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

The change in trade receivables is reported as a cash flow adjustment on the statement of cash flows under investing activities according to the indirect method.

14.29 ($1,500,000/[100,000 + 110,000]/2), 2.14.29 (same calculation), 3.The ratio stayed the same because only the adjusting entry affects the balance of trade receivables,receivables do not change.

The following data were taken from the records of Milius Corporation on December 31,20B: Items not included in above amounts: Estimated bad debt loss,1% of credit sales.Average income tax rate,25%.Number of shares of common shares outstanding,9,000 Requirements: 1.Based on the above data,prepare a multiple-step income statement (including gross margin,pretax profit,and earnings per share). 2a.How much was the gross margin? b.What was the gross margin ratio? c.Explain what these two amounts mean.

When a depositor receives a bank statement indicating a "NSF cheque," what should he do?

G Co.,which is a biotechnology firm,reported the following revenues on their 2012 income statement: Product sales $582.2 million,Royalties $214.7 million,Contract revenue $107.0 million and Interest income $64.1 million.Their cost of sales were reported as $104.5 million.What was their gross profit percentage?

Information gained from an aging analysis of trade receivables provides management with insights regarding future cash flows,losses due to uncollectible accounts,and the general effectiveness of the credit and collection activities of the entity.

Journal entries made to update the cash account,after a bank reconciliation has been prepared,should affect the "Bank Statement" part of the reconciliation rather than the "Depositor's Books" part of the reconciliation.

When preparing the monthly bank reconciliation,the accountant for Teddy Trucks discovered that a cheque correctly written to one of Teddy's suppliers for $159 had been incorrectly recorded in the books as $195.To correct the error,the accountant prepared an adjusting entry which required a debit to which of the following accounts?

Albert Company agreed to build a bowling complex for Pins R Us for a price of $2,000,000.The project is expected to take three years to complete.Albert estimated that the total cost of the project would be $1,600,000.During the first year,construction costs amount to $600,000.If Albert uses the percentage of completion method,how much revenue will be recognized for the first year?

Why is the reconciliation of a company's cash account to the bank statement so important for effective internal control for cash?

MP Co.'s gross profit percentage decreased from 59.2% in 2011 to 58.3% in 2012.This means that MP Co.'s cost of goods sold as a percentage of sales has decreased.

It is important to record sales returns and allowances in a separate account so management can determine the volume of returns and allowances in order to measure the quality of their products.

"F.O.B.shipping point" means that title to the shipped goods passes to the buyer when they are delivered.

When is revenue recognized under the percentage of completion method?

Tabor Company had trade receivables of $450,000 and an allowance for doubtful accounts of $15,500 just prior to writing off as worthless a trade receivable from Fox Company of $5,000.What was the net realizable value of trade receivables as shown by the accounting record before and after the write-off?

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?

When using the allowance method for accounting for bad debts,trade receivables is reported on the statement of financial position at the expected net realizable value.When a particular receivable from a customer ultimately is determined to be uncollectible,the recording of this event will do which of the following?

The cash records and the bank statement of Molus Company showed the following at the end of February 20A: Outstanding cheques at the end of January 20A,$8,000; cheques written by Molus Company during February 20A,$50,000; and cheques cleared by the bank during February 20A,$54,000.Therefore,the outstanding cheques at the end of February 20A,amounted to which of the following?

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

For service companies,revenue is recognized the time at which services are provided.