Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

A recent annual report for C Co. contained the following data: 1. Calculate the receivables turnover ratio and average collection period for the year: 2. Explain the meaning of each number.

Errors give rise to unintentional misstatements in the financial statements.

Sales returns and allowances should be deducted from sales revenue when computing net sales.

Eddie Corporation uses the allowance method for estimating uncollectible accounts. Required: Prepare entries to record the following transactions:

During 20A, Thomas Company recorded bad debt expense of $15,000 and wrote off an uncollectible trade receivable amounting to $5,000. Assuming a January 1, 20A, credit balance in the allowance for doubtful accounts of $10,000, the December 31, 20A, balance in the allowance account would be which of the following?

Central Company sold goods for $5,000 to Western Company on March 12 on credit. Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the transaction by debiting Trade Receivables for $5,000 and crediting Sales Revenue for $5,000. Western paid the balance due on April 9. To record the April 9 transaction, Central would debit which of the following?

If the terms are 3/15, n/45 on a credit sale, the customer will save 3% of the invoice price by paying at least 30 days before the credit period ends.

If an account is collected after having been previously written off,

On February 15, a local business receives an invoice for electricity used in the month of January and pays it on March 1. In which month should the business recognize the expense?

An aging of trade accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

A bank reconciliation compares the ending cash balance in the company's records to the ending cash balance reported by the bank on the monthly bank statement.

"Toys 4 U" has reported the following information on their income statements for the years 2006 through 2010: 1. Compute the gross profit percentage for a. 2012 ________ b. 2011 ________ c. 2010 ________ d. 2009 ________ e. 2008 ________ 2. Has the gross profit ratio for "Toys 4 U" improved over time or worsened? Explain your reason.

Indicate whether each of the accounts listed below normally will have a debit or a credit balance. Record your answer to the left of each account by entering either Dr or Cr. ____ 1. Allowance for doubtful accounts ____ 2. Bad debt expense ____ 3. Sales returns and allowances 4. Deferred revenue ____ 5. Sales discounts ____ 6. Notes receivable ____ 7. Sales revenue ____ 8. Short-term investments

One might infer from a debit balance in Allowance for Doubtful Accounts that

SRM Company uses the allowance method to record its bad debt expense. When the account of a particular customer is deemed to be uncollectible and is written off, which of the following will be included in the journal entry?

An NSF cheque should appear in which section of the bank reconciliation?

Bank errors

Merchandise was sold on credit for $3,000, terms 1/10, n/30. The entry to record the cash collection should include which of the following?

The lower the receivables turnover, the more effectively the company has managed their credit granting and collection activities.

You have recently started a part time job in the accounting department of Burris Limited. The accountant, Ted Landry, had prepared the company's bank reconciliation for June 2013. After completing the reconciliation he made the following journal entry: Ted was reviewing the bank reconciliation with you when unfortunately you spilled your coffee on it. He asks you to rewrite the reconciliation, in good form. He remembers that the only outstanding deposit was the last deposit for the month You check the general ledger and the bank balance at June 30 was $24,527 (credit). You also check the bank statement and the balance was $22,314 (credit, i.e. overdrawn). You look up the last deposit for the month-it was for $21,789. Required: Using the above information prepare, in good form, the bank reconciliation for Burris Limited for June.