1. Wilshire Equipment Company sold merchandise on credit. No discounts were offered. The proper journal entry to record this sale would be:
A. Debit Sales, and Credit Accounts Receivable.
B. Debit Cash, and Credit Accounts Receivable.
C. Debit Accounts Receivable, and Credit Sales.
D. Debit Accounts Receivable, and Credit Purchases (or Inventory).
E. None of these.
2. Using the gross method of recording sales, what sales price should be recorded when an item with an $1,100 list price is sold with a 15% trade discount? The sales invoice includes the terms 2/10, n/30?
A. $935.
B. $1,078.
C. $1,100.
D. $916.30.
3. Merchandise is sold on account on January 16, terms 2/10, n/30, and recorded by debiting Accounts Receivable and crediting Sales for $2,000. If payment occurs on January 21, the journal entry would include a credit to:
A. Accounts Receivable for $1,960.
B. Accounts Receivable for $2,000.
C. Sales Discounts for $40.
D. Cash for $1,960.
E. None of these.
4. Sperry Company had beginning inventory of $80,000, purchased merchandise during the period for $140,000, and had ending inventory of $95,000. How much was goods available for sale?
A. $125,000.
B. $155,000.
C. $175,000.
D. $315,000.
E. None of these.
5. A typical internal accounting control feature would be:
A. managerial authorization of refunds.
B. prenumbered documents.
C. requiring two signatures on checks..
D. All of the above.
E. None of these.
6. Mathew Company provided the following data concerning its income statement: sales, $1,000,000; purchases, $400,000; beginning inventory, $250,000; ending inventory, $275,000; operating expenses, $95,000; freight-in, $5,000; sales discounts, $20,000; purchases discounts, $15,000; sales returns & allowances, $120,000; and purchases returns & allowances, $45,000. The data are complete and provide the basis for preparation of an income statement. How much is cost of goods sold?
7. Given below are account balances for Clayton Company:
Gross sales, $100,000
Sales returns and allowances, $8,000
Selling expenses, $12;000
Cost of goods sold, $46,000
Interest expense, $3,000
How much is the gross profit margin?
8. Given below are account balances for Aoki Company:
Net sales, $100,000
Administrative expenses, $22,000
Selling expenses, $12;000
Cost of goods sold, $46,000
Interest expense, $3,000
How much is the net profit margin?
9. The inventory classification on a retailer's balance sheet may include:
A. raw materials.
B. work in process.
C. ready goods.
D. All of the above.
E. None of these.
10. Inventory accounts are classified in which section of the balance sheet?
A. Current assets.
B. Investments.
C. Property, plant, and equipment.
D. Intangible assets.
E. None of these.
11. 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 should include the goods in inventory.
B. Ashton should not include the goods in inventory.
C. Ashton may optionally include the goods in inventory.
D. Ashton may optionally exclude the goods from inventory.
E. None of these.
12. The recorded cost of inventory would include the purchase price plus:
A. transportation charges incurred by the seller.
B. interest costs incurred on money borrowed to finance the inventory.
C. transportation charges incurred by the buyer.
D. All of these.
E. None of these.
13. 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 periodic LIFO:
A. ending inventory is $2,650.
B. cost of goods sold is $6,233.
C. gross profit is $4,200.
D. All of the above.
E. None of these.
14. 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 periodic FIFO:
A. ending inventory is $2,650.
B. cost of goods sold is $6,233.
C. gross profit is $4,200.
D. All of the above.
E. None of these.
15. Alta had beginning inventory of 100 units at $10 each. 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 periodic weighted-average inventory:
A. ending inventory is $2,650.
B. cost of goods sold is $6,233.
C. gross profit is $4,200.
D. All of the above.
E. None of these.
16. 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. ending inventory is $3,550.
B. cost of goods sold is $5,800.
C. gross profit is $4,200.
D. All of the above.
E. None of these.
17. Jackson Company's inventory cost on its balance sheet was lower using first-in, first-out than last-in, first-out. Assuming no beginning inventory, in which direction did the cost of purchases move during the period?
A. Up.
B. Down.
C. Steady.
D. Cannot be determined.
E. None of these.
18. A company has been using LIFO for 15 years. Its 20X7 ending inventory was $15,000, but it would have been $26,000 if FIFO had been used the last 15 years. Thus, if FIFO had been used, this company's net income before taxes would have been:
A. $11,000 less over the 15-year period.
B. $11,000 greater over the 15-year period.
C. $11,000 greater in 20X7.
D. $11,000 less in 20X7.
E. None of these.
19. The Cash account on the balance sheet would include all of the following except:
A. Certificates of deposit.
B. Currency.
C. Money orders.
D. Balances on deposit at a bank.
E. None of these.
20. Which statement about internal control for cash disbursements is false?
A. All significant disbursements should be made by check.
B. Cash in the ledger should be reconciled to cash reported by the bank.
C. The individual responsible for signing checks should not also prepare the checks.
D. Petty cash receipts should be destroyed once paid.
E. None of these.
21. When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would outstanding checks be handled?
A. Added to the balance per the bank statement.
B. Subtracted from the balance per the bank statement.
C. Either A or B depending on the nature of the outstanding checks.
D. Outstanding checks would be ignored.
E. None of these.
22. A bank reconciliation revealed bank charges of $11, outstanding checks of $221, and NSF checks of $90. The journal entry to cause the company records to match the correct adjusted ending cash balance includes:
A. a credit to cash for $11.
B. a credit to cash for $90.
C. a credit to cash for $101.
D. a credit to cash for $322.
E. None of these.
23. Hastings Company replenished a $500 petty cash fund. The petty cash box contained vouchers of $87 for postage, $173 for supplies, $58 for gasoline, and cash on hand of $180. The journal entry to reflect replenishment would include a:
A. credit to Petty Cash for $2.
B. debit to Cash Short for $2.
C. credit to Cash for $318.
D. credit to Cash or $180.
E. None of these.
24. Trading securities were purchased for $100,000. Initially the investment climbed in value to $125,000. By year's end, it had decreased in value to $90,000. At what amount should the trading securities be reported on the year-end balance sheet?
A. $90,000.
B. $100,000.
C. $125,000.
D. Each of the above is an acceptable alternative.
E. None of these.
25. Delwood Furniture Company has provided the following information:
Ending cash balance per bank statement is $14,862
Monthly bank service charge is $25
Deposits in transit at month-end are $1,218
Outstanding checks at month-end are $4,344
Customer's check returned-NSF is $174
What would be the cash balance per the company records, prior to recording any journal entries resulting from the bank reconciliation?
26. Non-trade receivables:
A. include advances to employees.
B. arise from the sale of a company's products or services.
C. generally comprise the majority of the total receivables balance.
D. do not include utility company deposits.
E. None of these.
27. Eastland Company regularly sells goods to customers who use National Express nonbank credit cards. Credit card sales on July 8 amounted to $1,000 and were subject to a 4% credit card company collection fee. Eastland should record sales of:
A. $960.
B. $996.
C. $1,000.
D. $1,040.
E. None of these.
28. 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 Cash for $1,000.
B. a debit to Accounts Receivable for $960.
C. a credit to Service Charge for $40.
D. a credit to Sales for $1,000.
E. None of these.
29. DeVries uses an allowance method for recording bad debts. DeVries determined that $1,000 of accounts receivable from Morris Corporation are uncollectible. The entry DeVries should make to write off the Morris account would include:
A. a credit to Cash for $1,000.
B. a credit to Allowance for Uncollectible Accounts for $1,000.
C. a credit to Accounts Receivable for $1,000.
D. a credit to Uncollectible Accounts Expense for $1,000.
E. None of these.
30. DeVries uses an allowance method for recording bad debts. DeVries previously wrote off a $1,000 of accounts receivable from Morris Corporation. However, Morris subsequently paid the full amount. The entry to record collection would include:
A. a credit to Cash for $1,000.
B. a credit to Allowance for Uncollectible Accounts for $1,000.
C. a credit to Uncollectible Accounts Expense for $1,000.
D. a debit to Uncollectible Accounts Expense for $1,000.
E. None of these.
31. Annual sales were $1,600,000, and the January 1 Allowance for Uncollectibles had a credit balance of $25,000. $18,600 of accounts were written off during the year. Using the percentage of sales technique and a 2% rate, uncollectible accounts expense is:
A. $7,000.
B. $18,600.
C. $25,600.
D. $32,000.
E. None of these.
32. Hall uses aging to estimate uncollectibles. Accounts of $100,000 are less than 30 days old (98% collectible), $50,000 are
30 to 60 days old (90% collectible), $25,000 are 61-120 days old (50% collectible), and the remaining $10,000 is 10% collectible.
A. The Allowance for Uncollectibles should have a balance of $7,000.
B. The Allowance for Uncollectibles should have a balance of $9,000.
C. The Allowance for Uncollectibles should have a balance of $28,500.
D. The Allowance for Uncollectibles should have a balance of $35,000.
E. None of these.
33. 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 $60,000.
B. The Uncollectibles Accounts Expense should be increased by $90,000.
C. The Uncollectibles Accounts Expense should be increased by $110,000.
D. The Uncollectibles Accounts Expense should be increased by $150,000.
E. None of these.