ACCY 101 Final

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ACCY 101 Final
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ACCY 101 Final
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  1. In a perpetual inventory system, the cost of purchases is debited to
    Inventory
  2. In a periodic inventory system, the cost of purchases is debited to
    purchases
  3. In a perpetual inventory system, the cost of inventory sold is
    Debited to cost of goods sold
  4. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be
    FIFO
  5. Ending inventory is equal to the cost of items on hand plus
    C. Items in transit sold fob destination
  6. Purchases equal the invoice amount
    Plus freight-in, less purchase discounts
  7. Using the gross method, purchase discounts lost are
    A. included in purchases
  8. Under the net method, purchase discounts lost are
    C. Included interest expense
  9. Inventory does not include
    C. Equipment used in the manufacturing of assets for sale
  10. Inventory does not include
    C. Equipment used in the manufacturing of assets for sale
  11. Under the gross method, purchase discounts taken are
    D. Deducted from purchases
  12. Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17, and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:
    . 5880
  13. Cost of goods sold is given by
    Net purchases + beginning inventory - ending inventory
  14. The LIFO Conformity Rule states that if LIFO is used for
    Tax purposes, it must be used for financial reporting
  15. In a perpetual average cost system
    A new weighted-average unit cost is calculated each time additional units are purchased
  16. In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory
    FIFO
  17. During periods when costs are rising and inventory quantities are stable, cost of goods sold will be
    Lower under average cost than LIFO
  18. During periods when costs are rising and inventory qualities are stable, ending inventory will be
    Higher under FIFO than LIFO
  19. In periods when costs are rising, LIFO liquidations
    Distort the net income
  20. The use of LIFO during a long inflationary period can result in
    Significant cash flow advantages over FIFO
  21. Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be:
    higher, lower
  22. Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising inventory costs, Company C's gross profit and inventory turnover ratio, compared to Company D's, would be:
    lower, higher
  23. The use of LIFO in accounting for a firm's inventory
    C. Usually provides a better match of expense with revenues
  24. In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of
    FIFO
  25. The primary reason for the popularity of LIFO is that it
    B. Saves income taxes currently
  26. When reported in financial statements, a LIFO allowance account usually
    Is added to LIFO cost to indicate what the inventory would cost on a FIFO basis
  27. If a company uses LIFO, a LIFO liquidation is problematic for a company's income taxes
    When inventory purchase costs are rising
  28. Dollar value LIFO
    Starts with ending inventory measured at current costs and recreates LIFO layers for measuring inventory costs
  29. Compared to dollar-value LIFO, unit LIFO is
    More costly to implement
  30. A company that prepares its financial statements according to IFRS can use each of the following inventory valuation methods except
    LIFO
  31. External decision makers would not look primarily to financial accounting information to assist them in making decisions on
    Capital budgeting
  32. Which of the following groups is not among financial intermediaries?
    CPAs
  33. Important elements of an internal control system for cash disbursements include each of the following except:
    The same person that prepares the check should also record it the proper journal
  34. COSO defines internal control as a process, affected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in:
    Effectiveness and efficiency of operations.
  35. Cash equivalents do not include:
    High grade marketable equity securities.
  36. Cash may not include:
    Restricted cash.
  37. Compensating balances represent
    Funds in a bank account that can't be spent.
  38. Cash that is restricted and not available for current operations is reported in the balance sheet as
    Investments.
  39. Which of the following is true about reporting cash under IFRS?
    Overdrafts typically are not shown as current liabilities on the balance sheet.
  40. On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 10?
    Option b (A/R 8,000 / Sales 8,000)
  41. On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date?
    Option b (Dr: Cash 7,840-- Sales discount 160 / Cr: A/R 8,000)
  42. On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on December 5, assuming the correct payment was received on that date?
    Option d (Cash 8,000 / A/R 8,000)
  43. Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on April 12?
    Option a (A/R 46,000 / Sales 46,000)
  44. Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on April 23, assuming the customer made the correct payment on that date?
    Option c (Dr: Cash 45,540-- Sales Discount 460 / Cr: A/R 46,0000)
  45. Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date?
    Option c (Cash 46,000 / A/R 46,000)
  46. On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 10?
    A. Option a (A/R 7,840 / Sales 7,840)
  47. On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 17, assuming the correct payment was received on that date?
    Option a (Cash7,840 / A/R 7,840)
  48. On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on December 10, assuming the correct payment was received on that date?
    Option b (Cash 8,000 / A/R 7,840--Interest Rev 160)
  49. Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 12?
    Option c (A/R 45,540 / Sales 45,540)
  50. Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date?
    Option d (Cash 45,540 / A/R 45,540)
  51. Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on June 10, assuming the customer made the correct payment on that date?
    Option b ( Cash 46,000/ A/R 45,540-- Interest Rev 460)
  52. Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting accounts receivable and debiting:
    Sales allowances.
  53. Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's would credit accounts receivable and debit
    Sales returns.
  54. Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should
    Record an allowance for sales returns in the year of the sale.
  55. Accounts receivable are normally reported at the:
    Expected amount to be received.
  56. The allowance for uncollectible accounts is a:
    Contra asset account.
  57. A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off? Allowance for uncollectible accounts? Accounts Receivable?
    Option c (Allowance for uncollectible accounts: Increase / Accounts Receivable: No effect
  58. Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:
    B. Allowance for uncollectible accounts
  59. Which of the following does not change the balance in accounts receivable?
    Bad debts expense adjusting entry.
  60. When you use an aging schedule approach for estimating uncollectible accounts:
    A. Bad debts expense is measured indirectly, and the allowance for uncollectible accounts balance is measured directly.
  61. Which of the following is recorded by a credit to Accounts receivable?
    Write-off of bad debts.
  62. If a company uses the balance sheet approach to estimate bad debt expense, bad debt expense for a period can be determined by:
    D. Taking the difference between the unadjusted balance in the allowance account and the desired balance.
  63. Nontrade receivables do not include:
    . Sales to customers.
  64. Long-term notes receivable issued for noncash assets at an unrealistically low interest rate will be:
    Discounted at an imputed interest rate.
  65. Priscilla's Exotic Pets discounted a note receivable without recourse and the sales criteria were met. The discounting is recorded as:
    A sale.
  66. Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, 5-year, noninterest-bearing note when an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to:
    The present value of $50,000 using a 10% interest rate.
  67. A note receivable Mild Max Cycles discounted with recourse was dishonored on its maturity date. Mild Max would debit
    A receivable.
  68. Plunder Inc. accepted a six-month noninterest-bearing note for $2,800 on January 1, 2011. The note was accepted as payment of a delinquent receivable of $2,500. What is the correct entry to record the note?
    • ( Note Receivable 2,800 /
    •                 A/R 2,500--
    •                 Discount on Note Receivable 300)
  69. Plunder Inc. accepted a six-month noninterest-bearing note for $2,800 on January 1, 2011. The note was accepted as payment of a delinquent receivable of $2,500. The cash collection on July 1, 2011, would be recorded as:
    (Dr: Discount on Note Receivable 300 / Cr: Interest Rev) & ( Dr: Cash 2,800 / Cr: Note Receivable 2,800)
  70. Which of the following is considered a sale of receivables?
    Factoring receivables without recourse.
  71. The transferor is considered to have surrendered control over its receivables if: A. The transferred assets have been isolated from the transferor. B. Each transferee has the right to pledge or exchange the assets it received. C. The transferor does not maintain effective control over the transferred assets through either repurchase or redemption agreements before maturity or the ability to cause the transferee to return the assets. D. All of the above must occur.
    All of the above must occur.
  72. Accounting for the pledging of accounts receivable as collateral for a loan requires:
    Disclosure of the arrangement in notes to the financial statements.
  73. In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which:
    The transferor of the receivable surrenders control over the assets transferred.
  74. In deciding whether financing with receivables is a secured borrowing or a sale under IFRS, the critical element is the extent to which:
    The transferee has received substantially all the risks and rewards of ownership
  75. The purpose of assigning accounts receivable is to:
    Provide collateral for a loan.
  76. Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2011. The note, along with interest at 6%, is due on June 30, 2012. On September 30, 2011, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank?
    C. $39,220.
  77. On April 1 of the current year, Troubled Company factored receivables with a carrying value of $85,000 for $60,000 in cash from Scrooge Lenders. The transfer was made without recourse. On April 1, Troubled would
    Debit loss on sale of receivables for $25,000.
  78. If a company adopts an accounts receivable factoring program, and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal)?
    Cash flow from operations may increase.
  79. Assume a company has been maintaining a receivables factoring program for the past five years, and has been experiencing the same level of sales, factoring and bad debts over that time period. Customers typically pay their receivables within 60 days. Which of the following is true with respect to the current period (all else equal)?
    Cash flow from operations is stable.
  80. Which of the following is NOT true regarding accounting for transfers of receivables under IFRS?
    All of the above are correct.
  81. On July 1, 2011, Cromartie Furniture established a $150 petty cash fund. A check for $150 was made out to the petty cash custodian. During July, the petty cash custodian paid the following bills from the petty cash fund: Office Supplies 36 Postage 22 Delivery charges 40 Bottled Water 28 total : 126 At the end of July the petty cash fund was replenished The journal entry to replenish the petty cash fund includes:
    A credit to cash and a debit to various expenses for $126.
  82. a series of equal periodic payments that starts more than one period after the agreement is called...
    a deferred annuity
  83. a series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is...
    an ordinary annuity
  84. Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity date of Loan A will be..
    Earlier than Loan B
  85. to determine the future value factor for an annuity due for a period n when given tables only for an ordinary annuity
    Obtain the FVA for n +1 and deduct 1
  86. To compute the interest rate paid from financing an asset purchase with an annuity you must know...
    present value of the annuity, dollar amount and timing of the annuity payments
  87. Loan C has the same principal amount, payment amount and maturity date as Loan D. However, Loan C is structured as an annuity due while Loan D is structured as an ordinary annuity. Loan C's interest rate is...
    Higher than Loan D
  88. in applying LCM, market cannot be
    greater than net realizable value
  89. in applying LCM, market cannot be...
    less than realizable value minus a normal profit margin
  90. Masterlink Co., in applying LCM, reports its inventory at net realizable value.
    cost is greater than net realizable value, NRV is not greater than replacement cost
  91. an argument against the use of LCM is its lack of..
    consistency
  92. when using the gross profit method to estimate ending inventory, it is not necessary to know
    cost of goods sold
  93. when computing the cost to retail percentage for the conventional retail method, included in the denominator are...
    net markups, but not net markdowns
  94. in calculating the cost to retail percentage for the retail method, the retail column will not include...
    freight-in
  95. under the retail inventory method...
    a company measures inventory on its balance sheet by converting retail prices to cost
  96. under the conventional retail method, the denominator of the current period cost to retail conversion percentage will not include...
    net markdowns
  97. under the LIFO retail method, the denominator of the cost to retail conversion percentage will not include...
    freight in
  98. in determining the cost to retail percentage for the current year...
    net markups are included
  99. when computing the cost to retail percentage for the average cost retail method, included in the denominator are...
    net markups and net markdowns
  100. the conventional retail inventory method is based on...
    average, lower of cost or market
  101. using the dollar-value LIFO retail method for inventory...
    combines retail LIFO accounting with dollar-value LIFO accounting
  102. to use the dollar value LIFO retail method for inventory, the first step is to...
    determine the cost to retail percentage for the current year transactions
  103. to use the dollar value LIFO retail method for inventory, the second step is to determine the estimated...
    ending inventory at the base year retail prices
  104. to determine if an increase in the dollar value of inventory is due to increased quantities, using dollar value LIFO retail...
    deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount
  105. to determine the value of a LIFO layer, using dollar value LIFO retail..
    multiply the LIFO layer by the layer-year price index, and by the layer-year cost to retail percentage
  106. retrospective treatment of prior years' financial statements is required when there is a change from...
    average cost to FIFO, FIFO to average cost, LIFO to average cost, ALL OF THE ABOVE
  107. Cash includes
    currency and coins, balances in checking accounts, and items acceptable for deposit in these accounts, such as checks and money orders received from customers
  108. Cash equivalents
    • include money market funds, treasury bills, and commercial paper. To be classified as cash equivalents, these investments must have a maturity date no longer than three months from the date of purchase
    • Credit and debit card receivables often are included in cash equivalents.
  109. compensating balances
     a specified balance (usually some percentage of the committee amount) a borrower of a loan is asked to maintain in a low-interest or noninterest-bearing account at the bank.
  110. Profitability
    the best long-run indication of liquidity.
  111. allowance
    What you need, compared to what you have.
  112. Accounts Receivable T Account
    • Debit Sales on A/C
    • Credit: W/O. Cash Paid
  113. Allowance for Doubtful A/C T-Account
    • Debit W/O
    • Credit: Bad Debts, sales returns, Return of Inventory
  114. Bad Debt or Sales Return Expense T-Accounts
    debt: Est (income statement approach)% of credit sales; Balance statement approach est of net realized value of A/R; Adjusting entry

    Credit: Never a credit balance; credited when expense applied to W/O; Direct W/O method immaterial)
  115. Sales Revenue T-Account
    • Debit: return; Bad debt; Return of Inventory
    • Credit: Sales (cash or on a/c)
  116. Inventory T-Account
    • Debt: return of inventory; purchase
    • Credit: inventory sold
  117. COGS T-Account
    • Debit: Inventory sold
    • Credit: Return of Inventory
  118. Sales Return Journal entry
    • A/R......xx
    •      Sales Rev........................xx
    • COGs.........................xx
    •      Inv.................................xx
  119. Actual Return Journal Entry
    • Sales Return Exp(.04% of sales)....xx
    •       A/R.............................................xx
    • Inventory...................................xx
    •      COGS(65% of sales).......................xx
  120. Adjusting Entries journal entry
    • Sales Return Exp...xx
    •   (.04%x11500-1300)
    • Inventory.............xx
    •       COGS....................xx
  121. Year end estimate on Bad debt Journal entry
    • Bad debt exp (.02x12000)....xx
    •     Allowance for doubtful a/c's.....xx
  122. Receivable turnover ration
    Net Sales/Avg a/r net
  123. Average collection ratio
    365/receivable turnover
  124. factor with recourse
    • Transfer,
    • 200000 transferred, .03 fee, 21000 fair value
  125. Assets with recourse
    • cash increase
    • receivable from factor
    • a/r decrease
    • net decrease in assets
  126. Liabilities with recourse
    • no change because sold w/p recourse
    • buyer assumes liabilities
  127. Income before income taxes
    decrease (sale of A/R)
  128. Discounted Note (non interest bearing)
    • Face amount xxx
    • Interest to maturing (xx*.03x3/12)
    • Maturity value
    • discount (xxxx*.03x2/12)
    • Cash proceeds
  129. factor with recourse journal entry
    • cash  (87% of A/R)
    • Receivable from factor
    • less: from sale of receivable
    •       Recourse liability
    •       A/R
  130. In a periodic inventory system, the cost of purchases is debited to:
    Purchases.
  131. The primary reason for the popularity of LIFO is that it:
    Saves income taxes currently.
  132. During periods when costs are rising and inventory quantities are stable, ending inventory will be:
    Higher under FIFO than LIFO.

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