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ACC 201 Study Guide - Final Guide: Income Statement, Net Income, Accounts Receivable

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School
MSU
Department
Accounting
Course
ACC 201
Professor
Petroni Kathy

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Document Summary

Which of the following statements is false, a firm could not have negative net income and a positive gross profit. b. Aa estimates bad debt expense assuming that 1. 5% of credit sales have historically been uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded: ,750, ,550, ,950, ,200. The answer is c. the beginning balance in the allowance account is a ,200 credit. The account would be increased (i. e. , credited) by 1. 5% of the credits sales of ,000 or by ,750. How much was chs company"s bad debt expense: ,500, ,400, ,900, ,600, big 10 coffee shops purchases a local coffee shop for ,000. The appraised value of the assets of the local coffee shop is ,000. Which of the following is false: big 10 coffee shops will recognize some goodwill. b. Coffee shops will recognize ,000 of goodwill. c.

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Related Questions

Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash (cost of merchandise $8,797). $11,200 b. Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $60). 100 c. Sold merchandise (costing $2,375) to a customer, on account with terms 2/10, n/30. 5,000 d. Collected half of the balance owed by the customer in (c) within the discount period. 2,450 e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid 80

1.

Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.

2.

Compute the gross profit percentage.

3.

Prepare journal entries to record transactions (a)–(e). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

4.

Hair World is considering a contract to sell merchandise to a hair salon chain for $10,000. This merchandise will cost Hair World $7,600. What would be the increase (or decrease) to Hair World’s gross profit and gross profit percentage?

[The following information applies to the questions displayed below.]

Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:


a. Sold merchandise for cash (cost of merchandise $10,797). $15,200
b.

Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $90).

 150
c. Sold merchandise (costing $2,613) to a customer, on account with terms 2/10, n/30. 5,500
d. Collected half of the balance owed by the customer in (c) within the discount period. 2,695
e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid 88
Required:
1. Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.
Sales Revenue
Net Sales
Gross Profit
2. Compute the gross profit percentage. (Round your answer to 1 decimal place.)
Gross Profit Percentage %
3.

Prepare journal entries to record transactions (a)–(e). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)


a1) Record the cash sales of $15,200.

a2) Record the cost of goods sold of $10,797.

b1) Record the return by a customer of unsatisfactory merchandise that was in perfect condition. A cash refund of $150 was given to the customer.

b2) Record the merchandise returned by the customer back into inventory. The original cost of the merchandise was $90.

c1) Record the sales on account of $5,500 on terms 2/10, n/30.

c2) Record the cost of goods sold of $2,613.

d) Record the collection of half of the balance of $2,695 owed by the customer within the discount period.

e) Record the allowance of $88 granted to the customer.

True/False

Indicate whether the sentence or statement is true or false. 1 point for each question

____ 1. The completed-contract method was developed to relate recognition of revenue on long-term construction-type contracts to the activities of a firm in fulfilling these contracts.

____ 2. Estimates of architects and engineers of percentage-of-completion are not acceptable under generally accepted accounting principles.

____ 3. The use of the direct write-off method is acceptable under generally accepted accounting principles.

____4. The method of estimating uncollectible accounts expense based on the accounts receivable balance emphasizes the determination of the net realizable value of the receivables.

____5. The "list" sales price less any trade discount is the amount at which the receivable and the corresponding revenue should be recorded.

____6. In a bank reconciliation statement, an outstanding check must be subtracted from the bank statement balance in determining the correct cash balance.

____ 7. Accounting for installment sales using the deferred gross profit approach requires determining a gross profit rate for the sales of each year, and establishing an accounts receivable and a deferred revenue account identified by the year of the sale.

____ 8. The deferred gross profit accounts are reported as liabilities under the installment sale method.

____ 9. The cost recovery method is often used when the circumstances surrounding a sale are too uncertain to use the installment sale method.

____ 10. In a bank reconciliation statement, the amount of a not-sufficient-funds check must be added to the depositor's cash balance in determining the correct cash balance.