1. (True or False) Accounts Receivable Turnover Ratio = Net Credit Sales divided by Average Net Accounts Receivable
2. To compute interest, one should multiply the amount of principal times the interest rate.
3. The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on matching
4. In preparing year-end financial statements, Interest does not need to be accrued for notes receivable that mature within one year of the balance sheet date.
5. Non-trade receivables: A) include advances to employees. B) arise from the sale of a company's products or services. C) do not include utility company deposits. D) None of these. E) generally comprise the majority of the total receivables balance.
6. Eastland Company collected payment from National Express Credit Card Company (nonbank) for sales of $1,000, less a 4% credit card collection fee. The proper journal entry to record this transaction would include: A) a debit to Accounts Receivable for $960. B) None of these C) a debit to Cash for $1,000. D) a credit to Service Charge for $40. E) a credit to Sales for $1,000.
7. The allowance method generally is considered preferable to the direct write-off method because the allowance method: A) recognizes expense when a specific account is determined to be uncollectible. B) relies on estimates which are always accurate and stable among years. C) recognizes the expense of a bad debt in the same period as the sale. D) None of these. E) reflects the actual facts as they have taken place.
8. An aging revealed a target year-end allowance of $100,000. The balance in Allowance for Uncollectibles, before adjustment, contained a $10,000 debit balance. $60,000 was actually written off during the year to arrive at the indicated debit balance. A) The Uncollectibles Accounts Expense should be increased by $150,000. B) The Uncollectibles Accounts Expense should be increased by $60,000. C) The Uncollectibles Accounts Expense should be increased by $90,000. D) The Uncollectibles Accounts Expense should be increased by $110,000. E) None of these.
9. Credit sales during 20X6 were $300,000, the Allowance for Uncollectibles had a beginning of year balance of $2,500, accounts written off during 20X6 were $2,200. It is estimated that 2% of all credit sales are eventually uncollectible. A) The Uncollectibles Accounts Expense should be $8,200. B) The Uncollectibles Accounts Expense should be $6,000. C) None of these. D) The Uncollectibles Accounts Expense should be $8,500. E) The Uncollectibles Accounts Expense should be $6,300.
10. Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the collection on the maturity date is: A) Debit Cash $4,060; credit Interest Revenue $60; credit Notes Receivable $4,000 B) Debit Cash $4,060; credit Notes Receivable $4,060 C) Debit Notes Receivable $4,060; credit Sales $4,060 D) Debit Cash $4,000; debit Interest Receivable $60 ; credit Sales $4,000 E) Debit Notes Receivable $4,000; credit Cash $4,000
11. Pepperdine reported net sales of $8,600 million, net income of $126 million and average accounts receivable of $890 million. Its accounts receivable turnover is: A) 9.7 B) 51.7 C) 37.8 D) 7.1 E) 68.3
12. (True or False) An increase in the days outstanding in receivables could be indicative of declining business conditions.
13. If a 10%, one-year, $1,000 note is dishonored by the maker, the payee might record a journal entry that includes: A) a credit to Interest Income of $100. B) All of these. C) None of these D) a debit to Accounts Receivable of $1,100. E) a credit to Notes Receivable for $1,000.
14. (True or False) The inventory turnover ratio can be calculated by dividing the average inventory level by cost of goods sold.
15. (True or False) Inventory errors affect both the balance sheet and the income statement disclosure in the period of the error.
16. Ashton agrees to purchase certain inventory items from Duart. Duart is to ship the goods F.O.B. destination. At Ashton's fiscal year end, Duart called to say that the goods had been shipped and Ashton could expect to receive them within a week. A) Ashton may optionally include the goods in inventory. B) Ashton should include the goods in inventory. C) None of these. D) Ashton should not include the goods in inventory. E) Ashton may optionally exclude the goods from inventory.
16. Grays Company has inventory of 10 units at a cost of $10 each on August 1. On August 3, it purchased 20 units at $12 each. 12 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 12 units that were sold? A) $120 B) $128 C) $140 D) $124 E)$130
17. Alta had beginning inventory of 100 units at $10 each. The purchase price increased steadily during the period. Purchases during the period were 200 at $11 each, 300 at $13 each, and 150 at $15 each. Sales were 500 units at $20. Using perpetual FIFO: A) None of these B) gross profit is $4,200. C) All of the answers are correct (except for None of these) D) ending inventory is $3,550. E) cost of goods sold is $5,800.
18. An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is: A) LIFO. B) FIFO. C) None of these. D) Weighted-average. E) Retail.
19. For 20X7, cost of goods available for sale for Martin Company was $400,000. The gross margin was 25% of sales. Sales for the year were $480,000. What was the amount of the ending inventory?
20. Eastland Company maintains a perpetual inventory system. On June 5, Eastland purchased 1,000 inventory units at $3 each, on account. On June 9, Eastland sold 500 units for $7 each, on account. Eastland's inventory method assessed the cost of units sold as $4 each. What is the proper journal entry for Eastland on June 9? (Remember with a perpetual inventory system, you have a "set" of journal entries. Be sure to write the journal entries in proper journal entry form.)
21. A company has beginning inventory of 10 units at a cost of $10 each on February 1. On February 3, it purchases 20 units at $12 each. 12 units are sold on February 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that are sold? A) $124 B) $120 C) $140 D) $128 E) $130
22. The September 30 physical inventory appropriately included $3,800 of merchandise that was not recorded as a purchase (on account) until October. What effect will this error have on the September 30 assets, liabilities, and income for the month ending, respectively? A) Overstate, overstate, no effect. B) No effect, no effect, understate. C) None of these. D) No effect, understate, overstate. E) Understate, understate, no effect.