Assignment
Use the following data for the next 5 questions
Marie Co. uses a periodic inventory system. The purchases of a particular product during 2008 are shown below:
|
Date
|
Description
|
Units
|
Unit Cost
|
Total Cost
|
|
Jan. 1
|
Beginning inventory
|
600
|
$9.00
|
$5,400
|
|
May. 18
|
Purchase
|
500
|
$9.50
|
4,750
|
|
June. 11
|
Purchase
|
700
|
$10.00
|
7,000
|
|
Nov. 23
|
Purchase
|
200
|
$10.25
|
2,050
|
|
|
Total
|
2,000
|
|
$19,200
|
During the year, 1,050 units were sold at $22 each. Ending inventory contains 950 units. Income tax rate is 30%.
1. Refer to the above data. Compute the cost of the ending inventory based on the LIFO method of inventory valuation.
a. $9,675
b. $10,475
c. $8,725
d. $9,525
e. None of the above
2. Refer to the above data. Compute the gross margin for 2008 based on the LIFO method of inventory valuation.
a. $12,275
b. $12,625
c. $13,375
d. $13,575
e. None of the above
3. Refer to the above data. Compute the cost of the ending inventory based on the FIFO method of inventory valuation.
a. $9,675
b. $10,475
c. $8,725
d. $9,525
e. None of the above
4. Refer to the above data. Compute the cost of goods sold for the current year based on the FIFO method of inventory valuation.
a. $9,675
b. $10,475
c. $8,725
d. $9,525
e. None of the above
5. Refer to the above data. Compute the cost of goods sold based on the average-cost method of inventory valuation.
a. $8,250
b. $10,080
c. $9,120
d. $10,560
e. None of the above
6. All of the following accounts normally have debit balances except:
a. Sales returns & allowances
b. Dividends
c. Transportation-in
d. Purchases
e. All of the above accounts normally have debit balances
7. Mary Pizza reports net sales of $1,000,000, cost of goods sold of $550,000, and net income of $80,000. The company's gross margin is:
a. $450,000
b. $920,000
c. $370,000
d. Some other amount
8. Ace Shop uses a periodic inventory system. The beginning inventory was $20,000, purchases amounted to $110,000, sales totaled $215,000, and the year-end inventory was $25,000. The cost of goods sold must have been:
a. $105,000
b. $110,000
c. $100,000
d. Some other amount
9. Blue Company had accounts receivable of $400,000 and an allowance for doubtful accounts of $17,000 just before writing off as worthless an account receivable from Red Company of $2,400. The net realizable values of the accounts receivable before and after the write-off were:
a. $400,000 before and $397,600 after
b. $417,000 before and $414,600 after
c. $383,000 before and $380,600 after
d. $383,000 before and $383,000 after
e. None of the above
10. At December 31, before adjusting and closing the accounts had occurred, the Allowance for Doubtful Accounts of Andy Corporation showed a debit balance of $12,900. An aging of the accounts receivable indicated the amount probably uncollectible to be $21,000. Under these circumstances, a year-end adjusting entry for bad debts expense would include a:
a. Debit to Bad Debts Expense of $12,900
b. Debit to Bad Debts Expense of $8,100
c. Credit to the Allowance for Doubtful Accounts for $21,000
d. Credit to the Allowance for Doubtful Accounts for $33,900
e. None of the above
Use the following information to answer the next 5 questions
The following adjusted balance information is taken from the books of Elise Company on December 31, 2008:
|
Bad Debt Expense
|
50
|
|
Allowance for Bad Debts
|
40
|
|
Cash
|
1,750
|
|
Sales Returns and Allowances
|
20
|
|
Sales Discounts
|
10
|
|
Purchases Returns and Allowances
|
10
|
|
Sales
|
2,200
|
|
Inventory, 1/1/2008
|
200
|
|
Equipment
|
1,000
|
|
Accumulated Depreciation
|
400
|
|
Retained Earnings, 1/1/2008
|
500
|
|
Common Stock
|
1,800
|
|
Purchases
|
900
|
|
Insurance Expense
|
80
|
|
Selling Expense
|
60
|
|
Purchases Discounts
|
20
|
|
Depreciation Expense
|
200
|
|
Prepaid Insurance
|
230
|
|
Administrative Expense
|
90
|
|
Transportation - in
|
80
|
|
Accounts Receivable
|
800
|
|
|
|
|
Accounts Payable
|
500
|
|
Inventory, 12/31/2008
|
300
|
11. Total current assets on December 31, 2008 balance sheet are:
a. $ 2,820
b. $ 3,040
c. $ 3,120
d. $ 2,740
e. None of the above
12. Total assets on December 31, 2008 balance sheet are:
a. $ 3,340
b. $ 4,640
c. $ 3,640
d. $ 3,420
e. None of the above
13. Cost of Goods Available for Sale for 2008 is:
a. $ 1,250
b. $ 1,150
c. $ 950
d. $ 1,070
e. None of the above
14. Cost of Goods Sold for 2008 is:
a. $ 950
b. $ 770
c. $ 650
d. $ 850
e. None of the above
15. Net Income for 2008 is:
a. $ 1,060
b. $ 1,320
c. $ 840
d. $ 890
e. None of the above
16. At the start of the current year, Fran Company had a credit balance in the Allowance for Doubtful Accounts of $6,000. At the end of the year, a provision of 2% of sales was made for estimated bad debts. Sales for the year were $2,000,000 and $37,000 of accounts receivable were written off as worthless. No recoveries of accounts previously written off were made during the year. After the year-end bad debts adjustment, The year-end financial statements should show:
a. Allowance for Doubtful Accounts with a credit balance of $43,000
b. Bad Debts expense of $37,000
c. Bad Debts expense of $77,000
d. Allowance for Doubtful Accounts with a credit balance of $9,000
e. None of the above
17. After doing a Bank Reconciliation, a note receivable collected by the bank should be entered in the depositor's accounting records by a:
a. Debit to Cash
b. Credit to Cash
c. Debit to Accounts Receivable
d. Debit to Retained Earnings
e. None of the above
18. In preparing a bank reconciliation, a bank overdraft fee shown on the bank statement should be:
a. Added to the balance per the depositor's records
b. Deducted from the balance per the depositor's records
c. Added to the balance per the bank statement
d. Deducted from the balance per the bank statement
e. None of the above
19. Enclosed with the bank statement received by June Company at August 31 was an NSF check for $930. No entry has yet been made by the company to reflect the bank's action in charging back the NSF check. In making correcting journal entries based on the bank reconciliation, the NSF check will result in an entry with a
a. Credit to the Allowance for Uncollectible Accounts
b. Debit to Cash
c. Debit to Accounts Receivable
d. Debit to Bad Debts Expense
e. None of the above
20. While preparing bank reconciliation, an accountant discovered that a $177 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $147. In preparing the bank reconciliation the appropriate action to correct this error would be to:
a. Deduct $30 from the balance per the bank statement
b. Add $30 to the balance per the depositor's records
c. Deduct $30 from the balance per the depositor's records
d. Add $30 to the balance per the bank statement
e. None of the above
21. The accounting records of Jim Company showed cash of $21,000 at June 30. The balance per the bank statement at June 30 was $23,070. The only reconciling items were deposits in transit of $6,000, outstanding checks totaling $8,400, and NSF check for $300 returned by the bank, which Jim had not yet charged back to the customer, and a bank service charge of $30. The preparation of a bank reconciliation should indicate cash owned by Jim at June 30 in the amount of:
a. $20,670
b. $20,700
c. $26,670
d. $20,370
e. None of the above
22. Moon 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 net income for the period
b. Reduce the amount of owner's equity
c. Reduce the amount of total accounts receivable
d. Reduce total current assets
e. None of the above
23. The Allowance for Doubtful Accounts represents:
a. The difference between total credit sales and collections on credit sales
b. The difference between the gross value of accounts receivable and the amount of accounts receivable expected to be collected
c. Cash set aside to make up for bad debt losses
d. The amount of uncollectible accounts written off to date
e. None of the above
24. 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. None of the above
25. A conceptual shortcoming in the direct write-off method of accounting for bad debts is:
a. The direct method properly matches revenues and expenses on the income statement.
b. the direct method is easy to apply
c. the direct method does not properly value accounts receivable on the balance sheet
d. None of the above
26. Lee Corporation issued a 90-day note dated June 14. The maturity date of this note is:
a. September 13
b. September 11
c. September 15
d. September 12
e. None of the above
27. If a 10%, 60-day note receivable is acquired from a customer in settlement of an existing account receivable of $18,000, the accounting entry for acquisition of the note will:
a. Include a credit to Interest Revenue for $300
b. Include a debit to Notes Receivable for $18,000 and no entry for interest
c. Include a debit to Notes Receivable for $19,800
d. Include a debit to Notes Receivable for $18,300
e. None of the above
Use the following data for the next 4 questions.
At the end of December, the unadjusted trial balance of Stan Inc., included the following accounts:
|
Item
|
Debit
|
Credit
|
|
Sales (80% represent credit sales)
|
|
$150,000
|
|
Accounts Receivable
|
$110,000
|
|
|
Allowance for Doubtful Accounts
|
|
$880
|
28. Refer to the above data. Stan ages the accounts receivable and determines the estimated uncollectible portion to be $2,800. What is the amount of Bad Debts expense recognized in Stan's income statement for December?
a. $1,920
b. $2,240
c. $2,800
d. $3,680
e. None of the above
29. Refer to the above data. Stan ages the accounts receivable and determines the estimated uncollectible portion to be $2,800. After the adjusting entry is made, the net realizable value of Stan's accounts receivable in the December 31 balance sheet is:
a. $106,320
b. $108,080
c. $109,120
d. $107,200
e. None of the above
30. Refer to the above data. Stan estimates bad debts expense to be 2% of credit sales. What is the amount of Bad Debts expense recognized in Stan's income statement for December?
a. $2,200
b. $3,000
c. $2,400
d. $1,520
e. None of the above
31. Refer to the above data. Stan estimates bad debts expense to be 2% of credit sales. After the adjusting entry is made, the net realizable value of Stan's accounts receivable in the December 31 balance sheet is:
a. $117,600
b. $108,480
c. $107,600
d. $106,720
e. None of the above
32. Which of the following results in the inventory being stated on the balance sheet at the most current acquisition costs?
a. FIFO
b. Average cost
c. Specific identification
d. LIFO
e. None of the above
33. During a period of steadily rising prices, which of the following cost flow assumptions is likely to result in reporting the highest gross profit?
a. Specific identification
b. Average cost
c. FIFO
d. LIFO
e. None of the above
34. During a period of steadily falling prices, which of the following cost flow assumptions is likely to result in reporting the highest amount of income taxes paid?
a. FIFO
b. LIFO
c. Average cost
d. Specific identification
e. None of the above
35. A LIFO reserve refers to:
a. The amount of inventory available for immediate delivery
b. The difference between the LIFO cost of an inventory and its current replacement cost
c. The tax savings resulting from the use of the LIFO inventory method
d. An adjustment to convert LIFO cost of inventory to an Average Cost basis.
e. None of the above
36. Vernon Company received a 60-day, 15% note for $9,000 on June 16. Which of the following statements is true?
a. The principal of the note plus interest is due on August 16
b. The maturity value of this note is $9,225
c. Vernon will receive $9,000 plus interest of $1,350 at maturity
d. Vernon should record a total receivable due of $9,225 on June 16
e. None of the above
37. On November 1, May Corporation sold merchandise in return for a 12%, 90-day note receivable in the amount of $50,000. The proper adjusting entry at December 31 (end of May's fiscal year) includes a:
a. Debit to Interest Receivable of $500
b. Credit to Notes Receivable of $1,500
c. Credit to Interest Revenue of $1,000
d. Debit to Cash of $1,000
e. None of the above
38. During January, Falmouth Corporation had sales of $80,000 and a cost of goods available for sale of $160,000. The company consistently earns a gross profit rate of 40%. Using the gross profit method, the estimated inventory at January 31 amounts to:
a. $48,000
b. $128,000
c. $32,000
d. $112,000
e. None of the above
39. Fay's Dress Shop uses the retail method to estimate its monthly cost of goods sold and month-end inventory. At August 31, the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases) totaled $40,000. These goods had been priced for resale at $100,000. Sales in August totaled $60,000. The estimated inventory at cost on August 31 is:
a. $24,000
b. $40,000
c. $16,000
d. Some other amount
40. The account "Transportation Out" would show up on the financial statements as:
a. An expense account on the income statement.
b. A current asset on the balance sheet.
c. A revenue account included in the "other revenue" section of the income statement.
d. An expense account on the balance sheet.
e. A liability account on the balance sheet.
41. The account "Purchases Returns and Allowances" would show up on the financial statements as:
a. An owner's equity account on the balance sheet.
b. A contra account in the cost of goods sold section on the income statement.
c. An expense account included in the "other expenses" section of the income statement.
d. A contra-revenue account on the income statement.
e. None of the above.
Use the following information to answer the next 3 questions:
Selected information from Kim Company 2008 annual report (December 31 year-end) is shown below:
|
Kim Company
|
2008
|
2007
|
|
Inventories
|
$200,000
|
$180,000
|
|
Cost of Goods Sold
|
800,000
|
600,000
|
Inventories (footnote):
Inventories are valued by the last in, first out (LIFO) method. Kim has used LIFO since 1985. The excess of current cost over the amount stated for inventories valued by the LIFO method amounted to approximately $44,000 at December 31, 2008 and $38,000 at December 31, 2007 respectively.
42. The approximate current value of the inventory as of December 31, 2008 is:
a. $244,000.
b. $200,000.
c. $282,000.
d. $156,000.
e. None of the above.
43. Assuming a 30% income tax rate, the total amount saved in income taxes since Kim Company started using LIFO is:
a. $30,800.
b. $13,200
c. $24,600.
d. $44,000.
e. None of the above.
44. Using LIFO, what was the additional amount charged to Cost of Goods Sold by Kim during 2008 as opposed to using FIFO.
a. $ 6,000.
b. $44,000
c. $38,000.
d. $20,000.
e. None of the above.
Use the following information to answer questions the next 3 questions:
Following is selected information (in millions) for Sue Company, AFTER year-end adjusting entries:
|
For year ended December 31:
|
2008
|
2007
|
|
Net Sales
|
$50,000
|
$40,000
|
|
Bad Debt Expense
|
1,400
|
1,200
|
|
|
|
|
|
As of December 31:
|
2008
|
2007
|
|
Gross Accounts Receivable
|
8,000
|
9,000
|
|
Allowance for Doubtful Accounts
|
300
|
200
|
45. Sue Company financial statement information shows that:
a. Total sales on account for 2008 amounted to $8,000 million
b. Net realizable value of receivables on December 31, 2008 is $7,700 million.
c. Total receivables on December 31, 2008 are $8,300 million.
d. Accounts of $1,400 million were written off as uncollectible in 2008.
e. None of the above.
46. On the basis of the information provided for Sue Company:
a. The relationship between gross Accounts Receivable and Net Sales is the same in 2008 compared to 2007.
b. The relationship between gross Accounts Receivable and Net Sales is better in 2008 compared to 2007.
c. The relationship between gross Accounts Receivable and Net Sales cannot be determined from the data provided.
d. The relationship between gross Accounts Receivable and Net Sales is worse in 2008 compared to 2007.
47. On the basis of the information provided for Sue Company, the Accounts Receivable written off in 2008 were
a. $1,600
b. $1,400
c. $1,300
d. $200
e. None of the above.
Use the following data for the next three questions. (Round all calculations to the nearest whole dollar!)
On July 1, 2008 Fred Company purchased a delivery truck for $95,000. The estimated useful life of the truck is five years, during which time it will be driven about 200,000 miles. Estimated residual value is $5,000.
48. If Fred Company uses the sum-of-the-years'-digits method of depreciation, the depreciation expense for 2009 will be:
a. $27,000
b. $24,000
c. $15,000
d. $30,000
e. None of the above.
49. If Fred Company uses the double-declining-balance method of depreciation, the accumulated depreciation balance at December 31, 2008 (after adjusting entries) will be:
a. $18,000
b. $19,000
c. $38,000
d. $36,000
e. None of the above.
50. If Fred Company uses the straight-line method of depreciation, the book value of the asset at December 31, 2010, (after adjusting entries), will be:
a. $50,000
b. $45,000
c. $95,000
d. $68,000
e. None of the above.