Chapter 5 Videos with Assessment

Jefferson Company made a loan of $6,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of cash flow from operating activities that Jefferson would report in Year 1 and Year 2, respectively would be

$0, and $360.

On December 31, Year 3, Alpha Company had an ending balance of $200,000 in its accounts receivable account and an unadjusted (current) balance in its allowance for doubtful accounts account of $300. Alpha estimates uncollectible accounts expense to be 1% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is

$1,700.

DeKalb Company made a loan of $6,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that DeKalb would report in Year 1 and Year 2, respectively would be

$270, and $90.

The following information was drawn from the inventory records of Alpha Company as of December, Year 2. Beginning inventory (purchased in Year 1)200 Units@$5eachPurchases made in Year 2800 Units@$8eachUnits Sold900 Units@$12each Which of the following is the amount of the gross margin shown on the Year 2 income statement assuming Alpha uses a LIFO cost flow method?

$3,900

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the LIFO cost flow method, the balance in the inventory account after the sales transaction will be

$30.

At the end of the accounting period Anderson Company had $4,500 in accounts receivable and $500 in its allowance for doubtful accounts account. Based on this information the net realizable value of accounts receivable is

$4,000.

The following information was drawn from the inventory records of Alpha Company as of December, Year 2. Beginning inventory (purchased in Year 1)200 Units@$5eachPurchases made in Year 2800 Units@$8eachUnits Sold900 Units@$12each Which of the following is the amount of the gross margin shown on the Year 2 income statement assuming Alpha uses a weighted average cost flow method?

$4,140

The following information was drawn from the inventory records of Alpha Company as of December 31, Year 2. Beginning inventory (purchased in Year 1)200 Units@$5eachPurchases made in Year 2800 Units@$8eachUnits Sold900 Units@$12each Which of the following is the amount of the gross margin assuming Alpha uses a FIFO cost flow method?

$4,200

The following information was drawn from the inventory records of Preston Company. Beginning inventory (purchased in Year 1)100 Units@$10each1st Purchase made in Year 2400 Units@$12each2nd Purchase made in Year 2500 Units@$14eachUnits Sold950 Units@$15each Based on this information, which of the following represents the amount of ending inventory appearing on the balance sheet assuming a LIFO cost flow?

$500

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the weighted average cost flow method, the amount of gross margin shown on the income statement will be

$9.

Forest Beach Company experienced an event that had the following effects on its financial statements. Which of the following events could have caused these effects?

Collected cash for the principal balance of a note receivable.

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. When the Company sold one of the items for $40, it expensed $30 to its cost of goods sold account. Based on this information which of the following cost flow methods is the company using?

FIFO

Which of the following cost flow methods would provide the lowest amount of net income in an inflationary environment?

LIFO

On August 1, Year 1 Hernandez Company loaned $48,000 cash to Acosta Company. The one-year note carried a 5% rate of interest. Which of the following shows how the accrual of interest revenue in Year 2 will affect Hernandez's financial statements?

Option A A.1,400=NA+1,4001,400−NA=1,400NA

On November 1, Year 1 Shelter Company loaned $7,000 cash to Cove Company. The one-year note carried a 7% rate of interest. Which of the following shows how the loan will affect Shelter's financial statements on November 1, Year 1?

Option A A.NA=NA+NANA−NA=NA(7,000) IA

On December 31, Year 1, Kardashian Company recorded an adjusting entry to recognize $5,470 of uncollectible accounts expense. Which of the following shows how this entry will affect Kardashian's financial statements?

Option B B.(5,470)=NA+(5,470)NA−5,470=(5,470)NA

On August 1, Year 1 Hernandez Company loaned $48,000 cash to Acosta Company. The one-year note carried a 5% rate of interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will affect Hernandez's financial statements?

Option D D.1,000=NA+1,0001,000−NA=1,000NAv

Assuming Alpha company uses the percent of receivables method to determine the amount of uncollectible expense, which of the following shows how the recognition of the expense will affect Alpha's financial statements?

Option D D.−=NA+−NA−+=−NA

Accrued interest revenue will appear on the income statement but not on the statement of cash flows.

True

Cash revenue generated from notes receivable appears in the operating activities section of the statement of cash flows but as a non-operating item on the income statement.

True

Under the allowance method the uncollectible accounts expense is

estimated and recognized at the end of the accounting period.

Most companies expect to collect the full balance of all of their accounts receivable. This statement is

false

The balance in the allowance for doubtful accounts provides an estimate of the amount of accounts receivable that is expected to be uncollectible. This statement is

false.

The cash flow associated with buying and selling inventory is not affected by the inventory cost flow method. This statement is

true.

The net realizable value of accounts receivable represents an estimate of the amount of the accounts receivable that a company realistically expects to collect. This statement is

true.