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

As of December 31,Mesa Company has a balance of $5,000 in trade receivables of which $500 is more than 30 days overdue.Mesa has a credit balance of $45 in the allowance for doubtful accounts.Mesa estimates its bad debts losses at 1% of current accounts and 10% of accounts over thirty days.What adjustment should Mesa make to the allowance for doubtful accounts?

An entry to write off an uncollectible account does not change the net realizable value (book value)of trade receivables.

The books of Tweed Company provided the following information: Beginning balances: Transactions during the year: Past collection experience has indicated that 1% of credit sales normally is not collected.Therefore,an adjusting entry for bad debt expense should be made in the amount of which of the following?

Cash is the most liquid of all assets,flowing continually into and out of a business.

In recording the year-end adjusting entry for bad debt expense,a company would do which of the following?

It is possible for the allowance for doubtful accounts to have a debit or credit balance prior to the year-end adjustment.

The revenue recognition principle dictates that revenue should be recognized in the accounting records

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.

Which of the following would not be considered an element of good internal control?

Calculate the receivables turnover for 2012 and 2011: a.2012 __________ b.2011 __________

When the allowance method is used,the entry which is appropriate when a particular account is written off as uncollectible should include which of the following?

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?

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.

A comparison of the balance in Joy Company's cash account (per its books)as of September 30,20A,and the bank statement dated September 30,20A,revealed the following information: Required: Prepare a bank reconciliation using the format below.Indicate the proper handling of each of the items given above by listing the appropriate item code (letter)and amount under each section of the reconciliation statement form below.Then determine the correct cash balance. Note: If one or more of the items given above should not appear on the reconciliation statement,do not include the item(s).

A portion of the income statement for Tea Company is shown below.Provide the missing account titles and amounts.

When using the allowance method for bad debts,how should bad debt expense be recorded?

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?

The reason that we must adjust revenue for the change in trade receivables to convert the figure to cash collected from customers is that trade receivables represent sales revenue not collected from customers at the beginning and end of the accounting year.

If a company has the opportunity to take a discount of 2/10,n/30 but must borrow money at an annual rate of 16%,what would be the net advantage of taking the discount?

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will receive which of the following?