One advantage to using a perpetual inventory system is that the company never has to physically count the inventory.
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True
False
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Question 2
Description: uestion 2 Unsaved
The weighted-average inventory method will likely result in neither the highest nor the lowest ending inventory.
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True
False
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Question 3
Description: uestion 3 Saved
When calculating accounts receivable turnover, a company would prefer a higher number rather than a lower number (within reason).
Question 3 options:
True
False
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Question 4
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When performing a bank reconciliation, checks outstanding are added back to the bank balance.
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True
False
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Question 5
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Usually the quick ratio will be a lower number than the current ratio.
Question 5 options:
True
False
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Multiple Choice
Select the best answer for each of the following questions.
Question 6
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The bad-debt method that uses the accounts receivable aging report is _______________.
Question 6 options:
the direct write-off method
the percentage-of-receivables method
the percentage-of-sales method
the bad-debt expense method
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Question 7
Description: uestion 7 Unsaved
When it is determined that too much money has been set aside for uncollectible accounts, we will _______________.
Question 7 options:
credit cash
debit reserve for uncollectible accounts
debit accounts receivable
credit reserve for uncollectible accounts
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Question 8
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A customer whose account was previously written off unexpectedly pays us. If we are using the allowance method we would _______________.
Question 8 options:
debit accounts receivable and credit allowance for uncollectible accounts AND debit cash and credit accounts receivable
debit bad-debt expense and credit cash
debit reserve for uncollectible accounts and credit cash
debit cash and credit bad-debt expense
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Question 9
Description: uestion 9 Unsaved
When a retailer accepts a bank card (VISA or MasterCard), they will make what entry for the day's receipts?
Question 9 options:
debit cash and debit "credit card expense"; credit sales
debit accounts receivable; credit sales, and credit "credit card expense"
debit cash and credit sales
debit accounts receivable and credit sales
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Question 10
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The company prepares, but does not yet pay, its first payroll of the new year. Salaries total $10,000 and 7.65% is withheld from paychecks for FICA tax. Ignore all other payroll deductions. The journal entries will be _______________.
Question 10 options:
debit wage expense $10,000 and credit wages payable $10,000; debit payroll tax expense for $765 and credit FICA tax payable $765
debit wage expense $10,000 and credit wages payable 10,000; debit payroll tax expense for $1,530 and credit FICA tax payable $1,530
debit wage expense $10,000 and debit payroll tax expense $765; credit wages payable $9,235 and credit FICA tax payable $1,530
debit wage expense $10,000; credit wages payable $8,470 and FICA tax payable $1,530
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Question 11
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A company buys a $10,000 bond at 102 as an investment. The correct entry is _______________.
Question 11 options:
debit investment in bonds and credit cash for $10,200
credit investment in bonds and debit cash for $10,200
debit investment in bonds and credit cash for $9,800
credit investment in bonds and debit cash for $9,800
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Question 12
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A company issues bonds having a stated value of $100,000 for $102,500. At maturity, the company will _______________.
Question 12 options:
debit bonds payable for $102,500
credit bonds payable for $102,500
debit bonds payable for $100,000
credit bonds payable for $100,000
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Question 13
Description: uestion 13 Unsaved
A company uses the percentage-of-receivables method for establishing the bad-debt reserve. They want the reserve balance to equal 0.5% of debts 30 days old or less, 2% of debts aged 31 to 60 days, and 4% of debts aged over 60 days. An aging report shows $780,000 relating to the past month, $232,600 relating to the prior month, and $89,200 relating to more than two months ago. The balance in the reserve account before adjustment is $10,175. What is the adjusting journal entry?
Question 13 options:
debit bad-debt expense, credit accounts receivable $1,945
debit allowance for bad debts, credit bad-debt expense $1,945
debit bad-debt expense, credit allowance for bad debts $12,120
debit bad-debt expense, credit allowance for bad debts $1,945
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Question 14
Description: uestion 14 Unsaved
A company is closing out the accounting period. The inventory balance at the beginning of the period was $222,750, and at the end of the period it was $215,600. Purchases of goods for resale during the period equaled $682,500. What was the cost of goods sold total?
Question 14 options:
$682,500
$689,650
$675,350
$905,250
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Question 15
Description: uestion 15 Unsaved
A merchandising company has beginning inventory of 50 units with a total cost of $500. They have the following transactions during the month of January: 1/5 bought 10 units at $11.00 each; 1/8 bought 15 units at $11.25 each; 1/15 sold 8 units for $16 each; 1/22 bought 10 units at $11.50 each and sold 12 units for $16.50 each. The ending inventory is $693.75. What inventory costing method is the company using?
Question 15 options:
FIFO
LIFO - perpetual
LIFO - periodic
weighted average
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Short Answer
Prepare the following journal entries. Dates and descriptions are not required.
Question 16
Description: uestion 16 Unsaved
What is the difference between the periodic-inventory and perpetual-inventory methods?
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Question 17
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Name two costs, in addition to the purchase price, that are added to merchandise inventory cost.
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Question 18
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What will be the result to inventory values, cost of goods sold, and net income if the LIFO method is used during times of inflation?
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Question 19
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When comparing financial ratios, it is important to make comparisons only within an industry or between like companies. Why might a retail store have a much higher accounts receivable turnover than a manufacturing company?
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Question 20
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How is gross margin or gross profit calculated on a merchandizing company income statement?
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Question 21
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If a retail store has a sale with everything listed at 30% off, and a rack of clothing is also marked as "an additional 20% off," what is the total discount offered?
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Question 22
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What does 1/10, n/30 mean?
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Question 23
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What cash control is compromised when the purchasing manager is one of the authorized check signers?
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Question 24
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Name at least three out of the four documents that the accounting department should have access to in order to pay an invoice.
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Question 25
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What item from the company's records must be added to the bank balance when reconciling the bank statement?
Question 25 options:
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