ACCT 2101 Study Guide - Midterm Guide: Accounts Receivable, Ddb Worldwide, Weighted Arithmetic Mean
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Use the following to answer questions 53-56:
The financial statements of Wines, Inc., provide the followinginformation for the current year:
Dec.31 | Jan.1 | |
Accountsreceivable...................................................................... | $210,000 | $180,000 |
Inventory...................................................................... | 200,000 | 190,000 |
Prepaidexpenses....................................................................... | 14,000 | 10,000 |
Accounts payable (formerchandise)................................................................. | 176,000 | 161,000 |
Accrued expensespayable......................................................................... | 13,000 | 19,000 |
Netsales.............................................................................. | 2,900,000 | |
Cost of goodssold............................................................................... | 1,500,000 | |
Operating expenses (including depreciation of$40,000)...................................................................................... | 300,000 |
53. Refer to the above data.Compute the amount of cash received from customers during thecurrent year.
A) $2,900,000.
B) $2,690,000.
C) $2,870,000.
D) Some other amount.
54. Refer to the above data.Compute the amount of Wine's cash payments for purchases ofmerchandise during the current year.
A) $1,500,000.
B) $1,495,000.
C) $1,505,000.
D) Some other amount.
55. Refer to the above data. Compute the amount of Wine's cash paymentsfor operating expenses.
A) $260,000.
B) $270,000.
C) $250,000.
D) Some other amount.
56. Refer to the above data.Wine's net cash flow from operating activities for the current yearis:
A) $1,105,000.
B) $1,375,000.
C) $1,495,000.
D) Some other amount.
57. Alpine Company reported anincrease of $190,000 in its accounts receivable during the year2005. The company's statement of cash flows for 2005 reported $1million of cash received from customers. What amount of net salesmust Alpine have recorded in 2005?
A) $ 810,000.
B) $1,190,000.
C) $1,000,000.
D) $ 190,000
58. When there is an allowancefor doubtful accounts in use, the writing-off of an uncollectibleaccounts receivable will:
A) Reduce income.
B) Reduce an expense.
C) Not change income nor total assets.
D) Increase total assets.
59. The aging of the accountsreceivable approach to estimating uncollectible accounts doesnot:
A) Take into consideration the existing balance in the Allowancefor Doubtful Accounts.
B) Utilize a percentage of probable uncollectibleaccounts for each age group of accounts receivable.
C) Stress the relationship between uncollectibleaccounts expense and net sales.
D) Tend to give a reliable estimate of uncollectible accountsbecause of the consideration given to the collectability ofspecific accounts receivable.
60. Juliet Inc. had accounts receivable of $300,000 and an allowancefor doubtful accounts of $18,500 just before writing off asworthless an account receivable from Arrow Company of $1,200. Thenet realizable values of the accounts receivable before and afterthe write-off were:
A) $281,500 before and $280,300 after.
B) $281,500 before and $281,500 after.
C) $300,000 before and $298,800 after.
D) $318,500 before and $317,300 after.
61. Romeo Inc. had accountsreceivable of $250,000 and an allowance for doubtful accounts of$9,700 just before writing off as worthless an account receivablefrom Juliet Company of $1,500. After writing off this receivablewhat would be the balance in Romeo's Allowance for DoubtfulAccounts?
A) $9,700 credit balance.
B) $10,900 credit balance.
C) $8,200 credit balance.
D) $8,200 debit balance.
62. Sandy Company uses thebalance sheet approach in estimating uncollectible accountsexpense. It has just completed an aging analysis of accountsreceivable at December 31, 2006. This analysis disclosed thefollowing information:
Age | Percentage | |
Group | Considered | |
Total | Uncollectible | |
Not yet due | $51,000 | 1% |
1-30 days past due | $29,000 | 2% |
31-60 past due | $12,000 | 8% |
What is the appropriate balance for Sandy's Allowance for DoubtfulAccounts at December 31, 2006?
A) $92,000.
B) 2% of credit sales in 2006.
C) $1,540.
D) $2,050.
63. At the start of the currentyear, Utopia Corporation had a credit balance in the Allowance forDoubtful Accounts of $1,400. During the year, a monthly provisionof 2% of sales was made for uncollectible accounts. Sales for theyear were $300,000, and $5,200 of accounts receivable were writtenoff as worthless. No recoveries of accounts previously written offwere made during the year. The year-end financial statements shouldshow:
A) Uncollectible accounts expense of $11,200.
B) Allowance for Doubtful Accounts with a creditbalance of $2,200.
C) Allowance for Doubtful Accounts with a creditbalance of $6,600.
D) Uncollectible accounts expense of $5,200.
Financial Accounting, 14th Edition
Carl S. Warren; Jim Reeve; Jonathan Duchac
Final_Multiple choice
1. The primary objectives of control over inventory are
a.safeguarding the inventory from damage and maintainingconstant observation of the inventory
b.reporting inventory in the financial statements
c.maintaining constant observation of the inventory andreporting inventory in the financial statements
d.safeguarding inventory from damage and reporting inventory inthe financial statements
2. When merchandise sold is assumed to be in the order in whichthe purchases were made, the company is using
a.first-in, last-out
b.first-in, first-out
c.last-in, first-out
d.average cost
3. Use the information below to answer the followingquestion.
The Boxwood Company sells blankets for $60 each. The following wastaken from the inventory records during May. The company had nobeginning inventory on May 1.
| Date | Blankets | Units | Cost |
| May 3 | Purchase | 5 | $20 |
| 10 | Sale | 3 | |
| 17 | Purchase | 10 | $24 |
| 20 | Sale | 6 | |
| 23 | Sale | 3 | |
| 30 | Purchase | 10 | $30 |
Assuming that the company uses the perpetual inventory system,determine the gross profit for the sale of May 23 using the FIFOinventory cost method.
a.$72
b.$108
c.$180
d.$120
4.If merchandise inventory is being valued at cost and thepurchase price is steadily falling, which method of costing willyield the largest net income?
a.FIFO
b.LIFO
c.average cost
d.weighted average
5.Stevens Company started the year with an inventory cost of$145,000. During the month of January, Stevens purchased inventorythat cost $53,000. January sales totaled $140,000. Estimated grossprofit is 35%. The estimated ending inventory as of January 31is
a.$58,000
b.$107,000
c.$69,300
d.$91,000
6. Which one of the following below is not anelement of internal control?
a.risk assessment
b.cost-benefit considerations
c.monitoring
d.information and communication
7. A check drawn by a company for $340 in payment of a liabilitywas recorded in the journal as $430. What entry is required in thecompany's accounts?
a.debit Cash; credit Accounts Receivable
b.debit Accounts Receivable; credit Cash
c.debit Accounts Payable; credit Cash
d.debit Cash; credit Accounts Payable
8. A bank reconciliation should be prepared
a.to explain any difference between the company's balance perbooks with the balance per bank
b.by the company's bank
c.whenever the bank refuses to lend the company money
d.by the person who is authorized to sign checks
9.
Pilger Corporation has cash on hand at year-end of $201,000 anda negative cash flow from operations of $144,000. What is the ratioof cash to monthly cash expenses?
a.1.4 months
b.7.2 months
c.12.0 months
d.16.8 months
10. When does an account become uncollectible?
a.when accounts receivable is converted into notesreceivable
b.when a discount is availed on notes receivable
c.at the end of the fiscal year
d.there is no general rule for when an account becomesuncollectible
11.On the balance sheet, the amount shown for the Allowance forDoubtful Accounts is equal to the
a.total estimated uncollectible accounts as of the end of theyear
b.sum of all accounts that are past due
c.total of the accounts receivables written-off during theyear
d.uncollectible accounts expense for the year
12. Allowance for Doubtful Accounts has a debit balance of $600at the end of the year (before adjustment), and an analysis ofaccounts in the customers ledger indicates uncollectiblereceivables of $13,000. Which of the following entries records theproper adjusting entry for bad debt expense?
a.debit Allowance for Doubtful Accounts, $600; credit Bad DebtExpense, $600
b.debit Bad Debt Expense, $600; credit Allowance for DoubtfulAccounts, $600
c.debit Bad Debt Expense, $13,600; credit Allowance for DoubtfulAccounts, $13,600
d.debit Bad Debt Expense, $12,400; credit Allowance for DoubtfulAccounts, $12,400
13. When comparing the direct write-off method and the allowancemethod of accounting for uncollectible receivables, a majordifference is that the direct write-off method
a.is used primarily by small companies with few receivables
b.is used primarily by large companies with many receivables
c.uses an allowance account
d.uses a percentage of sales method to estimate uncollectibleaccounts
14. Accumulated Depreciation
a. is used to show the amount of cost expiration ofintangibles
b.is used to show the amount of cost expiration of naturalresources
c.is the same as Depreciation Expense
d.is a contra asset account
15. Equipment with a cost of $220,000 has an estimated residualvalue of $30,000 and an estimated life of 10 years or 19,000 hours.It is to be depreciated by the straight-line method. What is theamount of depreciation for the first full year, during which theequipment was used 2,100 hours?
a.$19,000
b.$21,000
c.$30,000
d.$22,000
16. The process of transferring the cost of metal ores and otherminerals removed from the earth to an expense account is called
a.depreciation
b.depletion
c.amortization
d.deferral
17. The Bacon Company acquired new machinery with a price of$15,200 by trading in similar old machinery and paying $12,700. Theold machinery originally cost $9,000 and had accumulateddepreciation of $5,000. In recording this transaction, BaconCompany should record
a.a loss of $1,500
b.the new machinery at $12,700
c.a gain of $1,500
d.the new machinery at $16,700
18. Assuming a 360-day year, when a $50,000, 90-day, 9%interest-bearing note payable matures, total payment will be
a.$54,500
b.$4,500
c.$1,125
d.$51,125
19. Which of the following is required to be withheld fromemployee's gross pay?
a.only federal income tax
b.both federal and state unemployment compensation taxes
c.only state unemployment compensation tax
d.only federal unemployment compensation tax
20. Hall Company sells merchandise with a one-year warranty. Inthe current year, sales consisted of 4,500 units. It is estimatedthat warranty repairs will average $10 per unit sold, and 30% ofthe repairs will be made in the current year and 70% in the nextyear. In the current year's income statement, Hall should showwarranty expense of
a.$45,000
b.$0
c.$13,500
d.$31,500
21. Which of the following below is not acharacteristic of a limited liability company?
a.limited legal liability
b.unlimited life
c.taxable
d.moderate ability to raise capital
22. Seth and Beth have original investments of $50,000 and$100,000 respectively in a partnership. The articles of partnershipinclude the following provisions regarding the division of netincome: interest on original investment at 10%; salary allowancesof $27,000 and $18,000, respectively; and the remainder to bedivided equally. How much of the net income of $42,000 is allocatedto Seth?
a.$20,000
b.$23,000
c.$32,000
d.$0
23. Which of the following is not a rightpossessed by common stockholders of a corporation?
a.the right to share in assets upon liquidation
b.the right to receive a minimum amount of dividends
c.the right to sell their stock to anyone they choose
d.the right to vote in the election of the board ofdirectors
24. The charter of a corporation provides for the issuance of100,000 shares of common stock. Assume that 45,000 shares wereoriginally issued and 5,000 were subsequently reacquired. What isthe amount of cash dividends to be paid if a $2 per share dividendis declared?
a.$80,000
b.$100,00
c.$90,000
d.$10,000
25.Which statement below is not a reason for acorporation to buy back its own stock?
a.to increase the shares outstanding
b.for supporting the market price of the stock
c.resale to employees
d.bonus to employees
