Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrence?
a. A capital lease is entered into with the
a. A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.
Which of the following situations does not base an accounting measure on present values?
a. Pensions.
b. Sinking funds.
c. Prepaid insurance.
d. Leases.
c. Prepaid insurance.
What is not a variable that is considered in interest computations?
a. Time.
b. Interest rate.
c. Assets.
d. Principal.
c. Assets.
Which table would you use to determine how much must be deposited now in order to provide for 5 annual withdrawals at the beginning of each year, starting one year from the first deposit?
a. Future value of an annuity due of 1
b. Present value of an annui
d. Present value of an ordinary annuity of 1.
An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at
a. 8% for 32 periods.
b. 2% for 32 periods.
c. 8% for eight periods.
d. 2% for eight periods.
b. 2% for 32 periods.
If an annuity due and an ordinary annuity have the same number of equal payments and the same interest rates, then
a. the future value of the annuity due is less than the future value of the ordinary annuity.
b. the present value of the annuity due is les
c. the present value of the annuity due is greater than the present value of the ordinary annuity.
In which account are post-dated checks received classified?
a. Receivables.
b. Cash.
c. Prepaid expenses.
d. Payables.
a. Receivables
A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and
a. has a current market value that is greater than its original cost.
b. is so near its maturity that it presents insignificant risk of
b. is so near its maturity that it presents insignificant risk of changes in interest rates.
When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will:
a. offset the overdraft against cash account.
b. report the same in the notes to financial statement.
c. classify the bank overdraf
a. offset the overdraft against cash account.
If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as
a. a deduction from sales in the income statement.
b. an item of "other expense" in the income statement.
c. a deductio
a. a deduction from sales in the income statement.
How can accounting for bad debts be used for earnings management?
a. Using an aging of the accounts receivable balance to determine bad debt expense.
b. Determining which accounts to write-off.
c. Changing the percentage of receivables recorded as bad deb
c. Changing the percentage of receivables recorded as bad debt expense.
What is the normal journal entry when writing-off an account as uncollectible under the allowance method?
a. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.
b. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
c. Debit All
c. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense?
a. A percentage of accounts receivable not adjusted for the balance in the allowance.
b. An amount derived from aging accounts receivabl
d. A percentage of accounts receivable adjusted for the balance in the allowance.
At the beginning of 2016, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2016 year-end statement of
d. Overstate, understate, understate, zero.
Why would a company sell receivables to another company?
a. To comply with customer agreements.
b. To accelerate access to amounts collected.
c. To improve the quality of its credit granting process.
d. To limit its legal liability.
b. To accelerate access to amounts collected.
What is "recourse" as it relates to selling receivables?
a. The obligation of the purchaser of the receivables to pay the seller in case the debtor fails to pay.
b. The obligation of the seller of the receivables to pay the purchaser in case the debtor fa
b. The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay.
A Cash Over and Short account
a. is debited when the petty cash fund proves out short.
b. is debited when the petty cash fund proves out over.
c. is a contra account to Cash.
d. is not generally accepted.
a. is debited when the petty cash fund proves out short.
AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?
a. Debit Accounts Receivable for $25,000 an
b. Debit Accounts Receivable for $25,000.
($25,000 x 100%)
Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a debit balance of $6,000 in the allowance for doubtful accounts. If the company estimates tha
a. $25,400.
($1,270,000 ? .02) = $25,400
Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates tha
c. $378,000.
($6,500,000 ? .06) - $12,000 = $378,000
Wellington Corp. has outstanding accounts receivable totaling $6 million as of December 31 and sales on credit during the year of $30 million. There is also a debit balance of $24,000 in the allowance for doubtful accounts. If the company estimates that 8
a. $480,000.
$6,000,000 ? .08 = $480,000
At the close of its first year of operations, December 31, 2017, Ming Company had accounts receivable of $1,620,000, after deducting the related allowance for doubtful accounts. During 2017, the company had charges to bad debt expense of $270,000 and wrot
d. $1,770,000
$1,620,000 + ($270,000 - $120,000) = $1,770,000
Before year-end adjusting entries, Dunn Company's account balances at December 31, 2017, for accounts receivable and the related allowance for uncollectible accounts were $1,500,000 and $90,000, respectively. An aging of accounts receivable indicated that
a. $1,375,000.
$1,500,000 - $125,000 = $1,375,000
Lester Company received a seven-year zero-interest-bearing note on February 22, 2017, in exchange for property it sold to Porter Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of in
c. 6% and 6%
Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $900,000 to Arch Inc. Arch Inc. will pay $975,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should
c. $810,000.
($900,000 ? .90) = $810,000
Sun Inc. factors $6,000,000 of its accounts receivables with recourse for a finance charge of 3%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liabilit
c. Loss of $480,000.
($6,000,000 ? .03) + $300,000 = $480,000
Moon Inc. factors $3,000,000 of its accounts receivables without recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair value of the recourse liab
a. $2,640,000.
$3,000,000 - [$3,000,000 ? (.04 + .08)] = $2,640,000
Ace Co. prepared an aging of its accounts receivable at December 31, 2017 and determined that the net realizable value of the receivables was $900,000. Additional information is available as follows:
Allowance for uncollectible accounts at 1/1/17�credit b
c. $27,000.
Allowance for Doubtful Acct. balance $102,000 + $15,000 - $69,000 = $48,000 (before bad debt expense)
$975,000 - $900,000 - $48,000 = $27,000 (bad debt expense
Under what circumstances should a company with high rate of return on sales consider the inventory sold?
a. When the goods are sold on installment
b. When the payment for goods is received
c. When it can reasonably estimate the amount of returns
d. When t
c. When it can reasonably estimate the amount of returns
Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet?
a. Accounts payable.
b. Inventory.
c. Not on the balance sheet.
d. Equipment.
c. Not on the balance sheet.
Goods in transit which are shipped f.o.b. shipping point should be
a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these answer choices are correct.
b. included in the inventory of the buyer.
The failure to record a purchase of merchandise on account even though the goods are properly included in the physical inventory results in
a. an understatement of assets and net income.
b. an understatement of liabilities and an overstatement of owners'
b. an understatement of liabilities and an overstatement of owners' equity.
What is the effect of a $50,000 overstatement of last year's inventory on current years ending retained earning balance?
a. Understated by $50,000.
b. Need more information to determine.
c. Overstated by $50,000.
d. No effect.
d. No effect.
Which inventory costing method most closely approximates current cost for each of the following:
Ending Inventory Cost of Goods Sold
a. FIFO LIFO
b. LIFO FIFO
c. FIFO FIFO
d. LIFO LIFO
a. FIFO LIFO
The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation:
a. FIFO.
b. moving-average.
c. weighted-average.
d. LIFO perpetual.
c. weighted-average.
In a period of rising prices, the inventory method which tends to give the highest reported net income is
a. base stock.
b. first-in, first-out.
c. last-in, first-out.
d. weighted-average.
b. first-in, first-out.
In the context of dollar-value LIFO, what is a LIFO layer?
a. The LIFO value of the inventory for a given year.
b. The difference between the LIFO inventory and the amount used for internal reporting purposes.
c. The inventory in base year dollars.
d. The
d. The LIFO value of an increase in the inventory for a given year.
Bell Inc. took a physical inventory at the end of the year and determined that $780,000 of goods were on hand. In addition, Bell, Inc. determined that $60,000 of goods that were in transit that were shipped f.o.b. shipping point were actually received two
a. $930,000.
$780,000 + $60,000 + $90,000 = $930,000
A trial balance before adjustments included the following:
Debit Credit
Sales $1,700,000
Sales returns and allowance $56,000
Accounts receivable 172,000
Allowance for doubtful accounts 3,040
If the estimate of uncollectibles accounts is made by taking 10%
c. $14,160.
($172,000 ? .10) - $3,040 = $14,160
In preparing its bank reconciliation for the month of April 2017, Henke, Inc. has the following information available.
Balance per bank statement, 4/30/17 $102,420
NSF check returned with 4/30/17 bank statement 1,350
Deposits in transit, 4/30/17 15,000
Ou
c. $101,820
$102,420 + $15,000 - $15,600 = $101,820
Hay Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $379,500, and the price index was 110.
a. $1,279,500.
b.
d. $1,249,500.
$300,000 + $1,800,000 - $349,500 = $1,750,500 COGS
$3,000,000 - $1,750,500 = $1,249,500
RF Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $430,080, and the price index was 112.
What is RF Company'
b. $394,080.
$430,080 � 1.12 = $384,000 - $300,000 = $84,000.
$300,000 + ($84,000 ? 1.12) = $394,080
Milford Company had 600 units of "Tank" in its inventory at a cost of $6 each. It purchased 900 more units of "Tank" at a cost of $9 each. Milford then sold 1,050 units at a selling price of $15 each. The LIFO liquidation overstated normal gross profit by
c. $450.
[(1,050 - 900) ? ($9 - $6)] = $450
Transactions for the month of June were:
Purchases Sales
June 1(balance) 3,200 @ $3.20 June 2 2,400 @ $5.50
3 8,800 @ 3.10 6 6,400 @ $5.50
7 4,800 @ 3.30 9 4,000 @ $5.50
15 7,200 @ 3.40 10 1,600 @ $6.00
22 2,000 @ 3.50 18 5,600 @ $6.00
25 800 @ $6.00
Assu
a. $17,160.
(800 ? $3.2) + (1,600 ? $3.1) + (1,600 ? $3.4) + (1,200 ? $3.5) = $17,160.
Niles Co. has the following data related to an item of inventory:
Inventory, March 1 400 units @ $2.10
Purchase, March 7 1,400 units @ $2.20
Purchase, March 16 280 units @ $2.25
Inventory, March 31 520 units
The value assigned to ending inventory if Niles
b. $1,104.
(400 ? $2.10) + (120 ? $2.20) = $1,104
The cash account shows a balance of $85,000 before reconciliation. The bank statement does not include a deposit of $4,600 made on the last day of the month. The bank statement shows a collection by the bank of $1,880 and a customer's check for $640 was r
c. $86,096.
$85,000 + $1,880 - $640 - $180 + $36 = $86,096
Becky had net sales (all on account) in 2017 of $1,800,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were: accounts receivable $1,000,000 debit, and allowance for doubtful accounts $2,000 debit. Becky estimates tha
d. $970,000
($1,000,000 - [($1,000,000 ? .03) = $970,000)
The following information was available from the inventory records of Rich Company for January:
Units Unit Cost Total Cost
Balance at January 1 9,000 $9.77 $87,930
Purchases:
January 6 6,000 10.30 61,800
January 26 8,100 10.71 86,751
Sales
January 7 (7,50
c. $46,067.
($87,930 + $61,800 + $86,751) � (9,000 + 6,000 + 8,100) = $10.237/unit
$10.237 ? 4,500 = $46,067