ACCT 2001 Chapter : ACCT 2001 Chapter 8 Class Notes

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15 Mar 2019

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Service organization - records a receivable when it provides _____________ on account. Merchandiser - records accounts receivable at the ___________________ of merchandise on account. Illustration: assume that jordache co. on july 1, 2012, sells merchandise on account to polo company for ,000 terms 2/10, n/30. On july 5, polo returns merchandise worth to jordache co. On july 11, jordache receives payment from polo company for the balance due. Sales on account raise the possibility of accounts not being ________________ Seller records losses from extending credit as _________________ expense. Illustration: hampson furniture has credit sales of ,200,000 in 2012, of which. The vice-president of finance of hampson furniture on march 1, 2013, authorizes a write-off of the balance owed by r. a. ware. On july 1, r. a. ware pays the amount that hampson furniture had written off on.

Related Questions

Calculate cost of goods available for sale and cost of goodssold for the month.

5. Principles of an efficient and effectiveaccounting information system include all of the followingexcept

a. cost effectiveness.

b. flexibility.

c. useful output.

d. All of these options are principles.

6. Which of the following statements isincorrect?

a. A major consideration in developing an accountingsystem is cost effectiveness.

b. When an accounting system is designed, noconsideration needs to be given to the needs and knowledge of thevarious users.

c. The accounting system should be able toaccommodate a variety of users and changing information needs.

d. To be useful, information must be understandable,relevant, reliable, timely, and accurate.

7. All of the following are advantages ofusing subsidiary ledgers except they

a. eliminate errors in individual accounts.

b. free the general ledger of excessive details.

c. show, in a single account, transactions affectingone customer or one creditor.

d. make possible a division of labor.

8. Which of the following is notan advantage of a subsidiary ledger?

a. Shows transactions affecting one customer or onecreditor in a single account.

b. Helps locate errors in individual accounts.

c. Puts greater detail in the general ledger.

d. Makes possible a division of labor.

9. Credit sales of assets other thanmerchandise are recorded in the

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

10. When the totals of the sales journal are posted at the end of themonth, there will be credits to

a. Sales and Merchandise Inventory and debits toAccounts Receivable and Cost of Goods Sold.

b. Accounts Receivable and Cost of Goods Sold anddebits to Sales and Merchandise Inventory.

c. Sales and debits to each individual customeraccount.

d. the Sales account only, and no debits.

11. TheOther Accounts column of a multi-column journal is often referredto as the

a. Sundry Accounts column.

b. Controlling Account column.

c. Credit Account column.

d. Debit Account column.

12. Companies record credit purchases of equipment or supplies inthe

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. one-column purchases journal.

13. Inthe expanded purchases journal, debits are made in whichcolumns?

a. Accounts Payable, Merchandise Inventory, andOffice Supplies

b. Merchandise Inventory, Office Supplies, and StoreSupplies

c. Cash, Office Supplies, and Store Supplies

d. Accounts Payable, Cash, and MerchandiseInventory

14. Ifa customer takes a sales discount, an entry is made in the

a. cash receipts journal.

b. sales journal.

c. cash payments journal.

d. general journal.

15. Claimsfor which formal instruments of credit are issued as proof of thedebt are

a. accounts receivable.

b. interest receivable.

c. notes receivable.

d. other receivables.

16. Interestis usually associated with

a. accounts receivable.

b. notes receivable.

c. doubtful accounts.

d. bad debts.

17. Thereceivable that is usually evidenced by a formal instrument ofcredit is a(n)

a. trade receivable.

b. note receivable.

c. accounts receivable.

d. income tax receivable.

18. Which ofthe following receivables would not be classified as an"other receivable"?

a. Advance to an employee

b. Refundable income tax

c. Notes receivable

d. Interest receivable

19. Notes oraccounts receivables that result from sales transactions are oftencalled

a. sales receivables.

b. non-trade receivables.

c. trade receivables.

d. merchandise receivables.

20. LarsonCompany on July 15 sells merchandise on account to Stuart Co. for$1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandiseworth $400 to Larson Company. On July 24 payment is received fromStuart Co. for the balance due. What is the amount of cashreceived?

a. $600

b. $588

c. $580

d. $1,000

champagnecattle375

Use the following information forquestions 1â3.

At May 1, 2008, Treeline Company had beginning inventoryconsisting of 200 units with a unit cost of $7. During May, thecompany purchased inventory as follows:

200 units at $7

300 units at $8

The company sold 500 units during the month for $12 per unit.Treeline uses the average cost method.

1. The average cost per unit for May is

2. The value ofTreelineâs inventory at May 31, 2008 is

3. Treelineâs gross profit for the month ofMay is

Pembrook Company had beginning inventory on May 1 of $12,000.During the month, the company made purchases of $30,000 butreturned $2,000 of goods because they were defective. At the end ofthe month, the inventory on hand was valued at $9,500.

Calculate cost of goods available for sale and cost of goodssold for the month.

5. Principles of an efficient and effectiveaccounting information system include all of the followingexcept

a. cost effectiveness.

b. flexibility.

c. useful output.

d. All of these options are principles.

6. Which of the following statements isincorrect?

a. A major consideration in developing an accountingsystem is cost effectiveness.

b. When an accounting system is designed, noconsideration needs to be given to the needs and knowledge of thevarious users.

c. The accounting system should be able toaccommodate a variety of users and changing information needs.

d. To be useful, information must be understandable,relevant, reliable, timely, and accurate.

7. All of the following are advantages ofusing subsidiary ledgers except they

a. eliminate errors in individual accounts.

b. free the general ledger of excessive details.

c. show, in a single account, transactions affectingone customer or one creditor.

d. make possible a division of labor.

8. Which of the following is notan advantage of a subsidiary ledger?

a. Shows transactions affecting one customer or onecreditor in a single account.

b. Helps locate errors in individual accounts.

c. Puts greater detail in the general ledger.

d. Makes possible a division of labor.

9. Credit sales of assets other thanmerchandise are recorded in the

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

10. When the totals of the sales journal are posted at the end of themonth, there will be credits to

a. Sales and Merchandise Inventory and debits toAccounts Receivable and Cost of Goods Sold.

b. Accounts Receivable and Cost of Goods Sold anddebits to Sales and Merchandise Inventory.

c. Sales and debits to each individual customeraccount.

d. the Sales account only, and no debits.

11. TheOther Accounts column of a multi-column journal is often referredto as the

a. Sundry Accounts column.

b. Controlling Account column.

c. Credit Account column.

d. Debit Account column.

12. Companies record credit purchases of equipment or supplies inthe

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. one-column purchases journal.

13. Inthe expanded purchases journal, debits are made in whichcolumns?

a. Accounts Payable, Merchandise Inventory, andOffice Supplies

b. Merchandise Inventory, Office Supplies, and StoreSupplies

c. Cash, Office Supplies, and Store Supplies

d. Accounts Payable, Cash, and MerchandiseInventory

14. Ifa customer takes a sales discount, an entry is made in the

a. cash receipts journal.

b. sales journal.

c. cash payments journal.

d. general journal.

15. Claimsfor which formal instruments of credit are issued as proof of thedebt are

a. accounts receivable.

b. interest receivable.

c. notes receivable.

d. other receivables.

16. Interestis usually associated with

a. accounts receivable.

b. notes receivable.

c. doubtful accounts.

d. bad debts.

17. Thereceivable that is usually evidenced by a formal instrument ofcredit is a(n)

a. trade receivable.

b. note receivable.

c. accounts receivable.

d. income tax receivable.

18. Which ofthe following receivables would not be classified as an"other receivable"?

a. Advance to an employee

b. Refundable income tax

c. Notes receivable

d. Interest receivable

19. Notes oraccounts receivables that result from sales transactions are oftencalled

a. sales receivables.

b. non-trade receivables.

c. trade receivables.

d. merchandise receivables.

a. $600

b. $588

c. $580

d. $1,000

pinkbat881

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

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

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ACCT 2001 Chapter : ACCT 2001 Chapter 8 Class Notes

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