For MCQ's please provide one line explanation
Use the following data for the next 7 questions
Sirmans Co. uses a periodic inventory system. The purchases of a particular product during the year are shown below:
Jan. 1 Beginning inventory .......... 400 units @ $ 8.00
Apr. 18 Purchase ........................ 600 units @ $10.00
Aug. 11 Purchase ........................ 700 units @ $12.00
Oct. 23 Purchase ........................ 300 units @ $14.00
The number of units sold during the year was 1,500. Each unit was sold for $20.
1. Refer to the above data. Compute the cost of goods sold for the current year based on the LIFO method of inventory valuation.
2. Refer to the above data. Compute the cost of the ending inventory based on the LIFO method of inventory valuation.
3. Refer to the above data. Compute the cost of goods sold for the current year based on the FIFO method of inventory valuation.
4. Refer to the above data. Compute the cost of the ending inventory based on the FIFO method of inventory valuation.
5. Refer to the above data. Compute the cost of goods sold based on the average-cost method of inventory valuation.
6. Refer to the above data. Compute the gross profit for the current year based on the LIFO method of inventory valuation.
7. Refer to the above data. Compute the gross profit for the current year based on the FIFO method of inventory valuation.
8. Which of the following results in the cost of goods sold being stated at the most current acquisition costs?
a. Average cost
b. FIFO
c. LIFO
d. Specific identification
e. None of the above
9. During a period of falling prices, which of the following methods is likely to result in reporting the lowest income tax expense?
a. Average cost
b. FIFO
c. LIFO
d. Specific identification
e. None of the above
Use the following information to answer the next 11 questions, SELECT ALL ANSWERS THAT APPLY.
On May 1, Sam Company sold $5,000 of inventory to Bob Company. The sale was made on account and Sam granted Bob credit terms of 2/10, n/30. The inventory cost Sam Company $3,000. On May 3, Bob returned $1,000 of the inventory to Sam. (The inventory returned by Bob cost Sam $600.) On May 9, Bob paid Sam in full for the amount due.
10. What account will Bob debit on May 1 if the periodic inventory system is used?
a. Accounts Payable
b. Cost of Goods Sold
c. Merchandise Inventory
d. Purchases
e. None of the above
11. What account will Bob debit on May 1 if the perpetual inventory system is used?
a. Accounts Payable
b. Cost of Goods Sold
c. Merchandise Inventory
d. Purchases
e. None of the above
12. What account willSam debit on May 1 if the periodic inventory system, is used?
a. Accounts Payable
b. Cost of Goods Sold
c. Merchandise Inventory
d. Purchases
e. None of the above
13. What account willSam debit on May 1 if the perpetual inventory system is used?
a. Accounts Payable
b. Cost of Goods Sold
c. Merchandise Inventory
d. Purchases
e. None of the above
14. What journal entry will Bob record on May 3 if the periodic inventory system is used?
a. debit Accounts Payable, $1,000; credit Merchandise Inventory, $1,000.
b. debit Accounts Payable, $1,000; credit Purchases, $1,000.
c. debit Accounts Payable, $1,000; credit Purchase Discounts, $1,000.
d. debit Accounts Payable, $1,000; credit Purchase Returns and Allowances, $1,000.
e. debit Merchandise Inventory; $600; credit Cost of Goods Sold, $600.
15. What journal entry will Bob record on May 3 if the perpetual inventory system is used?
a. debit Accounts Payable, $1,000; credit Merchandise Inventory, $1,000.
b. debit Accounts Payable, $1,000; credit Purchases, $1,000.
c. debit Accounts Payable, $1,000; credit Purchase Discounts, $1,000.
d. debit Accounts Payable, $1,000; credit Purchase Returns and Allowances, $1,000.
e. debit Merchandise Inventory; $600; credit Cost of Goods Sold, $600.
16. What journal entry will Sam record on May 3 if the periodic inventory system is used?
a. debit Merchandise Inventory, $600; credit Cost of Goods Sold, $600.
b. debit Sales, $1,000; credit Accounts Receivable, $1,000.
c. debit Sales, $1,000; credit Cash, $1,000.
d. debit Sales Returns and Allowances, $1,000; credit Accounts Receivable, $1,000.
e. debit Sales Returns and Allowances, $1,000; credit Cash, $1,000.
17. What journal entry will Sam record on May 3 if the perpetual inventory system is used?
a. debit Merchandise Inventory, $600; credit Cost of Goods Sold, $600.
b. debit Sales, $1,000; credit Accounts Receivable, $1,000.
c. debit Sales, $1,000; credit Cash, $1,000.
d. debit Sales Returns and Allowances, $1,000; credit Accounts Receivable, $1,000.
e. debit Sales Returns and Allowances, $1,000; credit Cash, $1,000.
18. What journal entry will Bob record on May 9 if the periodic inventory system is used?
a. debit Accounts Payable, $4,000; credit Cash, $4,000.
b. debit Accounts Payable, $5,000; credit Cash, $5,000.
c. debit Accounts Payable, $4,000; credit Merchandise Inventory, $80; credit Cash, $3,920.
d. debit Accounts Payable, $4,000; credit Purchase Discounts; $80, credit Cash, $3,920
e. debit Accounts Payable, $4,000; credit Purchase Returns and Allowances, $80; credit Cash, $3,920.
19. What journal entry will Bob record on May 9 if the perpetual inventory system is used?
a. debit Accounts Payable, $4,000; credit Cash, $4,000.
b. debit Accounts Payable, $5,000; credit Cash, $5,000.
c. debit Accounts Payable, $4,000; credit Merchandise Inventory, $80; credit Cash, $3,920.
d. debit Accounts Payable, $4,000; credit Purchase Discounts; $80, credit Cash, $3,920
e. debit Accounts Payable, $4,000; credit Purchase Returns and Allowances, $80; credit Cash, $3,920.
20. What journal entry will Sam record on May 9?
a. debit Cash, $4,000; credit Accounts Receivable, $4,000.
b. debit Cash, $5,000; credit Accounts Receivable, $5,000.
c. debit Cash, $3,920; debit Sales, $80; credit Accounts Receivable, $4,000.
d. debit Cash, $3,920; debit Sales Discounts, $80; credit Accounts Receivable, $4,000.
e. debit Cash, $3,920; debit Sales Returns and Allowances, $80; credit Accounts Receivable, $4,000.
Use the following information to answer the next 6 questions:
The following selected information is taken from the books of the Rick Company
Cash 2,500 Sales 15,000
Accounts receivable 3,000 Purchases returns and allowances 400
Purchases 9,000 Purchases discounts 300
Sales returns and allowances 150 Accounts Payable 3,000
Sales discounts 350 Allowance for Doubtful Accounts 400
Inventory, 1/1/2007 3,000 Selling expense 400
Inventory, 12/31/2007 2,000 Administrative expense 600
Transportation - out 300 Bad Debt Expense 200
Transportation - in 200 Rent expense 1,000
Dividends 1,500 Insurance expense 500
21. Net Sales for the period is:
22. Cost of net purchases for the period is:
23. Cost of Goods Available for Sale for the period is:
24. Cost of Goods Sold for the period is:
25. Gross Profit for the period is:
26. Net Income for the period is:
Use the following data for the next 4 questions.
At the end of January, the unadjusted trial balance of Vernon, Inc., included the following accounts:
Debit Credit
Sales (75% represent credit sales) ................... $600,000
Accounts Receivable .................................. $200,000
Allowance for Doubtful Accounts .................. 2,000
27. Refer to the above data. Vernon estimates bad debts expense to be 2% of credit sales. What is the amount of Bad Debts expense recognized in Vernon's income statement for January?
28. Refer to the above data. Vernon estimates bad debts expense to be 2% of credit sales. After the adjusting entry is made, the net realizable value of Vernon's accounts receivable in the January 31 balance sheet is:
29. Refer to the above data. Vernon ages the accounts receivable and determines the estimated uncollectible portion to be 4% of gross accounts receivable. What is the amount of Bad Debts expense recognized in Vernon's income statement for January?
30. Refer to the above data. Vernon ages the accounts receivable and determines the estimated uncollectible portion to be 4% of gross accounts receivable. After the adjusting entry is made, the net realizable value of Vernon's accounts receivable in the January 31 balance sheet is:
31. A company which uses the direct write-off method recognizes bad debts expense:
a. As indicated by aging the accounts receivable at the end of the period
b. As a percentage of net sales during the period
c. As a percentage of net credit sales during the period
d. As specific accounts receivable are determined to be worthless
e. None of the above
32. A conceptual shortcoming in the direct write-off method of accounting for bad debts is that this method violates the:
a. Cost principle
b. Going-concern assumption
c. Matching principle
d. Realization principle
e. None of the above
33. The account "Allowance for Bad Debts" is an example of what type of account?
a. An owners equity account on the balance sheet.
b. An expense account included in the "other expenses" section of the income statement.
c. A contra-asset account on the balance sheet.
d. A contra-liability account on the balance sheet.
e. None of the above.
34. At the start of the current year, Belmonde Company had a credit balance in the Allowance for Doubtful Accounts of $10,000. During the year, a provision of 2% of sales was made for uncollectible accounts. Sales for the year were $1,000,000 and $8,000 of accounts receivable were written off as worthless. No recoveries of accounts previously written off were made during the year. The year-end financial statements should show:
a. Bad Debts expense of $8,000
b. Bad Debts expense of $30,000
c. Allowance for Doubtful Accounts with a balance of $22,000
d. Allowance for Doubtful Accounts with a balance of $38,000
e. None of the above
35. Midas Company, which has an adequate amount in its Allowance for Doubtful Accounts, writes off as uncollectible an account receivable from a bankrupt customer. This action will:
a. Reduce total current assets
b. Reduce net income
c. Increase total current assets
d. Have no effect on total current assets
e. None of the above
Use the following information for the next question:
Following is selected information for Fred Company, AFTER year-end adjusting entries:
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For year ended December 31:
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2004
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2003
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Sales
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$5,000,000
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$4,500,000
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Bad Debts Expense
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120,000
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110,000
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As of December 31:
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Accounts Receivable (gross)
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$350,000
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$300,000
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Allowance for Bad Debts
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10,000
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20,000
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36. On the basis of the information provided for Fred Company, the Accounts Receivable written off in 2004 were:
Use the following information for the next 4 questions:
Royal Corp. had Accounts Receivable of $700,000 and an Allowance for Doubtful Accounts of $50,000 just before writing off an account receivable from Filo Company of $10,000.
37. The net realizable value of the accounts receivable beforethe write-off were:
38. Gross Accounts Receivable afterthe write-off are:
39. The balance in the Allowance for Doubtful Accounts afterthe write-off is:
40. The net realizable value of the accounts receivable after the write-off are: