.

The basic purpose of offering customers cash discounts such as 2/10, n/30 is to:

speed up the collection of accounts receivable.

Bremmer uses a periodic inventory system and the following information is available: Sales $ 237,600 Inventory-Beginning 18,600 Inventory-Ending 15,400 Purchases 133,000 What is the gross profit?

$101,400

Michael uses its periodic inventory system and the following information is available: Sales $ 55,700 Inventory-Beginning 10,000 Inventory-Ending 8,000 Purchases 46,300

$7,400

During the current year, Sherwood Forest Products had net sales of $400 million, cost of goods sold of $300 million, average accounts receivable of $40 million, and average inventory of $25 million. Refer to the above data. Sherwood Forest's accounts receivable turnover rate is:

10 times

During the current year, Sherwood Forest Products had net sales of $400 million, cost of goods sold of $300 million, average accounts receivable of $40 million, and average inventory of $25 million. Refer to the above data. Sherwood Forest's inventory turnover rate is:

12 times

Cardinal Company's bank statement showed a balance at May 31 of $180,974. The only reconciling items consisted of a large number of outstanding checks totaling $51,847. At May 31, what balance should Cardinal's Cash account show?

129127

Investments in available fors ale marketable securities:

Are adjusted to current market value at the end of each accounting period.

With a line of credit, a liability arises:

As soon as any money is borrowed.

The cost of the transportation of inventory purchased:

Becomes part of the cost of inventory.

In a periodic inventory system, the formula used in computing the cost of goods sold may be summarized as follows:

Beginning inventory + purchases - ending inventory.

Which of the following factors would suggest the use of a periodic inventory system?

Both a small company and a high volume of sales and a manual accounting system.

Kent Company has used the same inventory method for many years. This is an example of which principle?

Consistency

The Cost of Goods Sold account is closed by:

Debiting Income Summary and crediting Cost of Goods Sold.

In preparing a bank reconciliation, a service charge shown on the bank statement should be:

Deducted from the balance per the depositor's records.

In a periodic inventory system, the cost of goods sold is:

Determined by a computation which is performed at year-end, after the taking of a complete physical inventory.

When a petty cash fund is in use:

Expenses paid from the fund are generally recorded when the fund is replanished.

Which of the following results in the inventory being stated at the most current acquisition costs?

FIFO

Fisher Corporation invested $320,000 cash in available-for-sale marketable securities in early December. On December 31, the quoted market price for these securities is $337,000. Which of the following statements is correct?

Fisher's December 31 balance sheet reports marketable securities at $337,000 and an unrealized holding gain on investments of $17,000.

Which of the following appears in the income statement of a merchandising business, but not in the income statement of a business that renders only services?

Gross profit

The principle of consistency states that:

If changes in accounting principles are made, the reasons for the change and the effects on the company's net income must be disclosed.

The specific identification method is more appropriate than a cost flow assumption method:

If each item in the inventory is unique.

With respect to the valuation of inventory and measurement of the cost of goods sold, the principle of consistency means that the same method should be applied:

In successive accounting periods.

When preparing a bank reconciliation, deposits in transit will:

Increase the balance per the bank statement.

The accounts receivable turnover rate:

Indicates how many times the receivables were converted into cash during the year.

During periods of inflation, which method will yield the smallest ending inventory and the largest cost of goods sold?

LIFO

During periods of rising prices, and being primarily concerned with tax implications, most of the companies would select:

LIFO

When prices are increasing, which inventory method will produce the highest cost of goods sold?

LIFO

Which of the following results in the cost of goods sold being stated at the most current acquisition costs?

LIFO

In a period of rising prices, a company is most likely to use the FIFO method of pricing inventory if:

Management wants the company's income statement to indicate the highest possible amounts of gross profit and net income.

in a perpetual inventory system, two entries are normally made to record each sales transaction. The purpose of these entries is best described as follows:

One entry recognizes the sales revenue and the other recognizes the cost of goods sold.

The direct write-off method of recognizing uncollectible accounts expense:

Records uncollectible accounts expense when individual accounts receivable are determined to be worthless.

With available for-sale securities, unrealized holding gains and losses are:

Reported in the stockholders' equity section of the balance sheet.

In comparing a perpetual inventory system with a periodic inventory system, which of the following statements is not correct?

The perpetual method is easier to apply in a manual accounting system.

The term cash equivalent refers to:

Very liquid short-term investments such as U.S. Treasury Bills and commercial paper.

When making sales, the sales taxes received are:

a liabilty

An NSF check returned by the bank should be entered in the depositor's accounting records by a debit to:

accts recievable

When short-term investments appear in the balance sheet at their current market values, it is an exception to the ______ principle.

cost

Under the perpetual inventory system which journal entry would indicate a purchase of merchandise?

debit Inventory and credit Cash.

Financial assets include all of the following except:

inventories

Gross profit is the difference between:

net sales - cost of goods sold

The cost of delivering merchandise to the customer is:

operating expense

Bremmer uses a periodic inventory system and the following information is available: Sales $ 237,600 Inventory-Beginning 18,600 Inventory-Ending 15,400 Purchases 133,000 What is the cost of goods sold?

$136,200

Cardinal Company's bank statement showed a balance at May 31 of $208,400. The only reconciling items consisted of a large number of outstanding checks totaling $75,910. At May 31, what balance should Cardinal's Cash account show?

$208,400 − $75,910 = $132,490

At year-end, the perpetual inventory records of Walker Stores indicate 125 units of a particular product in inventory, acquired at the following dates and unit costs: Acquisition Date Quantity Unit Cost Total Cost Jun 13 50 $30 $1,500 Oct 19 75 $45 $3,375 Total on hand 125 $4,875 However, a complete physical inventory taken at year-end, indicates only 115 units of this product actually are on hand. Refer to the above date. Determine the dollar amount of the shrinkage loss assuming that Walker Stores uses the average cost method:

$4,875 ÷ 125 = $39 x 10 = $390

Oceanside Company uses the balance sheet approach in estimating uncollectible accounts expense. Its Allowance for Doubtful Accounts has a $1,900 credit balance prior to adjusting entries. It has just completed an aging analysis of accounts receivable at December 31, 2018. This analysis disclosed the following information: Age Percentage Group Considered Total Uncollectible Not yet due $ 66,000 1 % 1-30 days past due $ 32,000 3 % 31-60 past due $ 20,000 6 % What is the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018?

$66,000 × 0.01 = $660; $32,000 × 0.03 = $960; $20,000 × 0.06 = $1,200; $660 + $960 + $1,200 = $2,820

Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 19 $ 10 $ 190 Purchase (Jan. 11) 11 $ 16 176 Purchase (Jan. 20) 22 $ 18 396 Total 52 $ 762 On January 14, Beech Soda, Inc. sold 24 units of this product. The other 28 units remained in inventory at January 31. Assuming that Beech Soda uses the average cost flow assumption, the cost of goods sold to be recorded at January 14 is: (Round your intermediate calculation to one decimal place and final answer to the nearest cent).

(($190 + $176) ÷ (19 + 11)) × 24 = ($366 ÷ 30) × 24 = $12.2 × 24 = $292.80

Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 19 $ 10 $ 190 Purchase (Jan. 11) 11 $ 16 176 Purchase (Jan. 20) 22 $ 18 396 Total 52 $ 762 On January 14, Beech Soda, Inc. sold 24 units of this product. The other 28 units remained in inventory at January 31. Assuming that Beech Soda uses the LIFO cost flow assumption, the cost of goods sold to be recorded at January 14 is:

(11 × $16) + (13 × $10) = $306

Required information Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 19 $ 10 $ 190 Purchase (Jan. 11) 11 $ 16 176 Purchase (Jan. 20) 22 $ 18 396 Total 52 $ 762 On January 14, Beech Soda, Inc. sold 24 units of this product. The other 28 units remained in inventory at January 31. Assuming that Beech Soda uses the FIFO cost flow assumption, the cost of goods sold to be recorded at January 14 is:

(19 × $10) + (5 × $16) = $270

Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 19 $ 10 $ 190 Purchase (Jan. 11) 11 $ 16 176 Purchase (Jan. 20) 22 $ 18 396 Total 52 $ 762 On January 14, Beech Soda, Inc. sold 24 units of this product. The other 28 units remained in inventory at January 31. Assuming that Beech Soda uses the LIFO cost flow assumption, the 28 units of this product in inventory at January 31 have a total cost of:

(6 × $10) + (22 × $18) = $456 or $762 − $306 = $456

Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 19 $ 10 $ 190 Purchase (Jan. 11) 11 $ 16 176 Purchase (Jan. 20) 22 $ 18 396 Total 52 $ 762 On January 14, Beech Soda, Inc. sold 24 units of this product. The other 28 units remained in inventory at January 31. Assuming that Beech Soda uses the FIFO cost flow assumption, the 28 units of this product in inventory at January 31 have a total cost of:

(6 × $16) + (22 × $18) = $492 or $762 − $270 = $492

At year-end, the perpetual inventory records of Walker Stores indicate 125 units of a particular product in inventory, acquired at the following dates and unit costs: Acquisition Date Quantity Unit Cost Total Cost Jun 13 50 $30 $1,500 Oct 19 75 $45 $3,375 Total on hand 125 $4,875 However, a complete physical inventory taken at year-end, indicates only 115 units of this product actually are on hand. Refer to the above data. Determine the dollar amount of the shrinkage loss assuming that Walker Stores uses the FIFO method:

125 - 115 = 10 x $30 = $300

At year-end, the perpetual inventory records of Walker Stores indicate 125 units of a particular product in inventory, acquired at the following dates and unit costs: Acquisition Date Quantity Unit Cost Total Cost Jun 13 50 $30 $1,500 Oct 19 75 $45 $3,375 Total on hand 125 $4,875 However, a complete physical inventory taken at year-end, indicates only 115 units of this product actually are on hand. Refer to the above data. Determine the dollar amount of the shrinkage loss assuming that Walker Stores uses the LIFO method:

125 - 115 = 10 x $45 = $450

Oceanside Company uses the balance sheet approach in estimating uncollectible accounts expense. Its Allowance for Doubtful Accounts has a $1,200 credit balance prior to adjusting entries. It has just completed an aging analysis of accounts receivable at December 31, 2018. This analysis disclosed the following information: Age Percentage Group Considered Total Uncollectible Not yet due $ 52,000 1 % 1-30 days past due $ 30,000 2 % 31-60 past due $ 13,000 8 % What is the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018?

2160

The following information is available: Sales $ 2,850 Inventory-year-end $ 1,500 Purchases $ 1,950 Cost of Goods Sold $ 2,400 Gross profit is

450

Michael uses its periodic inventory system and the following information is available: Sales $ 55,700 Inventory-Beginning 10,000 Inventory-Ending 8,000 Purchases 46,300

48300

A bank statement shows a balance of $8,065 at June 30. The bank reconciliation is prepared and includes outstanding checks of $2,105, deposits in transit of $1,490, and a bank service charge of $35. Among the paid checks returned by the bank was check no. 900 in the amount of $530, which the company had erroneously recorded in the accounting records as $60. The "adjusted cash balance" at June 30 is:

7450

Merchandising companies that are small and do not use a perpetual inventory system may elect to use:

A periodic inventory system.

hich of the following is not considered a cash equivalent?

Accounts receivable

The purpose of establishing a petty cash fund is to:

Achieve internal control over small cash disbursements not made by check.

When the LIFO costing method is in use, the seller:

Assumes that the most recently acquired units are sold first.

The Allowance for Doubtful Accounts will appear on the:

Balance sheet.

Regal Artworks Co. records purchases net of all available purchase discounts. If the company makes payment after the discount has expired, the entry to record the payment should include a:

Debit to Purchase Discounts Lost.

When preparing a bank reconciliation, an NSF check will:

Decrease the balance per depositor's records.

When preparing a bank reconciliation, outstanding checks will

Decrease the balance per the bank statement.

Financial assets:

Include short-term investments in marketable securities and receivables, as well as cash.