acis 2115 – Flashcard
Unlock all answers in this set
Unlock answersquestion
45. Manufactured inventory that has begun the production process but is not yet completed is a. work in process. b. raw materials. c. merchandise inventory. d. finished goods.
answer
Work in progress
question
46. The factor which determines whether or not goods should be included in a physical count of inventory is a. physical possession. b. legal title. c. management's judgment. d. whether or not the purchase price has been paid.
answer
Legal Title
question
47. If goods in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods until they are delivered. c. the transportation company has legal title to the goods while the goods are in transit. d. no one has legal title to the goods until they are delivered.
answer
The seller has legal title until the goods are delivered.
question
48. Independent internal verification of the physical inventory process occurs when a. the employee is required to count all items twice for sake of verification. b. the items counted are compared to the inventory account balance. c. a second employee counts the inventory and compares the result to the count made by the first employee. d. all prenumbered inventory tags are accounted for
answer
a second employee counts the inventory and compares the result to the count made by the first employee.
question
68. Charlene Cosmetics Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 Total: $4,200 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is a. $1,463. b. $1,620. c. $1,575. d. $1,500.
answer
$1,500 [(4200/700)x6] (total cost/total units)xUnits@End of period
question
55. Goods held on consignment are a. never owned by the consignee. b. included in the consignee's ending inventory. c. kept for sale on the premises of the consignor. d. included as part of no one's ending inventory.
answer
never owned by the consignee
question
69. Echo Sound Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is a. the FIFO method. b. the LIFO method. c. the weighted average unit cost method. d. not determinable.
answer
The FIFO Method
question
70. Atom Company just began business and made the following four inventory purchases in June: June 1 150 units $ 825 June 10 200 units 1,120 June 15 200 units 1,140 June 28 150 units 885 total: $3,970 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is a. $1,385. b. $1,425. c. $1,455. d. $1,475.
answer
$1,385
question
72. A company just began business and made the following four inventory purchases in June: June 1 150 units $ 825 June 10 200 units 1,120 June 15 200 units 1,140 June 28 150 units 885 $3,970 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is a. $1,418. b. $1,475. c. $1,425. d. $1,400.
answer
$1,418
question
Olympus Climbers Company has the following inventory data: July 1 Beginning inventory 20 units at $19 $ 380 7 Purchases 70 units at $20 1,400 22 Purchases 10 units at $22 220 $2,000 A physical count of merchandise inventory on July 30 reveals that there are 40 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is a. $780. b. $820. c. $1,180. d. $1,220.
answer
$1,180
question
If employees are bonded a. it means that they are not allowed to handle cash. b. they have worked for the company for at least 10 years. c. they have been insured against misappropriation of assets. d. it is impossible for them to steal from the company.
answer
They have been insured against misappropriation of assets
question
An employee authorized to sign checks should not record a. owner cash contributions. b. mail receipts. c. cash disbursement transactions. d. sales transactions.
answer
cash disbursement transactions
question
59. Notes or accounts receivables that result from sales transactions are often called a. sales receivables. b. non-trade receivables. c. trade receivables. d. merchandise receivables.
answer
Trade receivables
question
62. Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false? a. It is true because trade receivables are current assets and non-trade receivables are long term. b. It is false because all current receivables must be grouped together in one account. c. It is true because non-trade receivables do not result from business operations and should not be included with accounts receivable. d. It is false because management can decide how to report receivables.
answer
non trade receivables are reported separately from trade receivables because they are not part of business operations
question
68. Which one of the following is not an accounting problem (issue) associated with accounts receivable? a. Depreciating accounts receivable b. Recognizing accounts receivable c. Valuing accounts receivable d. Accelerating cash receipts from accounts receivable
answer
Depreciating accounts receiveable. A/R does not depreciate. There is a contra asset account (allowance for bad debt expense set up to allow for uncollectible receivables.
question
70. Three accounting issues associated with accounts receivable are a. depreciating, returns, and valuing. b. depreciating, valuing, and collecting. c. recognizing, valuing, and accelerating collections. d. accrual, bad debts, and accelerating collections.
answer
recognizing, valuing, and accelerating collections. These are all concerned with realizing the receivable.
question
71. Carson Company on July 15 sells merchandise on account to Tayler Co. for $1,500, terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $600 to Carson Company. On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received? a. $900 b. $882 c. $870 d. $1,500
answer
$882 [(1500-600)x.98]
question
72. The Allowance for Doubtful Accounts is necessary because a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay. b. uncollectible accounts that are written off must be accumulated in a separate account. c. a liability results when a credit sale is made. d. management needs to accumulate all the credit losses over the years.
answer
when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
question
The receivable that is usually evidenced by a formal instrument of credit is a(n)
answer
Notes receivable
question
On January 15, Nifty Company sells merchandise on account to Martinez Associates for $3,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?
answer
$ 2328
question
Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include
answer
Debit to Accounts Receivable
question
What is the type of account and normal balance of Allowance for Doubtful Accounts?
answer
Contra asset, credit
question
Another name for bad debt expense is
answer
uncollectible accounts expense
question
two methods of accounting for uncollectible accounts are the
answer
direct write-off method and the allowance method.
question
When is a physical inventory usually taken?
answer
At the end of the company's fiscal year
question
Ownership passes to the buyer when purchased goods are received from a public carrier if the goods are shipped
answer
FOB destination.
question
Which of the following statements is true? GAAP dictates the method of inventory costing method a company must use. The IRS dictates the method of inventory costing method a company must use. The SEC dictates the method of inventory costing method a company must use. Company management selects the method of inventory costing method a company will use.
answer
Company management selects the method of inventory costing method a company will use.
question
In periods of rising prices, what will LIFO produce?
answer
lower net income than FIFO
question
A company just starting business made the following purchases in August: August 1 300 units $1,560 August 12 400 units 2,340 August 24 400 units 2,520 August 30 300 units 1,980 1,400 units $8,400 A physical count of the inventory on August 31 reveals that there are 500 units on hand. What inventory method produces the lowest gross profit for August? Average cost method LIFO method FIFO method Not determinable
answer
LIFO method
question
With the assumption of costs and prices generally rising, which of the following is correct? LIFO provides the closest valuation of inventory on the balance sheet to replacement cost. FIFO provides the closest cost of goods sold to replacement cost. Specific identification method provides the closest cost of goods sold to replacement cost on the income statement. LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold.
answer
LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold.
question
two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, which statement is true? The company using LIFO will have the highest ending inventory. The company using FIFO will have the highest cost of good sold. The company using FIFO will have the highest ending inventory. The company using LIFO will have the lowest cost of goods sold.
answer
The company using FIFO will have the highest ending inventory.
question
Which internal control principle is most important in a control system for handling cash receipts?
answer
segregation of duties
question
Which one of the following is not one of the principles of internal control?
answer
financial performance measures
question
Of which of the following is obtaining insurance protection against dishonest employees an example?
answer
bonding
question
The account Allowance for Doubtful Accounts is classified as a(n) a. liability. b. contra account of Bad Debt Expense. c. expense. d. contra account to Accounts Receivable.
answer
contra account to Accounts Receivable.
question
An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a
answer
debit to Bad Debt Expense for $3,300.
question
An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 debit balance, the adjustment to record bad debts for the period will require a
answer
debit to Bad Debt Expense for $6,100. $4,500 + $1,600 = $6,100
question
An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a
answer
debit to Bad Debt Expense for $5,700.
question
How much accrued interest should be reported on the payee's December 31 balance sheet on a $5,000, 8%, 9-month note receivable issued on June 1?
answer
($5,000 × 8% × 7/12 = $233).
question
During 2012, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2012, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2012, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2012?
answer
After the write-offs are recorded, Allowance for Doubtful Accounts will have a debit balance of $12,000 ($18,000 credit beginning balance combined with a $30,000 debit for the write-offs). The desired balance, using the percentage of receivables basis, is a credit balance of $20,000 ($200,000 × 10%). In order to have an ending balance of $20,000, a credit entry of $32,000 must be made to Allowance for Doubtful Accounts. Thus, the amount of the adjusting entry must be $32,000.
question
Using the allowance method, the uncollectible accounts for the year are estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment?
answer
40,000
