Quiz
1. One advantage to using a perpetual inventory system is that the company never has to physically count the inventory.
2. The weighted-average inventory method will likely result in neither the highest nor the lowest ending inventory.
3. When calculating accounts receivable turnover, a company would prefer a higher number rather than a lower number (within reason).
4. When performing a bank reconciliation, checks outstanding are added back to the bank balance.
5. Usually the quick ratio will be a lower number than the current ratio.
Multiple Choice
6. The bad-debt method that uses the accounts receivable aging report is _______________.
b. the percentage-of-receivables method
7. When it is determined that too much money has been set aside for uncollectible accounts, we will _______________.
8. A customer whose account was previously written off unexpectedly pays us. If we are using the allowance method we would _______________.
9. When a retailer accepts a bank card (VISA or MasterCard), they will make what entry for the day's receipts?
10. 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 _______________.
11. A company buys a $10,000 bond at 102 as an investment. The correct entry is _______________.
12. A company issues bonds having a stated value of $100,000 for $102,500. At maturity, the company will _______________.
13. 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?
14. 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?
15. 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?
16. What is the difference between the periodic-inventory and perpetual-inventory methods?
17. Name two costs, in addition to the purchase price, that are added to merchandise inventory cost.
18. 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?
19. 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?
20. How is gross margin or gross profit calculated on a merchandizing company income statement?
21. 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?
22. What does 1/10, n/30 mean?
23. What cash control is compromised when the purchasing manager is one of the authorized check signers?
24. Name at least three out of the four documents that the accounting department should have access to in order to pay an invoice.
25. What item from the company's records must be added to the bank balance when reconciling the bank statement?