Question 1

When an account is written off using the allowance method the

Accepted Answer

A) cash realizable value of total accounts receivable will increase. 
B) net accounts receivable will decrease. 
C) allowance account will increase. 
D) net accounts receivable will stay the same. 
A) cash realizable value of total accounts receivable will increase. 
B) net accounts receivable will decrease. 
C) allowance account will increase. 
D) net accounts receivable will stay the same.

Question 2

In a period of rising prices which of the following inventory methods generally results in the lowest amount of net income?

Accepted Answer

A) Average cost method 
B) LIFO method 
C) FIFO method 
D) Need more information to answer 
A) Average cost method 
B) LIFO method 
C) FIFO method 
D) Need more information to answer

Question 3

Hogan Industries had the following inventory transactions occur during 2022: $$\begin{array} { r l l c } 
& & \text { Units } & \text { Cost/unit } \
\text { Feb. 1, 2022 } & \text { Purchase } & 108 & \$ 45 \
\text { Mar. 14,2022 } & \text { Purchase } & 186 & \$ 47 \
\text { May 1, } 2022 & \text { Purchase } & 132 & \$ 49
\end{array}$$ The company sold 306 units at $63 each and has a tax rate of 30%.Assuming that a periodic inventory system is used what is the company's gross profit using LIFO? (rounded to whole dollars)

Accepted Answer

A) $14646 
B) $14190 
C) $5088 
D) $4632 
A) $14646 
B) $14190 
C) $5088 
D) $4632

Question 4

Atom Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } 
\text { June } & 1 & 150 \text { units } & \$ 990 \
\text { June } & 10 & 200 \text { units } & 1,344 \
\text { June } & 15 & 200 \text { units } & 1,368 \
\text { June } & 28 & 150 \text { units } & 1,062 \
& & & \$ 4,764
\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.Using the LIFO inventory method the value of the ending inventory on June 30 is

Accepted Answer

A) $1326. 
B) $1320. 
C) $1404. 
D) $1416. 
A) $1326. 
B) $1320. 
C) $1404. 
D) $1416.

Question 5

Under the allowance method writing off an uncollectible account

Accepted Answer

A) affects only balance sheet accounts. 
B) affects both balance sheet and income statement accounts. 
C) affects only income statement accounts. 
D) is not acceptable practice. 
A) affects only balance sheet accounts. 
B) affects both balance sheet and income statement accounts. 
C) affects only income statement accounts. 
D) is not acceptable practice.

Question 6

A company just starting in business purchased three merchandise inventory items at the following prices.First purchase $80; Second purchase $95; Third purchase $85.If the company sold two units for a total of $270 and used FIFO costing the gross profit for the period would be

Accepted Answer

A) $95. 
B) $105. 
C) $90. 
D) $80. 
A) $95. 
B) $105. 
C) $90. 
D) $80.

Question 7

Which of the following is not a common cost flow assumption used in costing inventory?

Accepted Answer

A) First-in first-out 
B) Middle-in first-out 
C) Last-in first-out 
D) Average-cost 
A) First-in first-out 
B) Middle-in first-out 
C) Last-in first-out 
D) Average-cost

Question 8

The account Allowance for Doubtful Accounts is classified as a(n)

Accepted Answer

A) liability. 
B) contra account of Bad Debt Expense. 
C) expense. 
D) contra account to Accounts Receivable. 
A) liability. 
B) contra account of Bad Debt Expense. 
C) expense. 
D) contra account to Accounts Receivable.

Question 9

Pop-up Party Favors Inc.has the following inventory data: $$\begin{array} { r l r r } 
\text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \
7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \
22 & \text { Purchases } & 15 \text { units at } \$ 22 &330\
&&&\$3,000
\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 48 units on hand.Using the FIFO inventory method the amount allocated to ending inventory for July is

Accepted Answer

A) $930. 
B) $990. 
C) $960. 
D) $1056. 
A) $930. 
B) $990. 
C) $960. 
D) $1056.

Question 10

Bad debt losses are a cost of selling on credit.

Accepted Answer

A) True 
 B)False

Question 11

Goods that have been purchased FOB destination but are in transit should be excluded from a physical count of goods by the buyer.

Accepted Answer

A) True 
 B)False

Question 12

In reviewing the accounts receivable the cash realizable value is $28000 before the write-off of a $2000 account.What is the cash receivable value after the write-off?

Accepted Answer

A) $28000 
B) $2000 
C) $30000 
D) $26000 
A) $28000 
B) $2000 
C) $30000 
D) $26000

Question 13

Under the allowance method of accounting for bad debts why must uncollectible accounts receivable be estimated at the end of the accounting period?

Accepted Answer

A) To allow the collection department to schedule work for the next accounting period. 
B) To determine the gross realizable value of accounts receivable. 
C) The IRS rules require the company to make the estimate. 
D) To match bad debt expense to the period in which the revenues were earned. 
A) To allow the collection department to schedule work for the next accounting period. 
B) To determine the gross realizable value of accounts receivable. 
C) The IRS rules require the company to make the estimate. 
D) To match bad debt expense to the period in which the revenues were earned.

Question 14

Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic cost of goods sold.Which inventory costing method should Ace consider using?

Accepted Answer

A) Average-cost because all inventory costs will then represent an average amount. 
B) Specific identification is the most realistic method because it involves the actual costs. 
C) LIFO because the cost of goods sold represents the latest costs. 
D) FIFO because the cost of goods sold represents the earliest costs. 
A) Average-cost because all inventory costs will then represent an average amount. 
B) Specific identification is the most realistic method because it involves the actual costs. 
C) LIFO because the cost of goods sold represents the latest costs. 
D) FIFO because the cost of goods sold represents the earliest costs.

Question 15

An aging of a company's accounts receivable indicates that $9000 is estimated to be uncollectible.If Allowance for Doubtful Accounts has a $3200 balance the adjustment to record bad debts for the period will require a

Accepted Answer

A) increase to Bad Debt Expense for $9000. 
B) decrease to Allowance for Doubtful Accounts for $5800. 
C) increase to Bad Debt Expense for $5800. 
D) increase to Allowance for Doubtful Accounts for $9000. 
A) increase to Bad Debt Expense for $9000. 
B) decrease to Allowance for Doubtful Accounts for $5800. 
C) increase to Bad Debt Expense for $5800. 
D) increase to Allowance for Doubtful Accounts for $9000.

Question 16

If prices never changed then there would be no need for alternative inventory cost flow assumptions.

Accepted Answer

A) True 
 B)False

Question 17

Alpha First Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } 
\text { June } & 1 & 150 \text { units } & \$ 1,040 \
\text { June } & 10 & 200 \text { units } & 1,560 \
\text { June } & 15 & 200 \text { units } & 1,680 \
\text { June } & 28 & 150 \text { units } & 1,320 \
& & & \$ 5,600 \
\hline
\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.Using the LIFO inventory method the value of the ending inventory on June 30 is

Accepted Answer

A) $1456 
B) $1508 
C) $1848 
D) $1824 
A) $1456 
B) $1508 
C) $1848 
D) $1824

Question 18

A low number of days in inventory may indicate all of the following except

Accepted Answer

A) Sales opportunities may be lost because of inventory shortages. 
B) There is less chance of having obsolete inventory items. 
C) The company has fewer funds tied up in inventory. 
D) Management has achieved the best balance between too much and too little inventory levels. 
A) Sales opportunities may be lost because of inventory shortages. 
B) There is less chance of having obsolete inventory items. 
C) The company has fewer funds tied up in inventory. 
D) Management has achieved the best balance between too much and too little inventory levels.

Question 19

If a company fails to record estimated bad debt expense

Accepted Answer

A) cash realizable value is understated. 
B) expenses are understated. 
C) revenues are understated. 
D) receivables are understated. 
A) cash realizable value is understated. 
B) expenses are understated. 
C) revenues are understated. 
D) receivables are understated.

Question 20

Use the following information regarding Black Company and Red Company to answer the question "Which amount is equal to Black Company's "days in inventory" for 2022 (to the closest decimal place)?" $$\begin{array}{l}
\begin{array} { | l | c | c | c | } 
\hline & \text { Year } & \begin{array} { c } 
\text { Inventory } \
\text { Turnover }
\end{array} & \text { Ending Inventory } \
\hline \text { Black Company } & 2020 & & \$ 26,340 \
\hline & 2021 & 8.7 & \$ 29,890 \
\hline & 2022 & 8.4 & \$ 30,100 \
\hline
\
\hline \text { Red Company } & 2020 & & \$ 25,860 \
\hline & 2021 & 7.0 & \$ 24,750 \
\hline & 2022 & 7.5 & \$ 22,530 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) 43.5 days 
B) 52.1 days 
C) 48.7 days 
D) 42.0 days 
A) 43.5 days 
B) 52.1 days 
C) 48.7 days 
D) 42.0 days

When an account is written off using the allowance method the

In a period of rising prices which of the following inventory methods generally results in the lowest amount of net income?

Under the allowance method writing off an uncollectible account

A company just starting in business purchased three merchandise inventory items at the following prices.First purchase $80; Second purchase $95; Third purchase $85.If the company sold two units for a total of $270 and used FIFO costing the gross profit for the period would be

Which of the following is not a common cost flow assumption used in costing inventory?

The account Allowance for Doubtful Accounts is classified as a(n)

Bad debt losses are a cost of selling on credit.

Goods that have been purchased FOB destination but are in transit should be excluded from a physical count of goods by the buyer.

In reviewing the accounts receivable the cash realizable value is $28000 before the write-off of a $2000 account.What is the cash receivable value after the write-off?

Under the allowance method of accounting for bad debts why must uncollectible accounts receivable be estimated at the end of the accounting period?

Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic cost of goods sold.Which inventory costing method should Ace consider using?

An aging of a company's accounts receivable indicates that $9000 is estimated to be uncollectible.If Allowance for Doubtful Accounts has a $3200 balance the adjustment to record bad debts for the period will require a

If prices never changed then there would be no need for alternative inventory cost flow assumptions.

A low number of days in inventory may indicate all of the following except

If a company fails to record estimated bad debt expense

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Fraud, Internal Control, and Cash

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

Filters

Exam 6: Reporting and Analyzing Long-Lived Assets

When an account is written off using the allowance method the

In a period of rising prices which of the following inventory methods generally results in the lowest amount of net income?

Under the allowance method writing off an uncollectible account

A company just starting in business purchased three merchandise inventory items at the following prices.First purchase $80; Second purchase $95; Third purchase $85.If the company sold two units for a total of $270 and used FIFO costing the gross profit for the period would be

Which of the following is not a common cost flow assumption used in costing inventory?

The account Allowance for Doubtful Accounts is classified as a(n)

Bad debt losses are a cost of selling on credit.

Goods that have been purchased FOB destination but are in transit should be excluded from a physical count of goods by the buyer.

In reviewing the accounts receivable the cash realizable value is $28000 before the write-off of a $2000 account.What is the cash receivable value after the write-off?

Under the allowance method of accounting for bad debts why must uncollectible accounts receivable be estimated at the end of the accounting period?

Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic cost of goods sold.Which inventory costing method should Ace consider using?

An aging of a company's accounts receivable indicates that $9000 is estimated to be uncollectible.If Allowance for Doubtful Accounts has a $3200 balance the adjustment to record bad debts for the period will require a

If prices never changed then there would be no need for alternative inventory cost flow assumptions.

A low number of days in inventory may indicate all of the following except

If a company fails to record estimated bad debt expense

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Fraud, Internal Control, and Cash

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

Filters