Indicate whether the following statements are true or false.
Question 1 (4 points)
One advantage to using a perpetual inventory system is that the company never has to physically count the inventory.
Question 1 options:
Question 2 (4 points)
The weighted-average inventory method will likely result in neither the highest nor the lowest ending inventory.
Question 2 options:
Question 3 (4 points)
When calculating accounts receivable turnover, a company would prefer a higher number rather than a lower number (within reason).
Question 3 options:
Question 4 (4 points)
When performing a bank reconciliation, checks outstanding are added back to the bank balance.
Question 4 options:
Question 5 (4 points)
Usually the quick ratio will be a lower number than the current ratio.
Question 5 options:
Select the best answer for each of the following questions.
Question 6 (4 points)
The bad-debt method that uses the accounts receivable aging report is _______________.
Question 6 options:
the bad-debt expense method
the percentage-of-sales method
the percentage-of-receivables method
the direct write-off method
Question 7 (4 points)
When it is determined that too much money has been set aside for uncollectible accounts, we will _______________.
Question 7 options:
debit accounts receivable
debit reserve for uncollectible accounts
credit reserve for uncollectible accounts
Question 8 (4 points)
A customer whose account was previously written off unexpectedly pays us. If we are using the allowance method we would _______________.
Question 8 options:
debit bad-debt expense and credit cash
debit accounts receivable and credit allowance for uncollectible accounts AND debit cash and credit accounts receivable
debit cash and credit bad-debt expense
debit reserve for uncollectible accounts and credit cash
Question 9 (4 points)
When a retailer accepts a bank card (VISA or MasterCard), they will make what entry for the day’s receipts?
Question 9 options:
debit accounts receivable; credit sales, and credit “credit card expense”
debit cash and debit “credit card expense”; credit sales
debit cash and credit sales
debit accounts receivable and credit sales
Question 10 (4 points)
The company prepares, but does not yet pay, its first payroll of the new year. Salaries total $10,000 and 7.65% is withheld from paychecks for FICA tax. Ignore all other payroll deductions. The journal entries will be _______________.
Question 10 options:
debit wage expense $10,000 and debit payroll tax expense $765; credit wages payable $9,235 and credit FICA tax payable $1,530
debit wage expense $10,000; credit wages payable $8,470 and FICA tax payable $1,530
debit wage expense $10,000 and credit wages payable 10,000; debit payroll tax expense for $1,530 and credit FICA tax payable $1,530
debit wage expense $10,000 and credit wages payable $10,000; debit payroll tax expense for $765 and credit FICA tax payable $765
Question 11 (4 points)
A company buys a $10,000 bond at 102 as an investment. The correct entry is _______________.
Question 11 options:
credit investment in bonds and debit cash for $9,800
debit investment in bonds and credit cash for $9,800
credit investment in bonds and debit cash for $10,200
debit investment in bonds and credit cash for $10,200
Question 12 (4 points)
A company issues bonds having a stated value of $100,000 for $102,500. At maturity, the company will _______________.
Question 12 options:
credit bonds payable for $100,000
debit bonds payable for $102,500
credit bonds payable for $102,500
debit bonds payable for $100,000
Question 13 (4 points)
A company uses the percentage-of-receivables method for establishing the bad-debt reserve. They want the reserve balance to equal 0.5% of debts 30 days old or less, 2% of debts aged 31 to 60 days, and 4% of debts aged over 60 days. An aging report shows $780,000 relating to the past month, $232,600 relating to the prior month, and $89,200 relating to more than two months ago. The balance in the reserve account before adjustment is $10,175. What is the adjusting journal entry?
Question 13 options:
debit bad-debt expense, credit allowance for bad debts $12,120
debit allowance for bad debts, credit bad-debt expense $1,945
debit bad-debt expense, credit accounts receivable $1,945
debit bad-debt expense, credit allowance for bad debts $1,945
Question 14 (4 points)
A company is closing out the accounting period. The inventory balance at the beginning of the period was $222,750, and at the end of the period it was $215,600. Purchases of goods for resale during the period equaled $682,500. What was the cost of goods sold total?
Question 14 options:
Question 15 (4 points)
The following transactions during the month of January: 1/5 bought 10 units at $11.00 each; 1/8 bought 15 units at $11.25 each; 1/15 sold 8 units for $16 each; 1/22 bought 10 units at $11.50 each and sold 12 units for $16.50 each. The ending inventory is $693.75. What inventory costing method is the company using?
Question 15 options:
LIFO – periodic
LIFO – perpetual
Prepare the following journal entries. Dates and descriptions are not required.
Question 16 (4 points)
What is the difference between the periodic-inventory and perpetual-inventory methods?
Question 17 (4 points)
Name two costs, in addition to the purchase price, that are added to merchandise inventory cost.
Question 18 (4 points)
What will be the result to inventory values, cost of goods sold, and net income if the LIFO method is used during times of inflation?
Question 19 (4 points)
When comparing financial ratios, it is important to make comparisons only within an industry or between like companies. Why might a retail store have a much higher accounts receivable turnover than a manufacturing company?
Question 20 (4 points)
How is gross margin or gross profit calculated on a merchandizing company income statement?
Question 21 (4 points)
If a retail store has a sale with everything listed at 30% off, and a rack of clothing is also marked as “an additional 20% off,” what is the total discount offered?
Question 22 (4 points)
What does 1/10, n/30 mean?
Question 23 (4 points)
What cash control is compromised when the purchasing manager is one of the authorized check signers?
Question 24 (4 points)
Name at least three out of the four documents that the accounting department should have access to in order to pay an invoice.
Question 25 (4 points)
What item from the company’s records must be added to the bank balance when reconciling the bank statement?
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