MGMT 200 Exam 2
Using the accounts receivable aging method, estimated uncollectible accounts are $50,000. If the balance of the Allowance for Uncollectible Accounts is an $18,000 debit before adjustment, what is the balance after adjustment? A. $68,000 B. $50,000 C. $32,000 D. $18,000
$50,000
Oxford Publishing Company purchases a copyright for $75,000. The copyright has a remaining legal life of 20 years, but only an expected useful life of ten years with no residual value. Assuming the company uses the straight‐line method, what is the amortization expense for the first year? A. $0 B. $3,750 C. $7,500 D. $75,000
$7,500
J&L Corporation uses the allowance method to account for uncollectible receivables. At the beginning of the year, the Allowance for Doubtful Accounts had a credit balance $1,000. During the year J&L wrote off uncollectible receivables of $2,100 In addition, J&L recorded during the year Bad Debt Expense of $2,700. What is J&L's year‐end balance in Allowance for Doubtful Accounts? A. $1,600 B. $4,800 C. $3,700 D. $600
A. $1,600
Greenwich, Inc. sells deluxe grass mowers to customers over the internet. History has shown that 5% of Greenwich's mowers will need repair under the warranty program. For the year, Greenwich has sold 5,000 mowers and 150 have been repaired. If the estimated cost to repair a mower is $100, what would be the warranty liability at the end of the year? A. $10,000 B. $15,000 C. $20,000 D. $25,000
A. $10,000
Which of the following describes depreciation? A. Allocation of cost of plant asset B. Physical deterioration of plant asset C. Decline in value of plant asset D. Gradual obsolescence of plant asset
A. Allocation of cost of plant asset
Which of the following would be considered a capital expenditure? A. Cost to acquire a patent B. Cost to oil or lubricate equipment C. Cost to replace some light bulbs D. Cost to paint the office building
A. Cost to acquire a patent
Cotswolds, Inc. estimates uncollectible accounts based on the percentage of accounts receivable. What effect will recording the estimate of uncollectible accounts have on the accounting equation? A. Decrease assets and decrease stockholders' equity B. Decrease assets and decrease liabilities C. Increase assets and decrease stockholders' equity D. Increase liabilities and decrease stockholders' equity
A. Decrease assets and decrease stockholders' equity
The inventory cost flow assumption that generally best matches the physical flow of inventory is: A. FIFO B. LIFO C. Weighted‐average D. Lower of cost or net realizable value
A. FIFO
Big Valley Farms, Inc. uses a perpetual inventory system. Big Valley purchased seed from Midwest Co., Inc. at a cost of $20,000, payable at time of delivery. The entry to record the delivery would be a. Inventory ........................................... 20,000 Cash ................................................20,000 b. Purchases ...........................................20,000 Accounts Payable ............................20,000 c. Purchases .........................................20,000 Cash ...............................................20,000 d. Inventory .........................................20,000 Accounts Payable ...........................20,000
A. Inventory....................... 20,000 Cash..............................................20,000
A perpetual inventory system measures cost of goods sold by: A. Making entries to the inventory account for each purchase and sale. B. Estimating the amount of inventory sold. C. Counting inventory at the end of the period. D. Debiting cost of goods sold for all purchases of inventory.
A. Making entries to the inventory account for each purchase and sale.
Which of the following inventory accounts consists of items for which the manufacturing process has not begun? A. Raw Materials B. Work‐In‐Process C. Cost of Goods Sold D. Finished Goods
A. Raw Materials
If the receivables turnover ratio increased during the year, A. receivable collection improved. B. receivables collection slowed down. C. sales revenues increased at a faster rate that accounts receivables increased. D. the days to collect also increased.
A. Receivable collection improved
Which of the following statements is true with respect to the percentage‐of‐credit‐sales method for estimating uncollectible accounts? A. This method is referred to as the balance sheet approach B. This method does not allow for future uncollectible accounts C. The amount recorded for bad debt expense does not depend on the balance of the allowance for uncollectible accounts D. Under this method, bad debt expense is recorded at the time of an actual bad debt
C. The amount recorded for bad debt expense does not depend on the balance of the allowance for uncollectible accounts
Under the allowance method, when a specific account is written off, A. expenses will increase. B. net income will decrease. C. total assets will be unchanged. D. total assets will decrease.
C. Total assets will be unchanged
Kensal Green, Inc. purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a new building. The costs incurred to tear down the building should be A. expensed as incurred. B. added to the cost of the new building. C. added to the cost of the land. D. spread over the estimated time period between the tearing down of the building and the completion of the plant.
C. added to the cost of the land
Goodwill should be recorded in the accounting records only when A. it is purchased from another company. B. it can be established that a definite benefit or advantage has resulted to a firm from some item such as a good name, capable staff, or reputation. C. it is acquired through the purchase of another business entity. D. a firm reports above normal earnings for five or more consecutive years.
C. it is acquired through the purchase of another business entity
A contingency is best described as a(n) a. legal liability. b. probable liability. c. potential liability. d. estimated liability.
C. potential liability
en the information in the table below, what is the company's gross profit? Sales revenue $350,000 Accounts receivable $280,000 Ending inventory $230,000 Cost of goods sold $180,000 Sales returns $50,000 Sales discount $20,000 A. $280,000 B. $170,000 C. $50,000 D. $100,000
D. $100,000
A company's Accounts Receivable balance at its December 31year‐end is $100,000, and its Allowance for Doubtful Accountshas a credit balance of $200 before year‐end adjustment. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debt expense is recorded at December 31? A. $ 200 B. $4,200 C. $4,000 D. $3,800
D. $3,800
Cost of goods sold equals: A. Beginning inventory ‐ net purchases + ending inventory. B. Beginning inventory ‐ accounts payable ‐ net purchases. C. Net purchases + ending inventory ‐ beginning inventory. D. Beginning inventory + net purchases ‐ ending inventory.
D. Beginning inventory + net purchases - ending inventory
Which of the following is not a subtotal? A. Gross margin B. Net income C. Income from operations D. Cost of goods sold
D. Cost of goods sold
To which account is the cost of inventory transferred when a product is sold? A. Sales B. Freight expense C. Gross margin D. Cost of goods sold
D. Costs of goods sold
When a gain contingency is probable and the amount of gain is reasonably estimable, the gain should be A. Offset against stockholders' equity. B. Reported in the income statement and disclosed. C. Reported in the income statement, but not disclosed. D. Disclosed, but not recognized in the income statement.
D. Disclosed, but not recognized in the income statement.
Which of the following items is not shown on a single‐step income statement? A. Cost of goods sold B. Interest expense C. Selling expenses D. Gross margin
D. Gross Margin
A company, using the allowance method of recording credit losses, wrote off a customer's account in the amount of $1,000. Later, the customer paid the account. The company reinstated the account by means of a journal entry and then recorded the collection. What is the result of these procedures? A. Increase in total assets by $1,000 B. Decrease total assets by $1,000 C. Decreases total assets by $2,000 D. Has no effect on total assets
D. Has no effect on total assets
The formula for the receivables turnover ratio is A. Average accounts receivable divided by average total assets. B. Net credit sales divided by average total assets. C. Average accounts receivable divided by net credit sales. D. Net credit sales divided by average accounts receivable.
D. Net credit sales divided by average accounts receivable
Costs that are expensed when incurred are called? A. Product costs B. Direct costs C. Inventoriable costs D. Period costs
D. Period costs
The matching rule relates to credit losses by stating that Uncollectible Accounts Expense should be recorded A. in the period of the loss. B. for an exact amount. C. generally in the subsequent year . D. in the period of the sale.
D. in the period of the sale
Bampton, Inc. merchandise inventory account showed a balance of $5,000 before year‐end adjustments. The physical inventory count of goods on hand totaled $6,000. Bampton uses a perpetual inventory system. To adjust the accounts which entry is required? Accounts & Description Debit Credit a. Cost of goods sold $1,000 Merchandise inventory $1,000 b. Merchandise inventory $1,000 Accounts receivable $1,000 c. Accounts payable $1,000 Merchandise inventory $1,000 d. Merchandise inventory $1,000 Cost of goods sold $1,000
d. Merchandise inventory $1,000 Cost of goods sold $1,000
The allowance for uncollectible accounts is similar to accumulated depreciation in that it represents the total of all accounts written off over the years. A. True B. False
B. False
The term goods flow refers to the association of costs with their assumed flow in the operation of a business. A. True B. False
B. False
Uncollectible accounts cannot be estimated because it is not possible to know which accounts will not be collected. A. True B. False
B. False
Under the periodic inventory system, cost of goods sold is recorded throughout the accounting period as inventory is sold. A. True B. False
B. False
If Greenwich, Inc. sells a $100 product with a 20% trade discount, Greenwich will record $100 of revenue and $20 of sales expense. A. True B. False
B. False ($80 Sales Revenue)
If a company has total revenues of $1,000,000, sales discounts of $50,000, sales returns of $50,000, and sales allowances of $100,000, the income statement will report net revenues of $750,000. A. True B. False
B. False (Revenues $ 1,000,000 Less: Sales discounts (50,000) Less: Sales returns (50,000) Less: Sales allowances (100,000) Net revenues $ 800,000)
Clifford Gardens, Inc. has ending inventory of $20,000, purchases during the year of $50,000, and beginning inventory of $10,000, cost of goods sold equals $30,000. A. True B. False
B. False ($40,000)
The Sales Returns account is an expense account A. True B. False
B. False (Contra Revenue Account)
The advantage of extending credit to customers A. Lower profitability B. Higher revenues C. Delay or failure to collect cash D. Less collection costs
B. Higher Revenues
One of the major differences between an airline and a steel manufacturer is that a steel manufacturer must account for: A. Revenues B. Inventory C. Salary expenses D. Employee salaries
B. Inventory
The inventory cost flow assumption that is least likely to match the physical flow of inventory for most companies is: A. FIFO B. LIFO C. Weighted‐average D. Specific identification
B. LIFO
Which inventory method generally best follows the matching principle? A. Weighted‐average cost B. LIFO C. FIFO
B. LIFO
The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the: A. Net realizable value. B. LIFO reserve. C. Inventory allowance. D. FIFO adjustment.
B. LIFO reserve
Subaru estimates warranty parts & labor costs in the same year a vehicle is sold. This best follows which of the following accounting principles? A. historical cost B. matching C. consistency D. relevance
B. Matching
The principle of using the lower of cost or net realizable value to value inventory reflects which of the following? A. Periodicity B. Matching C. Revenue recognition D. Historical cost
B. Matching
One could conclude from a debit balance in Allowance for Uncollectible Accounts that A. a posting error has been made. B. more has been written off than had been estimated. C. Uncollectible Accounts Expense has been overestimated. D. the accounts receivable aging method apparently is being used.
B. More has been written off than had been estimated
The depreciable cost of an asset is A. the unexpired cost of the asset. B. original cost less residual value. C. original cost less accumulated depreciation. D. the expired cost of the asset.
B. Original cost less residual value
The cost of a long‐term asset is expensed A. in the period in which it is sold. B. as the asset benefits the company. C. in the period in which it is acquired. D. when it is paid for.
B. as the asset benefits the company
Book value or carrying value A. equals asset cost less residual value. B. equals asset cost less accumulated depreciation. C. is the expired cost of an asset. D. is the same as residual value.
B. equals asset cost less accumulated depreciation
Which of the following is not considered an operating expense? A. Rent expense B. Interest expense C. Administrative (office) expense D. Advertising expense
B. interest expense
The matching principle A. results in the recording of a known amount for bad‐debt losses. B. necessitates the recording of an estimated amount for bad debts. C. requires that all bad‐debt losses be recorded when an individual customer doesn't pay. D. is violated when the allowance method is employed.
B. necessitates the recording of an estimated amount for bad debts
The ending balance of the Accounts Receivable account was $20,000. Services billed to customers for the period were $50,000, and collections on account from customers were $40,000. What was the beginning balance of Accounts Receivable? A. $30,000 B. $15,000 C. $10,000 D. $20,000
C. $10,000
Boiler Catering, Inc. purchased a commercial dishwasher by paying cash of $10,000. The dishwasher's fair value on the date of the purchase was $12,000. The company incurred $500 in transportation costs, $500 installation fees, and paid $250 for annual property insurance for the equipment. What amount will the catering company record the dishwasher? A. $13,250. B. $11,250. C. $11,000. D. $10,000.
C. $11,000
Baker Fine Foods has beginning inventory for the year of $12,000. During the year, Baker purchases inventory for $150,000 and ends the year with $20,000 of inventory. Baker will report cost of goods sold equal to: A. $150,000 B. $158,000 C. $142,000 D. $170,000
C. $142,000
Bamburg Corporation purchased equipment for $100,000 on January 1, 2018. The equipment is expected to have a five‐year life, with a residual value of $20,000 at the end of five years. Using the straight‐ line method, depreciation expense for 2018 would be: A. $100,000 B. $ 20,000 C. $ 16,000 D. $ 10,000
C. $16,000
Bampton, Inc. uses the percentage‐of‐credit‐sales method to record its expected credit losses. It estimates its losses at two (2%) percent of credit sales, which were $1,000,000 during the year. The Allowance for Doubtful Accounts had a credit balance of $5,000 before adjustment at year‐end. What is the adjustment to Bad Debt Expense and the Allowance for Doubtful Accounts? A. $ 5,000 B. $25,000 C. $20,000 D. $15,000
C. $20,000
Brighton Company, Inc. began the period with $10,000 in inventory. Brighton also purchased an additional $25,000 of inventory and returned $5,000 for a full credit. A physical count of the inventory at year‐end revealed an inventory on hand of $10,000. What was Brighton's cost of goods sold (CGS) for the period? A. $40,000 B. $25,000 C. $20,000 D. $10,000
C. $20,000
Hayne Company purchased land, building, and equipment for $500,000. The estimated fair values of the land, building, and equipment are $100,000, $500,000, and $400,000, respectively. At what amount would Hayne record the building? A. $1,000,000 B. $ 500,000 C. $ 250,000 D. $ 100,000
C. $250,000
A company performs an aging of accounts receivable calculation and arrives at an estimate for uncollectible accounts of $25,000. If Allowance for Uncollectible Accounts has a debit balance of $1,000 prior to the year‐end adjustment, what is the amount of the adjustment? A. $ 1,000 B. $25,000 C. $26,000 D. $ 5,500
C. $26,000
Hampton, Inc. has the following inventory transactions: Jan. 1 Beginning inventory 100 units @ $2 each Jan. 15 Purchase 100 units @ $3 each Jan. 31 Purchase 100 units @ $4 each What would be the cost of goods sold under the FIFO method if 200 units were sold in January? A. $ 800 B. $ 700 C. $ 500 D. $ 400
C. $500
San Bruno has the following inventory activity for the month of April. Under the FIFO inventory costing method and the perpetual inventory system, how much is San Bruno's cost of goods sold for April 14? April 1 Beg. inventory 10 units $10/unit April 8 Purchase 25 units $20/unit April 10 Purchase 30 units $25/unit April 14 Sale 35 units $40/unit April 27 Sale 42 units $40/unit A. $525 B. $650 C. $600 D. $850
C. $600
Using the percentage of net sales method, uncollectible accounts expense for the year is estimated to be $75,000. If the balance of the Allowance for Uncollectible Accounts is an $15,000 credit before adjustment, what is the balance after adjustment? A. $15,000 B. $75,000 C. $90,000 D. $60,000
C. $90,000
A company accepts a note receivable of $5,000 on October 1, 2018, that matures in 10 months and has stated interest of 6%. What amount of interest revenue will the company record in 2018 and 2019? A. 2018 = $100; 2019 = $150 B. 2018 = $150; 2019 = $100 C. 2018 = $75; 2019 = $175 D. 2018 = $0; 2019 = $250
C. 2018 = $75; 2019 = $175
At December 31, 2018, Hillsborough Corporation reports the following inventory amounts ($ per unit): Item # of Units Cost NRV A 100 $4 $3 B 150 $8 $6 The year‐end adjustment using the lower of cost and net realizable value would include: A. A debit to Cost of Goods Sold for $300 B. A debit to Inventory for $500 C. A credit to Inventory for $400 D. A credit to Cost of Goods Sold for $900
C. A credit to inventory of $500
The direct write‐off method is not an acceptable method for GAAP because it fails to report: A. Revenue from the sale of goods or services to customers B. Cash collected from customers C. Accounts receivable at net realizable value D. The amounts receivable from customers
C. Accounts receivable at net realizable value
Bampton Corporation filed suit against Cambridge, Inc., seeking damages for patent violations. Cambridge's legal counsel believes it is probable that Cambridge will settle the lawsuit for an estimated amount in the range of $500,000 to $1,000,000, with all amounts in the range considered equally likely. How should Cambridge report this litigation? A. As a liability for $1,000,000 with disclosure of the range. B. As a liability for $750,000 with disclosure of the range. C. As a liability for $500,000 with disclosure of the range. D. As a disclosure only. No liability is reported.
C. As a liability for $500,000 with disclosure of the range.
Hillsborough, Inc. can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be A. Disclosed and reported as a liability B. Neither disclosed nor reported as a liability C. Disclosed, but not reported as a liability D. Reported as a liability, but not disclosed
C. Disclosed, but not reported as a liability
You have just received notice that a customer of yours with an Accounts Receivable balance of $50,000, has gone bankrupt and will not be making any future payments. Using the allowance method, the journal entry you make is to A. Dr. Bad Debt Expense and Cr. Accounts Receivable B. Dr. Bad Debt Expense Expense and Cr. Allowance for Bad Debts. C. Dr. Allowance for Bad Debts and Cr. Accounts Receivable. D. Dr. Allowance for Bad Debts and Cr. Bad Debt Expense
C. Dr. Allowance for Bad Debts and Cr. Accounts Receivable
The cost of goods sold during the year is classified as a(n) ______ in the ______. A. Revenue; Income statement B. Asset; Balance sheet C. Expense; Income statement D. Liability; Balance sheet
C. Expense; Income Statement
Which of the following appears in different sections of the income statement when prepared on a single‐step basis and when prepared on a multistep basis? A. Sales commissions B. Rent expense C. Interest expense D. Sales
C. Interest expense
Which of the following statements is true? A. Product costs affect only the balance sheet B. Product costs affect only the income statement C. Product costs eventually affect both the balance sheet and the income statement. D. Period costs affect only the balance sheet
C. Product costs eventually affect both the balance sheet and the income statement
Burford Inc. shipped the wrong color of paint to a customer. The customer agreed to keep the paint after being offered a 10% price reduction. The price reduction is an example of a A. sales discount. B. sales return. C. sales allowance. D. sales expense.
C. Sales Allowance
Kensal Green, Inc. is facing a class‐action lawsuit in the upcoming year. It is probable that the corporation will have to pay a settlement of approximately $10,000,000 in the next twelve months. How would this fact be reported, if financial statements are prepared at the end of the current month? A. Report $10,000,000 as a current liability and describe the matter in the notes to the financial statements. B. Report $10,000,000 as a long‐term liability and describe the matter in the notes to the financial statements. C. Describe the potential liability in the notes to the financial statements. D. Reporting is not required for this matter.
A. Report $10,000,000 as a current liability and describe the matter in the notes to the financial statements.
When customers purchase products on account, Bufford, Inc. offers them a 1% reduction in the amount owed if they pay within 10 days. This is an example of a: A. Sales discount B. Sales return C. Sales allowances D. Bad debt
A. Sales Discount
A fur coat dealer probably would use which of the following inventory methods? A. Specific identification B. FIFO C. Weighted‐average cost D. LIFO
A. Specific Identification
An advantage of using the periodic inventory system is that it requires less recordkeeping than the perpetual inventory system. A. True B. False
A. True
At the time of a credit sale, a company would record an increase in assets and an increase in revenues.. A. True B. False
A. True
Credit sales transfer products and services to a customer today while bearing the risk of collecting payment from that customer in the future. A. True B. False
A. True
Driveways and parking lots are properly included in the Land Improvements account because they are subject to depreciation. A. True B. False
A. True
Freight charges associated with the purchase of inventory normally are included in inventory cost. A. True B. False
A. True
Generally, a higher inventory turnover ratio reflects positively on a company's ability to manage its inventory. A. True B. False
A. True
Goods in transit shipped FOB destination should be included in the seller's ending inventory. A. True B. False
A. True
Monthly installment payments on a note payable include both an amount that represents interest and an amount that represents a reduction of the outstanding loan balance. A. True B. False
A. True
The adjustment to write down inventory from cost to its lower net realizable value includes a debit to Cost of Goods Sold and a credit to Inventory. A. True B. False
A. True
The higher the inventory turnover, the lower the days' inventory on hand. A. True B. False
A. True
Which of the following is not a period cost? A. Wages for a machine operator B. Sales salaries C. The salaries of a company's administrative office D. Sales commissions
A. Wages for a machine operator
A company should classify a building and land held for a new plant facility as A. an investment. B. a current asset. C. an intangible asset. D. property, plant, and equipment.
A. an investment
Inventory records for Burlington, Inc. revealed the following: Date Transaction # of Units Unit Cost June 1 Beg. inventory 200 x $2.00 = $400 June 28 Purchase 400 x $3.00 = $1,200 $ Burlington sold 600 units of inventory during the month. Cost of goods sold assuming LIFO would be: A. $1,300 B. $1,600 C. $1,800 D. $1,900
B. $1,600
Consider the following year‐end information for JW Enterprises, Inc.: Cost of goods sold $600,000 Sales revenue 1,000,000 Operating expenses 300,000 Non‐operating expenses 50,000 Income tax expense 50,000 What amount will JW Enterprises report for operating profit? A. $200,000 B. $100,000 C. $ 50,000 D. $ ‐ 0 ‐
B. $100,000
Greenwich, Inc. sells deluxe grass mowers to customers over the internet. History has shown that 5% of Greenwich's mowers will need repair under a warranty program. For the year, Greenwich has sold 5,000 mowers and 150 have been repaired. If the estimated cost to repair a mower is $100, what would be the warranty expense for the year? A. $20,000 B. $25,000 C. $15,000 D. $10,000
B. $25,000
Cambridge Company has the following information: What is the amount of net sales for Cambridge? Total sales $500,000 Sales returns and allowances $50,000 Sales salaries costs (expense) $20,000 Sales travel costs (expense) $5,000 A. $500,000 B. $450,000 C. $430,000 D. $425,000
B. $450,000 ($500,000 - $50,000)
On August 1, 2017, Kensal Green Corp. lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months. How much interest revenue will Kensal Green report during 2017? A. $60 B. $50 C. $40 D. $30
B. $50
Inventory records for Brugge, Inc. revealed the following: Date Transaction Number of Units Unit Cost Jan. 1 Beg. inventory 300 $2.00 Jan. 20 Purchase 500 2.50 Sale (700) Ending inventory 300 Brugge sold 700 units of inventory during the month. Ending inventory assuming LIFO would be: A. $750 B. $600 C. $480 D. $400
B. $600
At December 31, Bampton Co. reported accounts receivable of$238,000 and an allowance for uncollectible accounts of $600 (debit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be A. $6,540 B. $7,740 C. $7,800 D. $7,140
B. $7,740
Dover Company reports the following inventory information: Date Quantity Price March 1 Beginning Inventory 20 $2 March 7 Purchase 15 $3 March 11 Sale (25) $7 March 12 Purchase 10 $4 Ending inventory 20 At what amount would Dover report ending inventory using FIFO cost flow assumptions? A. $55 B. $70 C. $110 D. $170
B. $70
What is the amount of depreciation, using the double‐ declining balance method, for the first year of use for equipment costing $12,000, with an estimated residual value of $500 and an estimated life of three years? A. $12,000 B. $8,000 C. $7,667 D. $4,000
B. $8,000
Clifford Gardens, Inc., sold inventory for $1,000 that was purchased for $800. Clifford Gardens records which of the following when it sells inventory using a perpetual inventory system? A. No entry is required for cost of goods sold and inventory. B. Debit Cost of Goods Sold $800; credit Inventory $800. C. Debit Cost of Goods Sold $1,000; credit Inventory $1,000. D. Debit Inventory $800; credit Cost of Goods Sold $800
B. Debit Cost of Goods Sold $800; credit Inventory $800.
Research and development costs should be: A. Expensed in the period they are determined to be unsuccessful B. Expensed in the period incurred C. Deferred pending determination of success D. Expensed if unsuccessful, capitalized if successful
B. Expensed in the period incurred
A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances. A. True B. False
B. False
During periods of consistently falling prices, the FIFO inventory method will produce the highest possible amount of net income. A. True B. False
B. False
During periods of rising costs, FIFO generally results in a higher cost of goods sold. A. True B. False
B. False
For inventory that is shipped FOB destination, title transfers from the seller to the buyer once the seller ships the inventory. A. True B. False
B. False
Hayne Corporation had average inventory of $1,000 and cost of goods sold of $5,000 during 2017. Hayne's inventory turnover ratio is 0.5. A. True B. False
B. False
In accounting for inventory, the assumed cost flow must match the physical goods flow. A. True B. False
B. False
Perpetual inventory refers to an inventory costing system as compared to a processing system? A. True B. False
B. False
Sales revenue less cost of goods sold is referred to as operating income A. True B. False
B. False
