Chapters 4,5,6

Which of the following methods are not used for inventory costing?

Simple-average NIFO

Receivables not expected to be collected should

not be counted in assets of the company

A formal credit arrangement between a creditor and debtor is called a(n)

note receivable

Sales to customers in which the customers pay within 30 to 60 days are referred to as

sales on account. credit sales.

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

The allowance method estimates

uncollectible accounts

Kilian Company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered until the following year, the financial statement effect in the current year will be:

understated assets, retained earnings, and net income

Items held for sale in the normal course of business are referred to as

inventory

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a

multiple-step income statement

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?

An entry to reinstate the account receivable and an entry to record payment.

Where is inventory reported in the financial statements?

Balance sheet as a current asset

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

Cost of Goods Sold Inventory

the definition of inventory includes which items?

Items held for resale Materials used currently in the production of goods to be sold Items currently in production for future sale

What is the formula for the receivables turnover ratio?

Net credit sales divided by average accounts receivable (net).

A trade discount is

a percentage reduction from list price.

a _________ _________ is the legal right to receive cash from a credit sale and represents an asset of the company

account receivable

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as

accounts receivable

To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to

allowance for uncollectible accounts.

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the

allowance method

Raven receives a 3-year note receivable from a customer for goods sold. How should Raven report this note receivable in its financial statements?

as a concurrent asset

The cost of estimated accounts receivable that will not be collected is referred to as

bad debt expense

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for

cost of goods sold. inventory.

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

credit sales

The income statement approach for estimating bad debts focuses on

current year's credit sales.

Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):

decrease in Accounts Receivable

The Accounts Receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

A trade discount is a reduction from the list price, which is used to

disguise real prices from competitors give quantity discounts to customers change prices without publishing a new catalog

A multiple-step income statement reports multiple levels of

income

In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs

incurred several years earlier.

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:

inventory