Question 1

Gross profit decreases when sales discounts increase.

Accepted Answer

A) True 
 B)False

Question 2

Redwing Company sold inventory costing $500 to a customer on account for $700. Which of the following does not correctly describe the collection of $686 cash when the customer takes advantage of a sales discount?

Accepted Answer

A)  Gross profit decreases $14. 
B)  Accounts receivable decreases $700. 
C) Net sales decrease $14. 
D) Net income is not affecteD.The sales discount decreases net sales, gross profit, and net income. 
A)  Gross profit decreases $14. 
B)  Accounts receivable decreases $700. 
C) Net sales decrease $14. 
D) Net income is not affecteD.The sales discount decreases net sales, gross profit, and net income.

Question 3

Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount will be given; if not paid within two days, the full invoice price will be due in thirty days.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is correct when bad debt expense is recorded at year-end?

Accepted Answer

A)  Current assets will increase. 
B)  Gross profit will decrease. 
C) Income from operations will decrease. 
D) Current liabilities will decrease. 
A)  Current assets will increase. 
B)  Gross profit will decrease. 
C) Income from operations will decrease. 
D) Current liabilities will decrease.

Question 5

Cyclone Inc. reported the following figures from its financial statements for the years 2013 through 2015: $$\begin{array}{l}
&\underline { 2015 }& \underline { 2014 } & \underline { 2013 }\
\text { Net revenues } & \$ 717,422 & \$ 1,110,178 & \$ 591,786 \
\text { Gross profit } & 560,421 & 960,434 & 498,605 \
\text { Net income (net loss) } & ( 92,788 ) & 70,776 & 47,811 \
\text { Cash flow from operations } & 106,850 & 509,707 & 204,496 \
\text { Accounts receivable } & 68,648 & 90,561 & 56,454
\end{array}$$ Required: 
A. Calculate the accounts receivable turnover for 2015 and 2014.
B. Calculate the average collection period for 2015 and 2014.

Accepted Answer

A. 2015 = 9.01 = Net sales $717,422 ÷ Av

Question 6

Sales returns and allowances is a contra-revenue account.

Accepted Answer

A) True 
 B)False

Question 7

Newark Company has provided the following information: • Cash sales, $450,000
• Credit sales, $1,350,000
• Selling and administrative expenses, $330,000
• Sales returns and allowances, $90,000
• Gross profit, $1,360,000
• Increase in accounts receivable, $55,000
• Bad debt expense, $33,000
• Sales discounts, $43,000
• Net income, $1,030,000
How much is Newark's cost of sales?

Accepted Answer

A)  $307,000. 
B)  $252,000. 
C) $440,000. 
D) $340,000. 
A)  $307,000. 
B)  $252,000. 
C) $440,000. 
D) $340,000.

Question 8

Which of the following transactions will result in an increase in the receivables turnover ratio?

Accepted Answer

A)  The journal entry to record bad debt expense. 
B)  Writing off an uncollectible account receivable. 
C) Selling inventory on account. 
D) Purchasing inventory on account. 
A)  The journal entry to record bad debt expense. 
B)  Writing off an uncollectible account receivable. 
C) Selling inventory on account. 
D) Purchasing inventory on account.

Question 9

Which of the following statements is correct?

Accepted Answer

A)  The journal entry to record bad debt expense requires a debit to bad debt expense and a credit to accounts receivable. 
B)  The journal entry to record bad debt expense requires a debit to bad debt expense and a credit to allowance for doubtful accounts. 
C) The journal entry to record the write-off of an uncollectible account receivable requires a debit to bad debt expense and a credit to accounts receivable. 
D) The journal entry to record the write-off of an uncollectible account receivable requires a debit to bad debt expense and a credit to allowance for doubtful accounts. 
A)  The journal entry to record bad debt expense requires a debit to bad debt expense and a credit to accounts receivable. 
B)  The journal entry to record bad debt expense requires a debit to bad debt expense and a credit to allowance for doubtful accounts. 
C) The journal entry to record the write-off of an uncollectible account receivable requires a debit to bad debt expense and a credit to accounts receivable. 
D) The journal entry to record the write-off of an uncollectible account receivable requires a debit to bad debt expense and a credit to allowance for doubtful accounts.

Question 10

Oakwood Company had accounts receivable of $750,000 and an allowance for doubtful accounts of $21,500 just prior to writing off as worthless a customer's $5,000 account receivable. The net realizable value of Oakwood's accounts receivable as shown by the accounting records before and after the write-off was as follows:

Accepted Answer

A)  Option A 
B)  Option B 
C) Option C 
D) Option D 
A)  Option A 
B)  Option B 
C) Option C 
D) Option D

Question 11

Chicago Company has hired you to reconcile its bank statement and cash account. At June 30, 2014, the Cash account on the books showed the following:   There were neither outstanding checks nor deposits in transit at May 31, 2014.
Required: 
A. Prepare the bank reconciliation at June 30, 2014.
B. Prepare the adjusting journal entries needed as a result of preparing the bank reconciliation.

Accepted Answer

The answer of Chicago Company has hired you to reconcile...

Question 12

Sabre Company sold inventory costing $600 to a customer on account for $900 with terms of 3/15, n/30. Which of the following is not correct?

Accepted Answer

A)  Gross profit increases $300 on the date of sale. 
B)  Total current assets are not affected on the date of cash collection if the customer pays 30 days after the date of sale. 
C) Total current assets increase $27 on the date of cash collection if the customer pays within 15 days of the date of sale. 
D) Gross profit and net sales both decrease $27 on the date of cash collection if the customer pays within 15 days of the date of sale. 
A)  Gross profit increases $300 on the date of sale. 
B)  Total current assets are not affected on the date of cash collection if the customer pays 30 days after the date of sale. 
C) Total current assets increase $27 on the date of cash collection if the customer pays within 15 days of the date of sale. 
D) Gross profit and net sales both decrease $27 on the date of cash collection if the customer pays within 15 days of the date of sale.

Question 13

A company sells a product FOB destination. The product is shipped on December 29, 2013 and the customer receives the shipment on January 3, 2014. Which of the following is true?

Accepted Answer

A)  The sale will be recorded when the customer's credit card information is received. 
B)  The sale will be recorded when the shipment is received by the customer. 
C) The sale will be recorded when the shipment is shipped. 
D) The sale will be recorded when it is known there will be no returns or allowances. 
A)  The sale will be recorded when the customer's credit card information is received. 
B)  The sale will be recorded when the shipment is received by the customer. 
C) The sale will be recorded when the shipment is shipped. 
D) The sale will be recorded when it is known there will be no returns or allowances.

Question 14

When completing the bank reconciliation, bank service charges should be deducted from the company's cash balance.

Accepted Answer

A) True 
 B)False

Question 15

The CHS Company has provided the following information: • Accounts receivable written-off as uncollectible during the year amounted to $11,500.
• The accounts receivable balance at the beginning of the year was $150,000.
• The accounts receivable balance at the end of the year was $210,000.
• The allowance for doubtful accounts balance at the beginning of the year was $14,000.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $12,900.
• Credit sales during the year totaled $900,000.
How much cash was received from collections of accounts receivable?

Accepted Answer

A)  $888,500. 
B)  $828,500. 
C) $690,000. 
D) $701,500. 
A)  $888,500. 
B)  $828,500. 
C) $690,000. 
D) $701,500.

Question 16

Which of the following correctly describes the following journal entry? Cash
Sales discounts
Accounts receivable

Accepted Answer

A)  The gross profit does not change. 
B)  Net income decreases. 
C) Current assets increase. 
D) Net sales increases. 
A)  The gross profit does not change. 
B)  Net income decreases. 
C) Current assets increase. 
D) Net sales increases.

Question 17

Sales discounts are deducted from sales in the calculation of net sales.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following demonstrates a poor internal control procedure?

Accepted Answer

A)  The bookkeeper makes cash deposits and records journal entries related to cash, while the treasurer prepares the bank reconciliation. 
B)  The president, who does no bookkeeping, prepares the bank reconciliation each month. 
C) The treasurer signs all checks after the bookkeeper prepares the supporting documents. 
D) One bookkeeper prepares cash deposits and the other bookkeeper enters the collections in the journal and ledger. 
A)  The bookkeeper makes cash deposits and records journal entries related to cash, while the treasurer prepares the bank reconciliation. 
B)  The president, who does no bookkeeping, prepares the bank reconciliation each month. 
C) The treasurer signs all checks after the bookkeeper prepares the supporting documents. 
D) One bookkeeper prepares cash deposits and the other bookkeeper enters the collections in the journal and ledger.

Question 19

The Rye Corporation has provided the following information: • Total sales were $1,200,000.
• Beginning net accounts receivable was $45,000.
• Ending net accounts receivable was $65,000.
• Sales returns and allowances totaled $100,000.
What was Rye's average collection period?

Accepted Answer

A)  16.73 
B)  19.75 
C) 36.50 
D) 18.25 
A)  16.73 
B)  19.75 
C) 36.50 
D) 18.25

Question 20

Flyer Company has provided the following information prior to any year-end bad debt adjustment: • Cash sales, $150,000
• Credit sales, $450,000
• Selling and administrative expenses, $110,000
• Sales returns and allowances, $30,000
• Gross profit, $290,000
• Accounts receivable, $110,000
• Sales discounts, $14,000
• Allowance for doubtful accounts credit balance, $1,200
Flyer 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?

Accepted Answer

A)  $7,950. 
B)  $6,750. 
C) $5,550. 
D) $7,800. 
A)  $7,950. 
B)  $6,750. 
C) $5,550. 
D) $7,800.

Gross profit decreases when sales discounts increase.

Redwing Company sold inventory costing $500 to a customer on account for $700. Which of the following does not correctly describe the collection of $686 cash when the customer takes advantage of a sales discount?

Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount will be given; if not paid within two days, the full invoice price will be due in thirty days.

Which of the following is correct when bad debt expense is recorded at year-end?

Sales returns and allowances is a contra-revenue account.

Which of the following transactions will result in an increase in the receivables turnover ratio?

Which of the following statements is correct?

Sabre Company sold inventory costing $600 to a customer on account for $900 with terms of 3/15, n/30. Which of the following is not correct?

A company sells a product FOB destination. The product is shipped on December 29, 2013 and the customer receives the shipment on January 3, 2014. Which of the following is true?

When completing the bank reconciliation, bank service charges should be deducted from the company's cash balance.

Which of the following correctly describes the following journal entry? Cash Sales discounts Accounts receivable

Sales discounts are deducted from sales in the calculation of net sales.

Which of the following demonstrates a poor internal control procedure?

The Rye Corporation has provided the following information: • Total sales were $1,200,000. • Beginning net accounts receivable was $45,000. • Ending net accounts receivable was $65,000. • Sales returns and allowances totaled $100,000. What was Rye's average collection period?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

Gross profit decreases when sales discounts increase.

Redwing Company sold inventory costing $500 to a customer on account for $700. Which of the following does not correctly describe the collection of $686 cash when the customer takes advantage of a sales discount?

Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount will be given; if not paid within two days, the full invoice price will be due in thirty days.

Which of the following is correct when bad debt expense is recorded at year-end?

Sales returns and allowances is a contra-revenue account.

Which of the following transactions will result in an increase in the receivables turnover ratio?

Which of the following statements is correct?

Sabre Company sold inventory costing $600 to a customer on account for $900 with terms of 3/15, n/30. Which of the following is not correct?

A company sells a product FOB destination. The product is shipped on December 29, 2013 and the customer receives the shipment on January 3, 2014. Which of the following is true?

When completing the bank reconciliation, bank service charges should be deducted from the company's cash balance.

Which of the following correctly describes the following journal entry? Cash Sales discounts Accounts receivable

Sales discounts are deducted from sales in the calculation of net sales.

Which of the following demonstrates a poor internal control procedure?

The Rye Corporation has provided the following information: • Total sales were $1,200,000. • Beginning net accounts receivable was $45,000. • Ending net accounts receivable was $65,000. • Sales returns and allowances totaled $100,000. What was Rye's average collection period?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters