Exam 2

What is the type of account and normal balance of Allowance for Doubtful Accounts? a. contra asset, credit b. asset, debit c. asset, credit d. contra asset, debit

a. contra asset, credit

The arrangements between buyer and seller as to when payments for merchandise are to be made are called a. credit terms b. net cash c. cash on demand d. gross cash

a. credit terms

The bank reconciliation a. should be prepared by an employee who records cash transactions b. is part of the internal control system c. is for information purposes only d. is sent to the bank for verification

b. is part of the internal control system

When a firm uses internal auditors, it is adhering to which of the following internal control elements? a. risk assessment b. monitoring c. proofs and security measures d. information and communication

b. monitoring

Using the following information, what is the amount of income from operations? Purchases $32,000 Selling expense $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expense 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a. $31,670 b. $29,960 c. $28,760 d. $29,800

d. $29,800

Minor Company had checks outstanding totaling $19,200 on its April bank reconciliation. In May, Minor Company issued checks totaling $64,900. The May bank statement shows that $47,600 in checks cleared the bank in May. A check from one of Minor Company's customers of $300 was also returned marked "NSF." The amount of outstanding checks on Minor Company's May bank reconciliation should be a. $28,400 b. $66,800 c. $17,300 d. $36,500

d. $36,500

Assuming that the company uses the perpetual inventory system, determine the ending inventory for the month of May using the LIFO inventory cost method. a. $324 b. $372 c. $320 d. $364

d. $364

Generally, the revenue account for a merchandising business is entitled a. Sales b. Fees Earned c. Gross Sales d. Gross Profit

a. Sales

The percent of fixed assets to total assets is an example of a. vertical analysis b. solvency analysis c. profitability analysis d. horizontal analysis

a. vertical analysis

In horizontal analysis, each item is expressed as a percentage of the a. base year figure b. retained earnings figure c. total assets figure d. net income figure

a. base year figure

Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method. a. $108 b. $120 c. $72 d. $180

a. $108

Rodgers Company gathered the following reconciling information in preparing its May bank reconciliation. Calculate the adjusted cash balance per books on May 31. Cash balance per books, 5/31 $5,400 Deposits in transit 375 Notes receivable and interest collected by bank 650 Bank charge for check printing 40 Outstanding checks 2,400 NSF check 140 a. $5,870 b. $6,245 c. $4,930 d. $3,845

a. $5,870

Based on the following data, what is the accounts receivable turnover? Sales on account during year $700,000 Cost of merchandise sold during year 270,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000 a. 17.5 b. 2.6 c. 20.0 d. 15.5

a. 17.5

Based on the following data for the current year, what is the inventory turnover? Sales on account during year $700,000 Cost of merchandise sold during year 270,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000 a. 2.7 b. 9.7 c. 2.5 d. 3.0

a. 2.7

Based on the following data for the current year, what is the number of days' sales in inventory? Sales on account during year $1,204,500 Cost of merchandise sold during year 657,000 Accounts receivable, beginning of year 75,000 Accounts receivable, end of year 85,000 Inventory, beginning of year 85,600 Inventory, end of year 98,600 a. 51.2 b. 44.4 c. 6.5 d. 7.5

a. 51.2

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? a. Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000 b. Bad Debt Expense 19,500 Allowance for Doubtful Accounts 19,500 c. Bad Debt Expense 22,000 Allowance for Doubtful Accounts 22,000 d. Bad Debt Expense 65,000 Allowance for Doubtful Accounts 65,000

a. Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as a. FOB shipping point b. FOB destination c. FOB n/30 d. FOB buyer

a. FOB shipping point

Under the perpetual inventory system, all purchases of merchandise are debited to the account a. Merchandise Inventory b. Cost of Merchandise Sold c. Cost of Merchandise Available for Sale d. Purchases

a. Merchandise Inventory

The following information is available for Jase Company: Market price per share of common stock $25.00 Earnings per share on common stock $1.25 Which of the following statements is correct? a. The price-earnings ratio is 20, and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year. b. The price-earnings ratio is 5%, and a share of common stock was selling for 5% more than the amount of earnings per share at the end of the year. c. The price-earnings ratio is 10, and a share of common stock was selling for 125 times the amount of earnings per share at the end of the year. d. The market price per share and the earnings per share are not statistically related to each other.

a. The price-earnings ratio is 20, and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year.

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is a. a deduction from the balance per company's records b. an addition to the balance per bank statement c. a deduction from the balance per bank statement d. an addition to the balance per company's records

a. a deduction from the balance per company's records

All of the following are documents used for inventory control except a. a petty cash voucher b. a vendor's invoice c. a receiving report d. a purchase order

a. a petty cash voucher

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. This item would be included on the bank reconciliation as a(n) a. addition to the balance per the company's records b. addition to the balance per the bank statement c. deduction from the balance per the bank statement d. deduction from the balance per the company's records

a. addition to the balance per the company's records

The debit balance in Cash Short and Over at the end of an accounting period is reported as a. an expense on the income statement b. income on the income statement c. an asset on the balance sheet d. a liability on the balance sheet

a. an expense on the income statement

The journal entry to record a note received from a customer to replace an account is a. debit Notes Receivable; credit Accounts Receivable b. debit Accounts Receivable; credit Notes Receivable c. debit Cash; credit Notes Receivable d. debit Notes Receivable; credit Notes Payable

a. debit Notes Receivable; credit Accounts Receivable

To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a a. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts b. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable d. debit to Loss on Credit Sales and a credit to Accounts Receivable

a. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts

Selling receivables is called a. factoring b. sales revenue c. a factor d. sold receivables

a. factoring

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? a. gross profit b. income from operations c. net income d. gross sales

a. gross profit

FIFO reports higher gross profit and net income than the LIFO method when a. prices are increasing b. prices are decreasing c. prices remain stable d. prices are reduced by 50%

a. prices are increasing

Sarbanes-Oxley applies to a. publicly held companies b. not-for-profit organizations c. privately held businesses d. all of these

a. publicly held companies

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis? a. ratio of fixed assets to long-term liabilities b. ratio of net sales to assets c. number of days' sales in receivables d. rate earned on stockholders' equity

a. ratio of fixed assets to long-term liabilities

Which document establishes an initial record of the receipt of the inventory? a. receiving report b. vendor's invoice c. purchase order d. petty cash voucher

a. receiving report

The portion of an invoice that is returned with payment is a a. remittance advice b. voucher c. debit memo d. credit memo

a. remittance advice

The current ratio is a. used to evaluate a company's liquidity and short-term debt paying ability b. a solvency measure that indicates the margin of safety of a bondholder c. calculated by dividing current liabilities by current assets d. calculated by subtracting current liabilities from current assets

a. used to evaluate a company's liquidity and short-term debt paying ability

A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is a. $10,000 b. $10,150 c. $10,900 d. $9,100

b. $10,150

Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Merchandise Inventory account? a. $21,000 b. $20,580 c. $30,000 d. $29,400

b. $20,580

After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of accounts receivable? a. $51,000 b. $289,000 c. $340,000 d. $391,000

b. $289,000

Using the following information, what is the amount of net income? Purchases $32,000 Selling expense $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expense 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a. $29,510 b. $29,960 c. $28,310 d. $29,350

b. $29,960

Using the following information, what is the amount of gross profit? Purchases $32,000 Selling expense $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expense 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a. $25,300 b. $31,670 c. $30,600 d. $62,840

b. $31,670

The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Blankets Units Cost May 3 Purchase 5 $20 10 Sale 3 17 Purchase 10 $24 20 Sale 6 23 Sale 3 30 Purchase 10 $30 Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method. a. $364 b. $372 c. $324 d. $320

b. $372

On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of a. $0 b. $450 c. $900 d. $1,800

b. $450

Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of sales discount allowable? a. $260 b. $500 c. $460 d. $150

b. $500

The balance sheets at the end of each of the first two years of operations indicate the following: Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 125,000 65,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par—Common stock 75,000 75,000 Retained earnings 310,000 210,000 If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate earned on total assets for the year? a. 10.4% b. 11.9% c. 10.5% d. 8.4%

b. 11.9%

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant, and equipment 280,000 Total assets $375,000 Liabilities and Stockholders' Equity Current liabilities $ 60,000 Long-term liabilities 95,000 Stockholders' equity—Common 220,000 Total liabilities and stockholders' equity $375,000 Income Statement Sales $90,000 Cost of goods sold 45,000 Gross margin $45,000 Operating expenses 15,000 Net income $30,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share $1.00 Cash provided by operations $40,000 What is the rate earned on stockholders' equity? a. 7.3% b. 13.6% c. 20.5% d. 40.9%

b. 13.6%

If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate earned on stockholders' equity for Year 2? a. 6.9% b. 14.5% c. 16.04% d. 13.8%

b. 14.5%

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? a. Uncollectible Accounts Expense b. Accounts Receivable c. Allowance for Doubtful Accounts d. Interest Expense

b. Accounts Receivable

Pierce Company sold to Stanton Company merchandise on account FOB shipping point, 2/10, net 30, for $20,000. Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make to record this sale? a. Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000 b. Accounts Receivable—Stanton, debit $19,600; Sales, credit $19,600, and Accounts Receivable—Stanton, debit $500; Cash, credit $500 c. Accounts Receivable—Stanton, debit $20,100; Sales, credit $20,100 d. Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000, and Delivery Expense, debit $500; Cash, credit $500

b. Accounts Receivable—Stanton, debit $19,600; Sales, credit $19,600, and Accounts Receivable—Stanton, debit $500; Cash, credit $500

Kaden Co. sells merchandise on credit to Jase Co. for $9,600. The invoice is dated July 15 with terms of 1/15, net If Jase Co. chooses not to take the discount, by when should the payment be made? a. July 30 b. August 29 c. August 15 d. July 25

b. August 29

The Corbit Corp. sold merchandise for $10,000 cash. The cost of the merchandise sold was $7,590. The journal entries to record this transaction under the perpetual inventory system would be a. Cash 10,000 Merchandise Inventory 10,000 Cost of Merchandise Sold 7,590 Sales 7,590 b. Cash 10,000 Sales 10,000 Cost of Merchandise Sold 7,590 Merchandise Inventory 7,590 c. Cash 10,000 Sales 10,000 Cost of Merchandise Sold 10,000 Merchandise Inventory 10,000 d. Cash 7,590 Sales 7,590 Cost of Merchandise Sold 7,590 Merchandise Inventory 7,590

b. Cash 10,000 Sales 10,000 Cost of Merchandise Sold 7,590 Merchandise Inventory 7,590

The inventory method that assigns the most recent costs to cost of merchandise sold is a. FIFO b. LIFO c. weighted average d. specific identification

b. LIFO

Which of the following accounts has a normal credit balance? a. Accounts Receivable b. Sales c. Merchandise Inventory d. Delivery Expense

b. Sales

Merchandise inventory is classified on the balance sheet as a a. current liability b. current asset c. long-term asset d. long-term liability

b. current asset

Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded? a. debit Cash, $2,000; credit Merchandise Inventory, $1,250 b. debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250 c. debit Cash, $1,250; credit Sales, $1,250 d. debit Accounts Receivable, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250

b. debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry? a. debit Accounts Payable; credit Merchandise Inventory b. debit Merchandise Inventory; credit Accounts Payable c. debit Merchandise Inventory; credit Cash Discounts d. debit Merchandise Inventory; credit Purchases

b. debit Merchandise Inventory; credit Accounts Payable

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a a. debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales b. debit to Cash and a credit to Sales c. debit to Cash, credit to Credit Card Expense, and a credit to Sales d. debit to Sales, debit to Credit Card Expense, and a credit to Cash

b. debit to Cash and a credit to Sales

When a buyer returns merchandise purchased for cash, the buyer will record the transaction as a a. debit to Merchandise Inventory; a credit to Cash b. debit to Cash; a credit to Merchandise Inventory c. debit to Cash; a credit to Sales d. debit to Sales; a credit to Accounts Payable

b. debit to Cash; a credit to Merchandise Inventory

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a a. debit to Accounts Payable b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. credit to Sales

b. debit to Merchandise Inventory

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a a. credit to Customer Refunds Payable b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. debit to Cash

b. debit to Merchandise Inventory

The objectives of internal control are to a. control the internal organization of the accounting department personnel and equipment b. provide reasonable assurance that assets are safeguarded and used for business purposes, financial reports are accurate, and laws and regulations are complied with c. prevent fraud, and promote the social interest of the company d. provide control over "internal-use only" reports and employee internal conduct

b. provide reasonable assurance that assets are safeguarded and used for business purposes, financial reports are accurate, and laws and regulations are complied with

Who is responsible for the freight costs when the terms are FOB shipping point? a. the ultimate customer b. the buyer c. the seller d. either the seller or the buyer

b. the buyer

One of the weaknesses of the direct write-off method is that it a. understates accounts receivable on the balance sheet b. violates the matching principle c. is too difficult to use for many companies d. is based on estimates

b. violates the matching principle

At the beginning of the year, the balance in Allowance for Doubtful Accounts is a credit of $760. During the year, previously written off accounts of $120 are reinstated and accounts totaling $740 are written off as uncollectible. The end-of-year balance (before adjustment) in Allowance for Doubtful Accounts should be a. $760 b. $120 c. $140 d. $740

c. $140

Calculate income from operations for Jonas Company based on the following data: Sales $764,000 Operating expenses 52,500 Cost of merchandise sold 538,000 a. $485,500 b. $711,500 c. $173,500 d. $226,000

c. $173,500

Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within the discount period. What is the sales amount to be recorded in the above transactions? a. $25,500 b. $26,010 c. $24,990 d. $16,000

c. $24,990

Using the following information, what is the cost of merchandise sold? Purchases $32,000 Selling expense $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expense 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a. $32,400 b. $32,670 c. $31,330 d. $38,370

c. $31,330

If net income is $250,000 and interest expense is $30,000 for Year 2, what are the earnings per share on common stock for Year 2? a. $4.16 b. $4.32 c. $4.02 d. $2.49

c. $4.02

The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $21 Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO? a. $610 b. $600 c. $590 d. $580

c. $590

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold was $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions? a. $10,500 b. $30,772 c. $7,972 d. $31,400

c. $7,972

A company reports the following: Net income $160,000 Preferred dividends $10,000 Shares of common stock outstanding 20,000 Market price per share of common stock $35 The company's earnings per share on common stock is a. $13.33 b. $8.50 c. $7.50 d. $35.00

c. $7.50

Assume the following sales data for a company: Current year $325,000 Preceding year 250,000 What is the percentage increase in sales from the preceding year to the current year? a. 70% b. 76.9% c. 30% d. 50%

c. 30%

Income statement information for Sadie Company is below: Sales $175,000 Cost of goods sold 115,000 Gross profit $ 60,000 Using vertical analysis of the income statement for Sadie Company, determine the gross profit margin. a. 100% b. 66% c. 34% d. 29%

c. 34%

When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit a. Merchandise Inventory b. Purchases Returns and Allowances c. Accounts Payable d. Accounts Receivable

c. Accounts Payable

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct regarding the entry to record estimated uncollectible receivables? a. Cash will be debited b. Bad Debt Expense will be credited c. Allowance for Doubtful Accounts will be credited d. Accounts Receivable will be debited

c. Allowance for Doubtful Accounts will be credited

Which account is not classified as a selling expense? a. Sales Salaries b. Delivery Expense c. Cost of Goods Sold d. Advertising Expense

c. Cost of Goods Sold

Merchandise is sold for cash. The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include a credit to a. Cash for $6,000 b. Sales for $6,240 c. Sales Tax Payable for $420 d. Sales for $5,580

c. Sales Tax Payable for $420

Which of the following accounts will not be found in the Cost of Merchandise Sold section of the income statement for a company using the periodic inventory method? a. Purchases b. Freight-In c. Selling Expense d. Merchandise Inventory

c. Selling Expense

President's salaries, depreciation of office furniture, and office supplies are a. selling expenses b. miscellaneous expenses c. administrative expenses d. inventory expenses

c. administrative expenses

Multiple-step income statements show a. gross profit but not income from operations b. neither gross profit nor income from operations c. both gross profit and income from operations d. income from operations but not gross profit

c. both gross profit and income from operations

Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as a. sales on account b. sales returns c. cash sales d. sales when the credit card company remits the cash

c. cash sales

If merchandise sold on account is returned to the seller, the seller acknowledges the return by issuing a a. sales invoice b. purchase invoice c. credit memo d. debit memo

c. credit memo

Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a a. debit to Cost of Merchandise Sold b. credit to Accounts Payable c. credit to Merchandise Inventory d. credit to Sales

c. credit to Merchandise Inventory

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a a. debit to Sales b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. credit to Accounts Receivable

c. credit to Merchandise Inventory

Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would include a a. debit to Cash for $5,000 b. debit to Merchandise Inventory for $100 c. credit to Sales for $4,900 d. debit to Accounts Receivable for $4,880

c. credit to Sales for $4,900

A $150 petty cash fund has cash of $54 and receipts of $83. The journal entry to replenish the account would include a a. credit to Petty Cash for $29 b. debit to Cash for $83 c. debit to Cash Short and Over for $13 d. credit to Cash for $54

c. debit to Cash Short and Over for $13

The entry to record the return of merchandise from a customer would include a a. debit to Sales b. credit to Sales c. debit to Customer Refunds Payable d. debit to Estimated Returns Inventory

c. debit to Customer Refunds Payable

Which of the following would appear as an extraordinary item on the income statement? a. loss resulting from the sale of fixed assets b. gain resulting from the disposal of a segment of the business c. loss from land condemned for public use d. liquidating dividend

c. loss from land condemned for public use

Cash equivalents include a. checks b. coins and currency c. money market accounts and commercial paper d. stocks and short-term bonds

c. money market accounts and commercial paper

Which of the following should not be considered cash by an accountant? a. money orders b. bank checking accounts c. postage stamps d. travelers' checks

c. postage stamps

Calculate the gross profit for Jefferson Company based on the following: Sales $764,000 Selling expenses 42,500 Cost of merchandise sold 538,000 a. $495,500 b. $183,500 c. $721,500 d. $226,000

d. $226,000

A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is a. $6,860 b. $7,140 c. $7,840 d. $7,000

d. $7,000

The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of: a. $110 b. $640 c. $530 d. $750

d. $750

Based on the following data for the current year, what is the number of days' sales in accounts receivable? Sales on account during year $584,000 Cost of merchandise sold during year 300,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000 a. 7.3 b. 2.5 c. 14.6 d. 25

d. 25

Which of the following accounts should be closed to Income Summary at the end of the fiscal year? a. Merchandise Inventory b. Accumulated Depreciation c. Dividends d. Cost of Merchandise Sold

d. Cost of Merchandise Sold

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are a. consigned b. n/30 c. FOB shipping point d. FOB destination

d. FOB destination

Which of the following accounts usually has a debit balance? a. Accounts Payable b. Sales Tax Payable c. Sales d. Merchandise Inventory

d. Merchandise Inventory

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n) a. deduction from the balance per company's records b. addition to the balance per bank statement c. deduction from the balance per bank statement d. addition to the balance per company's records

d. addition to the balance per company's records

Where are selling and administrative expenses found on the multiple-step income statement? a. before gross profit b. after sales and before gross profit c. after net income and before expenses d. after gross profit

d. after gross profit

A voucher is usually supported by a. a supplier's invoice b. a purchase order c. a receiving report d. all of these

d. all of these

Journal entries based on the bank reconciliation are required in the company's accounts for a. outstanding checks b. deposits in transit c. bank errors d. book errors

d. book errors

Which one of the following below is not an element of internal control? a. risk assessment b. monitoring c. information and communication d. cost-benefit considerations

d. cost-benefit considerations

A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is a. debit Cash, $6,120; credit Notes Receivable, $6,120 b. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Receivable, $120 c. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060 d. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120

d. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120

If the physical count of inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shrinkage? a. debit Merchandise Inventory, $158,000; credit Cost of Merchandise Sold, $158,000 b. debit Merchandise Inventory, $5,000; credit Cost of Merchandise Sold, $5,000 c. debit Cost of Merchandise Sold, $163,000; credit Merchandise Inventory, $158,000 d. debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000

d. debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000

Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a a. credit to Bad Debt Expense b. credit to Accounts Receivable c. debit to Allowance for Doubtful Accounts d. debit to Accounts Receivable

d. debit to Accounts Receivable

Entries are made to the petty cash account when a. making payments out of the fund b. recording shortages in the fund c. replenishing the petty cash fund d. establishing the fund

d. establishing the fund

A debit balance in the Allowance for Doubtful Accounts a. is the normal balance for that account b. indicates that actual bad debt write-offs have been less than what was estimated c. cannot occur if the percentage of receivables method of estimating bad debts is used d. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

d. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

A note receivable due in 18 months is listed on the balance sheet under the caption a. long-term liabilities b. fixed assets c. current assets d. investments

d. investments

When goods are shipped FOB destination and the seller pays the freight charges, the buyer a. journalizes a reduction for the cost of the merchandise b. journalizes a reimbursement to the seller c. does not take a discount d. makes no journal entry for the freight

d. makes no journal entry for the freight

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when a. a customer's account becomes past due b. an account becomes bad and is written off c. a sale is made d. management estimates the amount of uncollectibles

d. management estimates the amount of uncollectibles

What entry is required in the company's accounts to record outstanding checks? a. debit Accounts Receivable; credit Cash b. debit Cash; credit Accounts Receivable c. debit Cash; credit Accounts Payable d. no entry is required

d. no entry is required

Current assets are usually listed in order a. of the due date b. of the size c. alphabetically d. of liquidity

d. of liquidity

In credit terms of 3/15, n/45, the "3" represents the a. number of days in the discount period b. full amount of the invoice c. number of days when the entire amount is due d. percent of the cash discount

d. percent of the cash discount

The inventory system employing accounting records that continuously disclose the amount of inventory is called a. retail b. periodic c. physical d. perpetual

d. perpetual

Which of the following items would not affect the cost of merchandise inventory acquired during the period? a. trade discounts b. purchase discounts c. freight-in d. sales commissions

d. sales commissions

Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items? a. FIFO b. LIFO c. average d. specific identification

d. specific identification

Inventory shrinkage is recorded when a. merchandise is returned by a buyer b. merchandise purchased from a seller is incomplete or short c. merchandise is returned to a seller d. there is a difference between a physical count of inventory and inventory records

d. there is a difference between a physical count of inventory and inventory records