D is classified with investments on the balance sheet




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1. Merchandise inventory:
A) is a long-term asset.
B)is a current asset.
C) includes supplies.
D) is classified with investments on the balance sheet.
E) Must be sold within one month.

2. The credit terms 2/10, n/30 are interpreted as:
A) 2% cash discount if the amount is paid within 10 days, with the balance due in 30 days.
B) 10% cash discount if the amount is paid within 2 days, with the balance due in 30 days.
C) 30% discount if paid within 2 days.
D) 30% discount if paid within 10 days.
E) 2% discount if paid within 30 days.

3. On October 1, Robinson Company sold merchandise in the amount of $5,800 to Rosser, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the perpetual inventory system. The journal entry or entries that Robinson will make on October 1 is:
A)Sales..............................5,800
       Sales receivable .............       5,800
B)Sales..............................5,800
       Accounts Receivable...........       5,800
Cost of goods sold.................4,000
       Merchandise inventory.........       4,000
C)Accounts Receivable................5,800
       Sales.........................       5,800
D)Accounts Receivable................5,800
       Sales.........................       5,800
Cost of Good Sold..................4,000
       Merchandise Inventory.........       4,000

E)Accounts Receivable................4,000
       Sales.........................       4,000

4. On October 1, Whaley Company sold merchandise in the amount of $5,800 to Lee Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Whaley uses the perpetual inventory system. Lee pays the invoice on October 8, and takes the appropriate discount. The journal entry that Whaley makes on October 8 is:
A)Cash...............................5,800
      Accounts Receivable............       5,800
B)Cash...............................4,000
      Accounts Receivable............       4,000
C)Cash...............................3,920
Sales Discount.....................   80
      Accounts Receivable............       4,000
D)Cash...............................5,684
      Accounts Receivable............       5,684
E)Cash...............................5,684
Sales Discount..................... 116
      Accounts Receivable............       5,800


5. Acceptable inventory costing methods include:
A)LIFO method.
B)FIFO method.
C)Lower of cost or market method.
D)A & B.
E)A, B, & C.

6) A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
A)$304
B)$296
C)$288
D)$280
E)$276
(5 units x $20) + (8 units x $22) = $276


7.A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?
A)$120.
B)$124.
C)$128.
D)$130.
E)$140
(10 units x $10) + (2 units x $12) = $124


8.Generally accepted accounting principles require that the inventory of a company be reported at:
A)Market value.
B)Historical Cost.
C)Lower of cost or market.
D)Replacement cost.
E)Retail value.


9.The special journals of many accounting systems include the:
A)Sales journal.
B)Purchases journal.
C)Cash receipts journal.
D)Cash disbursements journal.
E)All of the above.

10.The four necessary elements of accounting information systems are:
A)Control, accountability, relevance, and flexibility.
B)Historical cost, relevance, compatibility, and cost-benefit.
C)Control, relevance, compatibility, and safety.
D)Control, relevance, compatibility, and cost-benefit.
E)Control, compatibility, flexibility, and cost-benefit.

11.The flexibility principle of accounting information systems require that the:
A)Benefits from an activity outweigh the costs of the activity.
B)System report useful, understandable, timely, and pertinent information for effective decision making.
C)System aid managers in controlling and monitoring business activities.
D)System adapt to changes in the company, business environment, and needs of decision makers at low cost.
E)System conform with a company's activities, personnel, and structure.

12.Hardware includes:
A)Bar-code readers.
B)Printers.
C)Software.
D)Ledgers.
E)All of the above.

13.The entry necessary to establish a petty cash fund should include:
A)A debit to Cash and a credit to Petty Cash.
B)A debit to Cash and a credit to Cash Over and Short.
C)A debit to Petty Cash and a credit to cash.
D)A debit to Petty Cash and a credit to Accounts Receivable.
E)A debit to Cash and a credit to Petty Cash Over and Short.

14.When a petty cash fund is in use:
A)Expenses paid with petty cash are recorded when the fund is replenished.
B)Petty Cash is debited when funds are replenished.
C)Petty Cash is credited when funds are replenished.
D)Expenses are not recorded.
E)Cash is debited when funds are replenished.


15.Outstanding checks refer to checks that have been:
A)Written, recorded, sent to payees, and received and paid by the bank.
B)Written and not yet recorded in the company books.
C)Held as blank checks.
D)Written, then recorded on the company books and sent to the customer, but have not yet been paid by the bank.
E)Issued by the bank.

16.A company made a bank deposit on September 30 that did not appear on the bank statement dated as of September 30. In preparing the September 30 bank reconciliation, the company should:
A)Deduct the deposit from the bank statement balance.
B)Send the bank a debit memorandum.
C)Deduct the deposit from the September 30 book balance and add it to the October 1 book balance.
D)Add the deposit to the book balance of cash.
E)Add the deposit to the bank statement balance.

17.The interest accrued on $6,500 at 6% for 60 days is:
A)$36.
B)$42.
C)$65.
D)$180.
E)$420.
$6,500 x 6% x 60/360 = $65


18.The amount of bad debt expense can be estimated by:
A)The percent of sales method.
B)The direct charge-off method.
C)The aging of accounts receivable method.
D)Only A & C.
E)All of the above.

19.A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:
A)Direct write-off method.
B)Aging of accounts receivable method.
C)Percentage of sales method.
D)Aging of investments method.
E)Percent of accounts receivable method.


20.A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

Accounts receivable..................$355,000 debit
Allowance for uncollectible accounts...     500 credit
Net Sales............................ 800,000 credit

All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
A)$1,275
B)$1,775
C)$4,500
D)$4,800
E)$5,500
$800,000 x 0.6% = $4,800


21.Lomax Enterprises purchased a depreciable asset for $22,000 on March 1, 20007. The asset will be depreciated on the straight-line method over its four-year useful life. Assuming the asset's value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, 2010?
A)$5,000.00
B)$4,166.67
C)$16,666.68
D)$20,000.00
E)$19,166.67

($22,000 - $2,000) / 48 months x 46 months = $19,166.67

22.The straight-line method depreciation method and the double-declining-balance depreciation method:
A)Produce the same total depreciation over an asset's useful life.
B)Produce the same depreciation expense each year.
C)Produce the same book value each year.
D)Are acceptable for tax purposes only.
E)Are the only acceptable methods of depreciation for financial reporting.

23.A method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:
A)Accelerated depreciation.
B)Declining-Balance depreciation.
C)Straight-line depreciation.
D)Units-of-production depreciation.
E)Modified accelerated cost recovery system (MACRS) depreciation.

24.A depreciation method that necessarily produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a (an):
A)Double-declining balance method.
B)Book value depreciation method.
C)Straight-line depreciation method.
D)Units-of-production depreciation method.
E)Unrealized depreciation method.

25. Steve's skateboards uses the perpetual inventory system and had the following sales transaction during April:
April 2   Sold merchandise to Happy Hobby Shop on credit
          for $4,800, terms 1/15, n/60. The items sold a
          had a cost of $2,700.
April 4   Happy Hobby Shop returned merchandise that had
          a selling price of $200. The cost of the
          merchandise returned was $110.
April 13 Happy Hobby Shop paid for the merchandise sold
          on April 2, taking any appropriate discount
          earned.

Prepare the journal entries that Steve Skateboards must make to record these transactions.

April 2

Debit. Accounts Receivable $4,800

Credit. Sales $4,800

 

Debit. Cost of Goods Sold $2,700

Credit. Merchandise Inventory $2,700

 

April 4

Debit. Sales Return and Allowance $200

Credit. Accounts Receivable $200

 

Debit. Merchandise Inventory $110

Credit. Cost of Goods Sold $110

 

April 13

Debit. Cash $4,554

Debit. Sales Discount $46

Credit. Accounts Receivable $4,600


26.A company made the following merchandise purchases and sales during the month of July:

July 1    purchased 380    units at    $15 each
July 5    purchased 270    units at    $20 each
July 9    sold 500        units at    $55 each
July 14   purchased 300    units at    $24 each
July 20   sold 250        units at    $55 each
July 30   purchased 250    units at    $30 each

There was no beginning inventory. If the company uses the first-in, first-out method and the perpetual system, what would be the cost of the ending inventory?


Ending Inventory (Units) = 380 + 270 – 500 + 300 - 250 +250 = 450 units


Cost of Ending Inventory = (200 x $24) + (250 x $30) = $12,300


27.Brown Company's bank statement for September 30 showed a cash balance of $1,350. The company's cash account in its general ledger showed a $995 debit balance. The following information was also available as of September 30.
a. A customer's check for $100 marked NSF was returned to Brown Company by the bank. In addition, the bank charged the company's account a $25 processing fee.
b.The September 30 cash receipts, $1,250, were placed in the bank's night depository after banking hours on that date and this amount did not appear on the September 30 bank statement.
c.A $15 debit memorandum for checks printed by the September 30 bank was included with the canceled checks.
d.Outstanding checks amounted to $1,145.
e.A customer's note for $900 was collected by the bank. A collection fee of $25 was deducted by the bank and the difference was deposited in the account.
f.Included with the canceled checks was a check for $275, drawn on another company, Browne Inc.

Prepare a bank reconciliation as of September 30.



Brown Company

Bank Reconciliation

September 30
















Unadjusted Balance per Book

995

Add:

Notes Collected by Bank, net

875

Total










1,870

Less:

NSF Check

100







Bank Charge

25







Debit Memo

15

(140)

Adjusted Balance per Book




1,730
















Unadjusted Balance per Bank

1,350

Add:

Deposit in Transit

1,250







Bank Error

275

1,525

Total










2,875

Less:

Outstanding Check




(1,145)

Adjusted Balance per Bank




1,730



28.The Connecting Company used the percent sales method of accounting for uncollectible accounts receivable. During the current year, the following transactions occurred:
Sept 7    Connecting Company determined that the $8,100
          account receivable of the Helena Company was
          uncollectible, and wrote it off.
Oct 15    Connecting Company determined that the $2,500
          account receivable of the Tree Company was
          uncollectible and wrote it off.
Nov 9     Helena Company paid $6,000 of the amount owed
          to the Connecting Company. Connecting Company
          does not expect further collections from the
          Helena Company.
Dec 31    Connecting Company estimates that 0.5% of its
          $1,900,000 of credit sales would be
          uncollectible.
1.Prepare the general journal entries to record these transaction.


Sept 7

Debit. Allowance for Uncollectible Accounts $8,100

Credit. Accounts Receivable-Helena Company $8,100


Oct 15

Debit. Allowance for Uncollectible Accounts $2,500

Credit. Accounts Receivable-Tree Company $2,500


Nov 9

Debit. Accounts Receivable-Helena Company $6,000

Credit. Allowance for Uncollectible Accounts $6,000


Debit. Cash $6,000

Credit. Accounts Receivable-Helena Company $6,000


Dec 31

Debit. Bad Debt Expense $9,500

Credit. Allowance for Uncollectible Accounts $9,500


2.If the balance of the allowance for uncollectible account was $8,000 on January 1 of the current year, determine the balance of the allowance for uncollectible accounts at December 31 of the current year. Assume that the transactions above are the only transactions affecting the allowance for uncollectible accounts during the year.

$8,000 - $8,100 - $2,500 + $6,000 + $9,500 = $12,900


29.On January 2, 2004, a company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line method of depreciation was used. Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1, 2008, under the following assumption:
a.The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000.


January 2

Debit. Delivery Truck $45,000

Credit. Cash $45,000


September 1

Debit. Delivery Truck (new) $60,000

Debit. Accumulated Depreciation $28,000

Debit. Loss from Disposal of Equipment $2,000

Credit. Delivery Truck (old) $45,000

Credit. Cash $45,000


Accumulated Depreciation = ($45,000 - $3,000) / 7 years x 4-8/12 = $28,000

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