1. A company experienced a period of steadily rising costs, which inventory valu
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Question
1. A company experienced a period of steadily rising costs, which inventory valuation method will result in the lowest net income reported for the company:
Specific identification method
Average cost method
Weighted-average method
LIFO method
FIFO method
2. A company had inventory on September 2 of 6 units at a cost of $23 each. On September 3, they purchased 11 units at $18 each. On September 8 they purchased 7 units at $31 each. On September 10, 9 units were sold for $64 each. Using the FIFO perpetual inventory method, what was the value of the inventory on September 10 after the sale?
3. What would the days' sales uncollected for Diamond Jewelers be if the company had ending accounts receivable of $2,500 and net sales of $50,000.
4. Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is:
5. A company that uses a detailed examination of accounts outstanding and analyzes how long the account has been open is using what method to estimate bad debt expense
A. Aging of accounts receivable method.
B. Direct write-off method.
C. Percentage of sales method.
D. Aging of investments method.
E. Percent of accounts receivable method.
6. A company receives a 7.5%, six-month note for $8,900. The total interest due on the maturity date is:
7. MixRecording Studios purchased $7,800 in electronic components from TechCom. MixRecording Studios signed a 60-day, 10% promissory note for $7,800. TechCom's journal entry to record the sales portion of the transaction is:
A) Accounts Receivable 7,800
Sales 7,800
B) Accounts Receivable 7,930
Sales 7,930
C) Notes Receivable 7,800
Sales 7,800
D) Notes Receivable 7,930
Sales 7,930
E) Notes Receivable 7,800
Interest Receivable 130
Sales 7,930
8. Salvage value is:
Also called residual value.
Also called scrap value.
An estimate of the asset's value at the end of its benefit period.
A factor relevant to determining depreciation.
E. All above.
9. A company has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 5 year life. What is the total depreciation expense for the current year?
10. A company had net sales of $35,404 million. Gross sales total $37,576. Its average total assets for the period were $14,502 million. Dell's total asset turnover equals:
11. A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?
12.
Good will:
Is not amortized, but is tested annually for impairment.
Is amortized using the straight-line method.
Is amortized using the units-of-production method.
May be amortized using either the straight-line or units-of-production method.
Is never amortized or tested for impairment.
13.
Ordinary repairs:
A. Are expenditures to keep an asset in normal operating condition.
Are necessary if an asset is to perform to expectations over its useful life.
Are treated as expenses.
Could include cleaning, lubricating, and normal adjusting.
All of the above.
14. Garret Toy Company purchased and installed a machine on January 1, 2008, at a total cost of $85,000. Straight-line depreciation is taken each year for four years assuming a five year life and no salvage value. The machine is sold for $23,500 cash on July 1, 2012. What is the gain or loss on sale of machinery?
15. A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:
16. A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals:
17. Alpha Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Alpha's net sales for this period equal:
18. Which of the following statements concerning inventory systems are true?
The periodic inventory system continually updates inventory records.
The perpetual inventory system updates inventory records at the end of a period.
The periodic inventory system updates inventory at the end of a period.
The perpetual inventory system continually updates inventory records.
Both C and D are true statements.
A.Specific identification method
B.Average cost method
C.Weighted-average method
D.LIFO method
E.FIFO method
Explanation / Answer
1. D. LIFO method ( As the ending inventory is from earliest purchases, cost of goods sold will be the highest under this method)
2. Value of ending inventory after the September 10 sale using the FIFO method = (8 units @ $ 18) + ( 7 units @ $ 31)
= $ 361
3. Days sales outstanding = 365 / Inventory turnover = 365 / Sales x Accounts receivable = 365 / 50,000 x 2,500 = 18.25 days
4. Accpunts receivable turnover = Net sales / Average accounts receivable = 8,739 / 864 = 10.11 times
5. A. Ageing of accounts receivable method.
6. Total interest due on maturity = $ 8,900 x 7.5% x 1/2 = $ 333.75
7. D. Note receivable to sales $ 7,800
8. E. All above
9. Depreciation expense for the current year = (42,000 - 4,000) / 5 x 4/12 = $ 2,533
10. Asset turnover = Net sales / Total assets = 35,404 / 14,502 = 2.44 times
11. Straight line depreciation over 10 year life is 10%.
Therefore double declining rate is 20%
First year depreciation expense = 5,400 x 20% = $ 1,080
Second year depreciation expense = (5,400 - 1,080) x 20% = $ 864
12. B. Is amortized using the straight line method
13. E. All of the above
14. At the end of 4 years, book value of the asset = 85,000 - 17,000 x 4 = $ 17,000
Gain on sale of asset = 23,500 - 17,000 = $ 6,500
15. Profit margin = Net income / Net sales = 2,000 / 10,000 = 20%
16. The amount paid = (1,800 - 200 ) x 98% = $ 1,568
17. Net sales = Cash sales + credit sales - sales returns and allowances - sales discounts = 94,275 + 83,450 - 1,700 - 3,475 = $ 172,550
18. E. Both C and D are true.
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