Which of the following about a periodic inventory system is true?
companies determine the cost of goods sold only at the end of the account period
Which of the following does NOT result in and adjustment in the inventory account under a perpetual system?
Payment of freight costs for goods shipped to a customer
Which sales accounts normally have a debit balance?
Sales discounts & Sales returns and allowances
A company makes a credit sale of $750 on June 13, terms 2/10, n/30, on which it grants a return of $50 on June 16. What amount is received as payment in full on June 23?
$686.
(750-50)x.98
To record the sale of goods for cash in a perpetual inventory system:
two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.
Gross profit will result if:
sales revenues are greater than cost of goods sold.
If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, what is the gross profit?
$90,000.
(400000-310000)
The multiple-step income statement for a merchandising company shows each of these features except:
Gross Profit, Cost of Goods Sold, a Sales Revenue Section
If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, what is cost of goods sold under a periodic system?
$390,000.
(60000+380000-50000)
Bufford Corporation had reported the following amounts at December 31, 2012: Sales revenue $184,000; ending inventory $11,600; beginning inventory $17,200; purchases $60,400; purchase discounts $3,000; purchase returns and allowances $1,100; freight-in $6
$74,100
(17200+(60400-3000-1100+600))
Which of the following would affect the gross profit rate? (Assume sales remains constant.)
An increase in cost of goods sold.
The gross profit rate is equal to:
net sales minus cost of goods sold, divided by net sales.
During the year ended December 31, 2012, Bjornstad Corporation had the following results: Sales revenue $267,000; cost of good sold $107,000; net income $92,400; operating expenses $55,400; net cash provided by operating activities $108,950. What was the
34.6%.
(92400/267000)
A quality of earnings ratio:
that is less than 1 indicates that a company might be using aggressive accounting tactics.
When goods are purchased for resale by a company using a periodic inventory system:
purchases on account are debited to Purchases.
When is a physical inventory usually taken?
1)When a limited number of goods are being sold or received
2)At the end of the company's fiscal year
Which of the following should not be included in the physical inventory of a company?
Goods held on consignment from another company.
As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2012. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000
$215,000.
(180000+35000)
Units Unit Cost
Inventory, Jan. 1 8,000 $11
Purchase, June 19 13,000 12
Purchase, Nov. 8 5,000 13
If 9,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO? what is the cost of the ending inventory under LIFO?
$113,000.
((5000x13)+(4000x12))
$100,000.
((8000x11)+(1000x12))
Units Unit Cost
Inventory, Jan. 1 5,000 $ 8
Purchase, April 2 15,000 10
Purchase, Aug. 28 20,000 12
If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is:
$75,250.
((5000x8)+(15000x10)+(20000x12))/40000=10.75x7000
In periods of rising prices, LIFO will produce:
lower net income than FIFO.
Considerations that affect the selection of an inventory costing method do not include:
perpetual versus periodic inventory system.
The lower-of-cost-or-market rule for inventory is an example of the application of:
the conservatism constraint.
Which of these would cause the inventory turnover ratio to increase the most?
Decreasing the amount of inventory on hand and increasing sales.
Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Carlos's days in inventory is:
121.7 days.
(285000/((80000+110000)/2)=3; 365/3)
The LIFO reserve is:
the difference between the value of the inventory under LIFO and the value under FIFO.
In a perpetual inventory system,
FIFO cost of goods sold will be the same as in a periodic inventory system.
Fran Company's ending inventory is understated by $4,000. The effects of this error on the current year's cost of goods sold and net income, respectively, are:
overstated and understated.
Harold Company overstated its inventory by $15,000 at December 31, 2012. It did not correct the error in 2012 or 2013. As a result, Harold's stockholders' equity was:
overstated at December 31, 2012, and properly stated at December 31, 2013.
Which of the following is not an element of the fraud triangle?
Segregation of duties.
Internal control is used in a business to enhance the accuracy and reliability of its accounting records andto:
safeguard its assets.
The principles of internal control do not include:
financial performance measures.
Physical controls do not include:
independent bank reconciliations.
Which of the following was not a result of the Sarbanes-Oxley Act?
Companies must file financial statements with the Internal Revenue Service.
Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:
establishment of responsibility.
The use of prenumbered checks in disbursing cash is an application of the principle of:
documentation procedures.
The control features of a bank account do not include:
having bank auditors verify the correctness of the bank balance per books.
Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system?
1)Establishment of responsibility.
2)Segregation of duties.
3)Independent internal verification.
In a bank reconciliation, deposits in transit are:
added to the bank balance.
Which of the following items in a cash drawer at November 30 is not cash?
A customer check dated December 1.
Which statement correctly describes the reporting of cash?
Cash is listed first in the current assets section.
Which of the following would not be an example of good cash management?
Invest temporary excess cash in stock of a small company.
Which of the following is not one of the sections of a cash budget?
Cash from operations section.
A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $2 in cash. In recording the check:
Cash Over and Short should be debited for $4.
(100-(94+2))
A receivable that is evidenced by a formal instrumentand that normally requires the payment of interest is:
a note receivable.
Kersee Company on June 15 sells merchandise on account to Soo Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount
$686.
(1000-300)x(100%-2%)
Accounts and notes receivable are reported in the current assets section of the balance sheet at:
cash (net) realizable value
Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. If the Allowance for Doubtful Accounts has a credit balance
$12,000.
(160000x.75)
In 2012, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2012, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2012, $30,000 of uncollectible accounts receivable were written off. Past experience indicat
$32,000.
(200000x.1)+(30000-18000)
Accounts receivable $800,000
Allowance for doubtful accounts per books before adjustment (credit) 50,000
Amounts expected to become uncollectible 65,000
What is the cash realizable value of the accounts receivable at December 31, after adjustment?
$735,000.
(800000-65000)
Which of these statements about promissory notes is incorrect?
A promissory note is not a negotiable instrument.
Michael Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is:
Notes Receivable 1,000
Accounts
Receivable 1,000
Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. The entry made by Schleis Co. when the note is collected, assuming no interest has previously been accrued, is:
Cash 10,300
Notes Receivable 10,000
Interest Revenue 300
If a company is concerned about extending credit to a risky customer, it could do any of the following except:
provide the customer a lengthy payment period to increase the chance of paying.
Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. What was the receivables turnover ratio?
6.4
800000/((100000+150000)/2)
Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7. What is its average collection period (days)?
52
(365/7)
Which of these statements about Visa credit card sales is incorrect?
The retailer must wait to receive payment from the issuer.
Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Good Stuff Retailers will include a credit to Sales Revenue of
Cash $48,000 and Service Charge Expense $2,000.
A company can accelerate its cash receipts by all of the following except:
writing off receivables.