Managerial accounting twu

Quiz 2 – Ch 2

 

Question 1

1 / 1 pts

An accrual of wages expense would produce what effect on the balance sheet?

Correct!

  

Increase liabilities and decrease equity

 

  

Decrease liabilities and increase equity

 

  

Increase assets and increase liabilities

 

  

Decrease assets and decrease liabilities

 

An accrual of wages expense produces an increase in wages payable (liability) and a decrease in retained earnings (stockholders’ equity), resulting in a decrease of profit.

 

Question 2

1 / 1 pts

Assets are recorded in the balance sheet in order of:

  

Market value

 

  

Historic value

 

Correct!

  

Liquidity

 

  

Maturity

 

Liquidity refers to the ease of conversation to cash. Current assets are to be used during the current operating cycle (starting with cash, short-term investments, accounts receivables, inventories and other assets). Market value and historic value refer to the measurement of assets. Maturity refers to the order in which liabilities are recorded in the balance sheet.

 

Question 3

1 / 1 pts

Cash collected on accounts receivable would produce what effect on the balance sheet?

  

Increase liabilities and decrease equity

 

  

Decrease liabilities and increase equity

 

  

Increase assets and decrease assets

 

  

Decrease assets and decrease liabilities

 

Cash collected on accounts receivable produces an increase in cash and a decrease in accounts receivable, both asset accounts. There is no impact on profit and on equity.

 

Question 4

1 / 1 pts

Net working capital is defined as:

  

Assets – liabilities

  

Current assets

 

Correct!

  

Current assets – Current liabilities

  

Market value – Book value

Net working capital = Current assets – Current liabilities

 

Question 5

1 / 1 pts

Sales less cost of goods sold equals:

  

Net income

 

  

Net profit margin

 

Correct!

  

Gross profit

 

  

Gross profit margin

 

Sales – Cost of goods sold = Gross profit. 
The gross profit margin is gross profit divided by sales.

 

Question 6

1 / 1 pts

The Cash T-account has a beginning balance of $64,000. During the year, $488,000 was debited and $498,000 was credited to the account. What is the ending balance of cash?

  

($10,000)

 

You Answered

  

$74,000

 

  

$54,000

 

  

Cannot be determined from the information given.

 

$64,000 + $488,000 – $498,000 = $54,000

   

 

Question 7

1 / 1 pts

Which of the following is one effect of a purchase of $1,000 of inventory on credit?

  

It would increase liabilities by $1,000

 

  

It would decrease retained earnings by $1,000

 

  

It would decrease liabilities by $1,000

 

  

It would decrease cash asset $5,000

 

The purchase on credit creates an account payable. It would increase liabilities by $1,000. In addition, the inventory account in the asset section of the balance sheet would also increase.

 

Question 8

1 / 1 pts

Which of the following will properly record the payment of a one-year insurance policy?

You Answered

  

Increase assets and increase retained earnings

 

  

Increase liabilities and decrease retained earnings

 

  

Increase and decrease assets

 

  

Decrease assets and decrease liabilities

 

Prepaid insurance in increased and cash is decreased, both of which are assets.

 

Question 9

1 / 1 pts

Which one of the following is included in current assets?

Correct!

  

Accounts receivable

 

  

Taxes payable

 

  

Automobiles

 

  

Common stock

 

Accounts receivable is included in current assets as it represents amount owed by customers that are expected to be paid within one year or the operating cycle.

 

Question 10

1 / 1 pts

Which one of the following is not a current liability?

  

Taxes payable

 

  

Accounts payable

 

  

Wages payable

 

Correct!

  

Wage expense

 

Wages expense is an income statement account, not a balance sheet account. Current liabilities are amounts owed and due to be repaid within one year or within one operating cycle.


Quiz 1 – Ch 1

 

Question 1

1 / 1 pts

On which statement are assets, liabilities and equity reported?

Correct!

  

Balance sheet

 

  

Income statement

 

  

Statement of stockholders’ equity

  

Statement of cash flows

 

A balance sheet reports on investing and financing activities. It lists amounts for assets, liabilities, and equity at a point in time.

 

Question 2

1 / 1 pts

Which of the four basic financial statements would contain a line item for expenses?

  

Balance sheet

 

Correct!

  

Income statement

 

  

Statement of equity

 

  

Statement of cash flows

 

The income statement reports on the revenues less the expenses over the reporting period. Expenses only appear on the income statement.

 

Question 3

1 / 1 pts

Which of the following would be reported on a statement of stockholders’ equity?

  

Cash

 

  

Total expenses

 

Correct!

  

Dividends

 

  

Financing cash flows

 

Dividends are a return of capital to stockholders and are found only on the statement of stockholders’ equity. Cash is found on the balance sheet. Total expenses is an income statement amount Financing cash flows are found on the statement of cash flows.

 

Question 4

1 / 1 pts

Which of the following assumptions that underlies the preparation of financial statements assumes that companies will continue their operations over time?

  

Separate economic entity

 

Correct!

  

Going concern

 

  

Accounting period

 

  

Measuring unit

 

Under the going concern assumption, companies are assumed to have continuity in that they can be expected to continue in operations over time.

 

Question 5

1 / 1 pts

Which one of the following is not an external user of financial information?

  

Stockholders

 

  

Creditors

 

  

Internal Revenue Service

 

Correct!

  

Top company management

 

Decision makers outside the company include stockholders, creditors, and tax agencies such as the Internal Revenue Service.

 

Question 6

1 / 1 pts

How are the balance sheet and the statement of cash flows linked?

Correct!

  

By the cash balance

 

  

By the amount of total retained earnings

 

  

By the total shareholder equity

 

  

By the amount of net income

 

The balance sheet and the statement of cash flows are linked by the cash balance. The statement of cash flows shows the inflows and outflows of cash during the period. Then ending cash balance is on the balance sheet.

 

Question 7

1 / 1 pts

Data from the financial statements of The Grocer Company and FoodValu, Inc., two national grocery chains are presented below:

$ in thousands

The Grocer Co.

FoodValu, Inc.

 

 

Total liabilities, 2016 ………

$30,020

$20,064

 

 

 

Total liabilities, 2015 ………

36,414

24,836

 

 

 

Total assets, 2016 …………

46,952

24,106

 

 

 

Total assets, 2015 ………….

47,010

27,516

 

 

 

Revenue, 2016 …………….

180,478

72,200

 

 

 

Net income (loss), 2016…….

1,204

(2,080

 

)

 


To the nearest hundredth of a percent, what is the 2016 return on equity ratio for The Grocer Company?

  

4.00%

 

  

13.11%

 

Correct!

  

8.75%

 

  

Not enough information provided

 

ROE = Net income / Average stockholders’ equity
= $ 1,204 / [($16,932+ $ $10,596)/2] = $1,204 / 13,764= 8.75%

Shareholders’ equity 2016 = $46,952 – 30,020 = $16,932
Shareholders’ equity 2015 = $47,010 – 36,414 = $10,596

Question 8

1 / 1 pts

Data from the financial statements of The Grocer Company and FoodValu, Inc., two national grocery chains are presented below:

$ in thousands

The Grocer Co.

FoodValu, Inc.

 

 

Total liabilities, 2016 ………

$30,020

$20,064

 

 

 

Total liabilities, 2015 ………

36,414

24,836

 

 

 

Total assets, 2016 …………

46,952

24,106

 

 

 

Total assets, 2015 ………….

47,010

27,516

 

 

 

Revenue, 2016 …………….

180,478

72,200

 

 

 

Net income (loss), 2016…….

1,204

(2,080

 

)

 


To the nearest hundredth, what is the 2016 debt-to-equity ratio for The Grocer Company?

  

2.41

 

  

4.92

 

Correct!

  

1.77

 

  

44.16

 

= $30,020 / $16,932 = 1.77

Stockholders’ equity 2016 = $46,952 – 30,020 = $16,932

 

Question 9

1 / 1 pts

Which of the following statements is true regarding generally accepted accounting principles (GAAP)?

  

GAAP is a set of laws

 

Correct!

  

GAAP is subject to change as conditions warrant

 

 

Under GAAP, if two companies engage in the same transactions, they must choose the same accounting methods

  

U.S. GAAP is the same as GAAP in other countries

 

Specific rules under GAAP are altered or new practices are formulated to fit changes in underlying economic circumstances of business transactions.

 

Question 10

1 / 1 pts

Which of the following forms of business organizations exists as a legal entity?

  

A sole proprietorship

 

  

A partnership

 

Correct!

  

A corporation

 

  

A labor union

 

A corporation is a form of business organization that exists as a legal entity that issues shares of stock to its owners or shareholders in exchange for cash or other resources.

 


Quiz 3 – Ch 3

 

Question 1

1 / 1 pts

A company bills customers for services rendered on account. Which of the following is one part of recording this transaction?

  

Debit Service Revenue

 

  

Credit Cash

 

Correct!

  

Debit Accounts Receivable

 

  

Credit Unearned Revenue

 

The journal entry includes a debit to Accounts Receivable and a credit to Service Revenue.

 

Question 2

1 / 1 pts

Which one of the following is not a reason for which adjusting entries are made?

Correct!

 

To close the income statement accounts and ready them for the following year’s activity

 

To allocate used or expired assets to reflect expenses incurred in the period

 

 

To allocate the earned portion of unearned revenue to reflect revenues earned during the period

 

To accrue expenses to reflect expenses incurred in the period that are not yet paid or recorded

Adjusting entries are made for all the reasons above except to close out the accounts. Answer A describes closing entries.

 

Question 3

1 / 1 pts

Which of the following is a distinguishing characteristic of a deferral?

  

It affects at least one liability account

 

  

It always impacts the cash account

 

Correct!

 

It includes the adjustment of an amount previously recorded in a balance sheet account

 

It increases a balance sheet account and decreases an income statement account

A deferral adjusts an amount previously recorded in a balance sheet account.

 

Question 4

1 / 1 pts

A company provides services to clients during the period that are neither paid for, nor billed to the clients. What must the company do?

  

Bill the client prior to year-end in order to recognize the revenue

 

  

Record the revenues as a liability at the end of the year

 

Correct!

  

Accrue revenue by making an adjusting entry at the end of the period

 

  

All of the above are true

 

Services earned but not yet billed or collected require an accrual to recognize the revenue and the account receivable at the end of the period. The bill does not have to be sent prior to year-end and there is no liability at year end since money is owed to the company.

 

Question 5

1 / 1 pts

Magic Corporation has the following normal account balances in its general ledger at the end of a period:

Sales revenue

$1,060,000

Advertising expense

  180,000


Which of the following gives the correct entry required to close only the accounts above?

  

Advertising Expense

180,000

 

Retained Earnings

880,000

 

Sales Revenue

 

1,060,000

 

  

Retained Earnings

880,000

 

Net Income

 

880,000

 

Correct!

  

Sales Revenue

1,060,000

 

Advertising Expense

 

180,000

Retained Earnings

 

880,000

 

  

None of the above. These accounts are not closed.

The closing process requires that revenue accounts are debited and retained earnings are credited for the amount equal to the revenue balance. The closing process also requires that expense accounts are credited and retained earnings debited for an amount equal to the expense balance. The net amount of retained earnings credited in this problem is equal to $880,000 (or $1,060,000 – $180,000), since revenues are greater than expenses.

 

Question 6

1 / 1 pts

When adjusting for depreciation, which of the following is one effect of the adjustment?

  

Accumulated depreciation is debited

 

Correct!

  

The asset’s book value declines

  

The cost of the equipment declines

 

  

The market value of the equipment declines

 

The adjusting entry creates a credit to accumulated depreciation and a debit to depreciation expense. The credit causes the book value to decline because it increases the contra account that is shown as a deduction from the cost of the equipment on the balance sheet.

 

Question 7

1 / 1 pts

Which of the following is the correct order of the steps in the accounting cycle?

  

Adjust, report, analyze, record, and close

 

You Answered

  

Record, report, analyze, adjust, and close

 

  

Report, analyze, close, record, and adjust

 

Correct Answer

  

Analyze, record, adjust, report, and close

 

The steps in the cycle are to first analyze the transaction, the record it, then make any necessary adjustments, report the results, and finally to close the temporary accounts to ready them for the next period’s activity.

 

Question 8

1 / 1 pts

On the last day of December 2016, Camrey’s Trucks entered into a transaction that resulted in a receipt of $216,000 cash in advance related to services that will be provided during January 2017. During December of 2016, the company also performed $128,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $1,165,470 at December 31, 2016. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Camrey’s Trucks makes the appropriate adjusting entry, how much will service revenue will be reflected on the December 31, 2016 income statement?

  

$1,165,470

 

  

$1,715,000

 

  

$1,623,000

 

Correct!

  

$1,293,470

 

Service revenue = $1,165,470 + $128,000 = $1,293,470

 

 

Question 9

1 / 1 pts

On the last day of December 2016, Camrey’s Trucks entered into a transaction that resulted in a receipt of $216,000 cash in advance related to services that will be provided during January 2017. During December of 2016, the company also performed $128,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $1,165,470 at December 31, 2016. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Camrey’s Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as unearned revenue?

  

$ 90,000

Correct!

  

$216,000

 

  

$ 64,000

  

$ 98,000

Unearned revenue represents the amount collected in advance that the company has not yet earned.

 

Question 10

1 / 1 pts

On the last day of December 2016, Camrey’s Trucks entered into a transaction that resulted in a receipt of $216,000 cash in advance related to services that will be provided during January 2017. During December of 2016, the company also performed $128,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $1,165,470 at December 31, 2016. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Camrey’s Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as accounts receivable?

  

$108,000

 

  

$256,000

 

  

$ 64,000

Correct!

  

$128,000

 

Outstanding receivables are the amount earned but not yet received from customers.


Quiz 4 – Ch 4

Question 1

1 / 1 pts

The statement of cash flows explains changes in a firm’s:

  

Cash on hand and cash in the bank

 

Correct!

  

Cash and cash equivalents

 

  

Cash, cash equivalents, and accounts receivable

 

  

Working capital

 

Cash on hand and cash in bank are both considered to be cash. Accounts receivable is not part of cash or equivalents.

 

Question 2

1 / 1 pts

Which of the following is not a cash equivalent for purposes of preparing a statement of cash flows?

Correct!

  

Investment in common stock of other companies

 

  

Investment in Treasury bills

 

  

Investment in a money market fund

 

  

Investment in commercial paper

 

Cash equivalents must be easily convertible into a known cash amount and close to maturity so that their value is not affected by interest rate changes. Stock has no maturity date so it can never be a cash equivalent.

 

Question 3

1 / 1 pts

Which of the following is not a category for classifying cash flows in a statement of cash flows?

  

Operating activities

 

Correct!

  

Nonoperating activities

 

  

Financing activities

 

  

Investing activities

 

There are three activities: operating, investing, and financing.

 

Question 4

1 / 1 pts

A firm’s net cash flow from operating activities includes:

  

Cash received from sale of equipment

 

  

Cash received from issuance of common stock

 

Correct!

  

Cash received from sale of merchandise

 

  

Cash received as payment of loan from a borrower

 

Operating activities are cash in- and outflows from selling goods or rendering services. Selling equipment is an investing activity. Issuing stock and paying loans are financing activities.

 

Question 5

1 / 1 pts

A firm’s cash flows from investing activities include:

Correct!

  

Cash received from the sale of a plant asset

 

  

Cash paid as dividends

 

  

Cash received from the rendering of services to customers

 

  

Cash paid to retire bonds payable

 

Investing activities are those involving the acquisition and disposal of property, plant, and equipment and intangible assets, and the purchase and sale of investments in government securities and other companies.

Question 6

1 / 1 pts

A firm’s cash flow from financing activities includes:

Correct!

  

Cash paid to reacquire treasury stock

 

  

Cash paid for merchandise purchased

 

  

Cash received from sale of investment in bonds

 

  

Cash received as interest income

 

Financing activities involve receiving capital from owners, providing returns to owners, and borrowing and repaying amounts from creditors.

 

Question 7

1 / 1 pts

In a statement of cash flows, interest paid to creditors is classified as a cash flow from:

Correct!

  

Operating activities

 

  

Trading activities

 

  

Financing activities

 

  

Investing activities

 

Interest paid and received are both operating activities.

 

Question 8

1 / 1 pts

Nichole Company has an accrual basis net income of $260,000 and the following related items:

Depreciation expense

$76,000

Accounts receivable increase

  24,000

Inventory decrease

  28,000

Accounts payable decrease

16,000


How much is Nichole’s net cash flow from operating activities?

  

$248,000

 

Correct!

  

$324,000

 

  

$174,000

 

  

$320,000

 

$260,000 + $76,000  $24,000 + $28,000  $16,000 = $324,000

 

Question 9

1 / 1 pts

Which of the following is a required separate disclosure for firms using the indirect method in the statement of cash flows?

Correct Answer

  

Cash paid during the year for interest and income taxes

 

You Answered

  

All changes in cash equivalents

 

  

Total operating expenses

 

  

All of the above

 

Cash received from customers, cash paid for inventory, cash paid for interest, cash paid for income taxes, and cash paid for operating expenses are the major cash flows reporting under the direct method in the operating activities section.

 

Question 10

1 / 1 pts

With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?

 

Indirect method because it provides better information for decision making

 

  

Direct method because it is based on the accrual basis of accounting

 

 

Direct method because it requires a supplemental indirect method section

 

Correct!

  

Indirect method because it is less expensive to prepare

 

The indirect method is easier and cheaper because it takes less time. The direct method requires an additional step in that companies must also present a supplemental indirect method section.


Quiz 5

Question 1

1 / 1 pts

Liquidity refers to:

  

The life cycle of the company

 

  

The amount of receivables the company has in its balance sheet

 

  

The amount of financial leverage

 

Correct!

  

None of the above

 

Liquidity refers to cash, the amount on hand available to pay current obligations as they become due.

 

Question 2

1 / 1 pts

Which ratio provides an indication of the salability of the company’s products?

  

Account receivable turnover

 

  

Current ratio

 

Correct!

  

Inventory turnover

 

  

Gross profit margin

 

Inventory turnover measures the number of times during a period a company sells its inventory. Trends in this metric can provide an indication of the salability of the company’s products.

 

Question 3

1 / 1 pts

What does the current ratio measure?

  

Solvency

 

  

Profitability

 

  

Short-term debt paying ability

 

You Answered

  

Leverage

 

The current ratio is a measure of short-term debt paying ability. It measures a company’s ability to pay its current obligations as they become due.

 

Question 4

1 / 1 pts

Which of the following is one measure of liquidity?

  

Debt-to-equity ratio

 

  

Times interest earned

 

Correct!

  

Quick ratio

 

  

None of the above

 

The only measure of liquidity listed above is the quick ratio which is a variation of the current ratio (Current Ratio = Current assets / Current liabilities) to focus on quick assets (cash, securities, and receivables). The debt-to-equity ratio is a common measure of financial leverage, and the times interest earned ratio is a metric of solvency analysis.

 

Question 5

1 / 1 pts

K Grocers’ 2016 balance sheet shows average shareholders’ equity of $9,264 million, net income of $1,505 million, and common shares issued of $1,918 million. The company has no preferred shares issued. K Grocers’ return on common equity for the year is:

Correct!

  

16.25%

 

  

2.74%

 

  

36.5%

 

  

There is not enough information to calculate the ratio.

 

ROE = Net income/Average shareholders’ equity

 

= $1,505 million / $9,264 million = 16.245%

 

 

Question 6

1 / 1 pts

K Grocers’ 2016 financial statements show average shareholders’ equity of $9,264 million, net income of $1,505 million, interest expense of $870 million, and average total assets of $ 46,982 million. 

Assume that the statutory tax rate is 35%. How much is K Grocers’ return on assets for the year?  

  

16.2%

 

You Answered

  

5.1%

 

  

4.4%

 

  

There is not enough information to calculate the ratio.

 

ROA = EWI / Average total assets

 

= $1,505 + [$870 x (1 – .035)] / $46,982 million = 4.4%

 

 

Question 7

1 / 1 pts

K Grocers’ 2016 financial statements show interest expense of $870 million, net income of $1,505 million, sales of $225,935 million, and average total assets of $23,491 million. Assume that the statutory tax rate is 35%. 

How much is K Grocers’ profit margin for the year?

Correct!

  

0.92%

 

  

1.05%

 

  

8.81%

 

  

There is not enough information to calculate the ratio.

 

Profit margin = EWI / Sales 
= $1,505 million + [$870 million x (1 – 0.35)] / $225,935 million =   0.92%

 

Question 8

1 / 1 pts

Walkie Enterprises reported sales revenue totaling $1,120,000, $1,340,000, and $1,675,000 in the years, 2014, 2015, and 2016, respectively. Performing horizontal analysis, what is the percentage change for 2016?

Correct!

  

25.00%

 

  

38.16%

 

  

47.16%

 

  

14.11%

 

Change in revenue / Revenue in previous year 
= ($1,675,000 – $1,340,000) / $1,340,000 = 25.00%

 

Question 9

1 / 1 pts

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute the profit margin to the nearest hundredth of a percent.

 

Operating profit

before tax

Earnings without interest expense (EWI)

Average

total assets

Sales

Tax rate on

operating profit

$116,600

$233,500

$721,200

$1,703,130

33%

 

  

6.85%

 

  

32.38%

 

Correct!

  

13.71%

 

  

9.19%

 

Profit margin = EWI / Sales revenue 
= $233,500 / $1,703,130 = 13.71%

 

Question 10

1 / 1 pts

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute ROA to the nearest hundredth.

 

Operating profit

before tax

Earnings without interest expense (EWI)

Average

total assets

Sales

Tax rate on

operating profit

$116,600

$233,500

$721,200

$1,703,130

33%

 

  

27.30%

 

  

13.71%

 

  

16.17%

 

Correct!

  

32.38%

 

ROA = EWI / Average total assets 
= $233,500 / $721,200 = 32.38%

 


Quiz 6

 

Question 1

1 / 1 pts

Which of the below cases is not an example of potentially misleading reporting?

  

Channel stuffing

 

  

Overly optimistic estimates

 

Correct!

  

Recognizing revenue after goods are delivered

 

  

Mischaracterizing transactions as arm’s length

Revenue recognition requires that amounts be earned and realized, or realizable before recognizing as revenue.

 

Question 2

1 / 1 pts

Caroline’s Collectibles estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Caroline’s Collectible computes a total of $6,720 in estimated losses as of December 31, 2016. Its Accounts Receivable account has a balance of $ 225,600 and its Allowance for Uncollectible Accounts has an unused balance of $960 before adjustment at December 31, 2016. 

How much is bad debt expense that Caroline’s Collectibles will report in 2016?

  

$   960

  

$7,680

 

  

$6,720

 

Correct!

  

$5,760

 

To bring the allowance to the desired balance of $6,720, the company will need to increase the allowance account by $5,760 (or $6,720 – $ 960) resulting in bad debt expense of that same amount.

 

Question 3

1 / 1 pts

On which financial statement and at what amount are accounts receivable reported?

  

Balance sheet at the amount owed by customers

 

  

Income statement at the net uncollectible amount

 

  

Income statement at the amount written off

 

Correct!

  

Balance sheet at the net realizable value

 

Accounts receivable are reported on the balance sheet at the amount expected to be collected which is accounts receivable less allowance for uncollectible accounts, also known as net realizable value.

 

Question 4

1 / 1 pts

At what amount will accounts receivable be reported on the balance sheet if the gross receivable balance is $94,000 and the allowance for uncollectible accounts is estimated at 8% of gross receivables?

  

$99,760

 

Correct!

  

$86,480

 

  

$90,240

 

  

$56,400

 

Receivables are reported net of the allowance account. 
In this case, $94,000 – ($94,000 x 8%) = $86,480.

 

Question 5

1 / 1 pts

Which of the following does not occur when a company receives additional information that requires it to increase its expectations of uncollectible accounts receivable?

  

Accounts receivable (net) is reduced

 

  

Bad debt expense is increased

 

  

Net income is reduced

 

Correct!

  

The allowance account is decreased

 

The allowance account is increased, resulting in additional expense and a reduction of profit and retained earnings.

 

Question 6

1 / 1 pts

Which of the following formula computes the average collection period?

  

Average daily sales / Account receivable

 

  

Account receivable / Average daily sales

 

  

Sales / Average accounts receivable

 

Correct!

  

Average accounts receivable / Average daily sales

 

Average collection period = Average accounts receivable / Average daily sales

 

Question 7

1 / 1 pts

If the collection period lengthens compared to historic figures and industry averages, what might the reason be?

  

Deterioration of collectibility of receivables

 

  

A change in sales mix to longer paying customers

 

  

A decrease in the amount of sales generated

 

Correct!

  

A and B

 

  

All of the above

 

A lengthened collection period means that receivables turnover slows Answers A and B are reasons for a slowdown in the receivables turnover.

 

Question 8

1 / 1 pts

Which of the following journal entries correctly records bad debt expense?

  

Bad debt expense                   xxx

    Accounts receivable                        xxx 

  

Allowance for doubtful accounts           xxx

     Bad debt expense                                         xxx

  

Allowance for doubtful accounts              xxx

     Accounts receivable                                        xxx

Correct!

  

Bad debt expense                                   xxx

    Allowance for doubtful accounts                    xxx

 

 

 

 

 

 

 

Question 9

1 / 1 pts

Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method?

Correct!

  

Allowance for doubtful accounts          xxx

     Accounts receivable                                     xxx

  

Bad debt expense                                   xxx

     Allowance for doubtful accounts                   xxx

  

Bad debt expense                  xxx

     Uncollectible sales                       xxx   

  

Allowance for doubtful accounts            xxx

     Bad debt expense                                        xxx               

 

Question 10

1 / 1 pts

Superior Company has provided you with the following information before any year-end adjustments:

Net credit sales are $120,000.
Historical percentage of credit losses is 2%.
Allowance for doubtful accounts has a credit balance of $300.
Accounts receivables ending balance is $47,000.

What is the estimated bad debt expense using the percentage of credit sales method?

  

$940.

 

  

$2,700.

 

  

$2,400.

 

You Answered

  

$2,100.

 Quiz 7

 

Question 1

1 / 1 pts

On which financial statement would you look to find the total costs of merchandise that remains and the total that has flowed through a company’s accounting system?

  

Balance sheet and statement of cash flows

 

Correct!

  

Income statement and balance sheet

 

  

Statement of cash flows and balance sheet

 

  

Statement of stockholders’ equity and balance sheet

When inventories are used up in production or are sold, their costs are transferred from the balance sheet (inventory account) to the income statement as cost of goods sold.

 

Question 2

1 / 1 pts

Garfield’s Goods purchases $80,000 of inventory during the period, has beginning of the period inventory of $12,000, and sells $72,000 of inventory during the period for $120,000. 

What is the company’s inventory balance to be reported on its balance sheet at year end?

  

$36,000

 

Correct!

  

$20,000

 

  

$10,000

 

  

$12,000

 

$12,000 + 80,000 ‒ $72,000 = $20,000

 

Question 3

1 / 1 pts

Assuming rising prices, which method will give the highest dollar value for cost of goods sold on the income statement?

  

FIFO

 

  

Average Cost

 

Correct!

  

LIFO

 

  

All of these give equal values for cost of goods sold

 

Under LIFO, the most costly units are the ones last purchased. LIFO matches these higher cost items against sales as cost of goods sold.

 

Question 4

1 / 1 pts

The following data refer to Cambridge Company’s ending inventory: 

Item code

Quantity

Unit Cost

Unit Market

Small

120

$228

$232

Medium

420

152

176

Large

610

168

176

Extra-Large

220

268

256


How much is the inventory if the lower of cost or market rule is applied to each item of inventory?

Correct!

  

$250,000

 

  

$252,640

 

  

$265,440

 

  

None of the above

 

(120 x $228) + (420 x $152) + (610 x $168)+ (220 x $256) = $250,000

 

Question 5

1 / 1 pts

The following hammers were available for sale during the year for Felicity Tools:

Beginning inventory ……………..

10 units at $160

First purchase ……………………

15 units at $220

Second purchase ………………..

30 units at $280

Third purchase ……………………

25 units at $260


Felicity has 30 hammers on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the first-in, first-out method?

  

$5,100

 

  

$5,950

 

Correct!

  

$7,900

 

  

$7,800

 

The ending inventory is made up of 25 units in the third purchase plus 5 units in the second purchase. (25 × $260) + (5 × $280) = $7,900

 

Question 6

1 / 1 pts

The following hammers were available for sale during the year for Felicity Tools:

Beginning inventory ……………..

10 units at $160

First purchase ……………………

15 units at $220

Second purchase ………………..

30 units at $280

Third purchase ……………………

25 units at $260


Felicity has 45 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method?

  

$10,550

 

Correct!

  

$ 7,700

  

$ 6,600

  

$ 7,600

(10 + 15 + 30 + 25 units) – 45 units = 35 units sold. 
Cost of goods sold = (10 units × $160) + (15 units × $220) + (10 units × $280) = $ 7,700

 

Question 7

1 / 1 pts

Wonderland Company imports and sells a product produced in Canada. In the summer of 2016, a natural disaster disrupted production, affecting its supply of product. On January 1, 2016, Wonderland’s inventory records were as follows:

Year purchased

Quantity (units)

Cost per unit

Total cost

2014

4,000

$160

$   640,000

2015

10,000

$220

2,220,000

Total

14,000

 

$2,840,000


Through mid December of 2016, purchases were limited to 16,000 units, because the cost had increased to $320 per unit. Wonderland sold 18,400 units during 2016 at a price of $392 per unit, which significantly depleted its inventory. 

Assume that Wonderland makes no further purchases during 2016. Wonderland uses the LIFO inventory method. Compute Wonderland’s gross profit for 2016.

  

$1,762,400

 

Correct!

  

$1,564,800

 

  

$2,494,000

 

  

$1,714,400

 

Sales revenue

18,400 x $392 =

$7,212,800

Cost of goods sold

(16,000 × $320) + (2,400 × $220) =

5,648000

Gross profit

 

$1,564,800

 

 

Question 8

1 / 1 pts

The following amounts and costs of platters were available for sale by Cari’s Ceramics during 2016:

Beginning inventory ….

10 units at $164

First purchase …………

15 units at $220

Second purchase …….

30 units at $280

Third purchase ……….

25 units at $260


Cari’s Ceramics has 60 platters on hand at the end of the year. 

What is the dollar amount of inventory at the end of the year according to the average cost method?

Correct!

  

$14,880

 

  

$ 6,200

  

$11,500

 

  

$ 9,720

(10 units × $164) + (15 units × $220) + (30 units × $280) + (25 units × $260) = $19,840
$19,840 / 80 units = $248.00
60 units × $248124 = $14,880

 

Question 9

1 / 1 pts

The following amounts and costs of platters were available for sale by Cari’s Ceramics during 2016:

Beginning inventory ….

10 units at $164

First purchase …………

15 units at $220

Second purchase …….

30 units at $280

Third purchase ……….

25 units at $260


Cari’s Ceramics has 60 platters on hand at the end of the year. 

How much is cost of goods sold in dollars at the end of the year according to the average cost method?

  

$ 9,920

Correct!

  

$ 4,960

  

$ 6,200

  

$11,500

 

(10 units × $164) + (15 units × $220) + (30 units × $280) + (25 units × $260) = $19,840
$19,840 / 80 units = $248.00

(10 + 15 + 30 + 25 units) – 60 units = 20 units sold
20 units × $248 = $4,960

 

Question 10

1 / 1 pts

Red Company and White Company reported the following information in their financial statements, prior to their merger:

 

Red Company

White Company

$millions

Sales

COGS

Inventories

Sales

COGS

Inventories

2016

$57,000

$48,250

$13,340

$88,560

$80,250

$33,800

2015

55,000

34,240

17,880

92,100

56,800

31,800


To the closest hundredth, how much is the 2016 inventory turnover for Red Company?

  

3.65

 

  

4.27

 

Correct!

  

3.09

 

  

3.62

 

$48,250 / [($13,340 + $17,880) / 2] = 3.09


Bonus Quiz

 

Question 1

1 / 1 pts

Flyer Company has provided the following information prior to any year-end bad debt adjustment:

  • Cash sales, $150,000
    • Credit sales, $450,000
    • Selling and administrative expenses, $110,000
    • Sales returns and allowances, $30,000
    • Gross profit, $490,000
    • Accounts receivable, $110,000
    • Sales discounts, $14,000
    • Allowance for doubtful accounts credit balance, $1,200

Flyer prepares an aging of accounts receivable and the result shows that 5% of accounts receivable is estimated to be uncollectible. How much is bad debt expense?

  

$4,240.

 

  

$5,500.

 

  

$6,700.

 

Correct!

  

$4,300.

 

 

Question 2

1 / 1 pts

Which of the following is correct when bad debt expense is recorded at year-end?

Correct!

  

Income from operations will decrease.

 

  

Current assets will increase.

 

  

Current liabilities will decrease.

 

  

Gross profit will decrease.

 

 

Question 3

1 / 1 pts

Superior Company has provided you with the following information before any year-end adjustments:

Net credit sales are $120,000.
Historical percentage of credit losses is 2%.
Allowance for doubtful accounts has a credit balance of $300.
Accounts receivables ending balance is $47,000.

What is the estimated bad debt expense using the percentage of credit sales method?

  

$2,700.

 

  

$940.

 

You Answered

  

$2,100.

 

  

$2,400.

 

 

Question 4

1 / 1 pts

The Rye Corporation has provided the following information:

  • Total sales were $1,200,000.
    • Beginning net accounts receivable was $45,000.
    • Ending net accounts receivable was $65,000.
    • Sales returns and allowances totaled $100,000.

What was Rye’s receivables turnover ratio?

You Answered

  

21.8

 

  

10.0

 

  

20.0

 

  

18.5

 

 

Question 5

1 / 1 pts

Which of the following statements is false?

  

The journal entry to record bad debt expense decreases current assets.

 

Correct!

 

The journal entry to write off an uncollectible account receivable decreases operating income.

 

The journal entry to write off an uncollectible account receivable does not affect current assets.

 

The journal entry to record bad debt expense decreases retained earnings.

 

 

Question 6

1 / 1 pts

Coleman Company has provided the following information: beginning inventory, $100,000; cost of goods sold, $450,000; and ending inventory, $80,000. How much were Coleman’s inventory purchases?

  

$450,000.

 

Correct!

  

$430,000.

 

  

$410,000.

 

  

$420,000.

 

 

Question 7

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the LIFO cost flow assumption under a periodic inventory system?

  

$770,000.

 

Correct!

  

$640,000.

 

  

$880,000.

 

  

$840,000.

 

 

Question 8

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the FIFO cost flow assumption under a periodic inventory system?

  

$880,000.

 

Correct!

  

$840,000.

 

  

$640,000.

 

  

$960,000.

 

 Question 9

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the average cost flow assumption under a periodic inventory system?

  

$840,000.

 

  

$880,000.

 

Correct!

  

$770,000.

 

  

$640,000.

 

 

Question 10

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was cost of goods sold using the LIFO cost flow assumption under a periodic inventory system?

  

$11,480,000.

 

Correct!

  

$11,680,000.

 

  

$11,590,000.

 

  

$11,550,000.

 

 

Question 11

1 / 1 pts

Which of the following accounts would not be considered a tangible asset?

  

Buildings

 

  

Land

 

Correct!

  

Copyright

 

  

Equipment

 

 

Question 12

1 / 1 pts

Which of the following statements is incorrect?

  

Additions and improvements to a depreciable asset occur infrequently.

 

  

Ordinary repairs and maintenance decrease net income.

 

  

Ordinary repairs and maintenance are recurring in nature.

 

Correct!

  

Capital expenditures decrease assets.

 

 

Question 13

1 / 1 pts

On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000.

If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect?

  

The December 31, 2018 accumulated depreciation balance was $18,000.

 

Correct!

  

The December 31, 2017 book value was $24,000.

 

  

The annual depreciation expense is $6,000.

 

  

The December 31, 2016 book value was $35,000.

 

 

Question 14

1 / 1 pts

Warren Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost $800,000. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years.

Assuming the first year’s depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?

  

$64,000.

 

  

$30,720.

 

Correct!

  

$58,880.

 

  

$32,000.

 

 

Question 15

1 / 1 pts

On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value.

What is the vehicle’s book value as of December 31, 2017, assuming Wasson uses the straight-line depreciation method?

  

$12,000.

 

  

$30,000.

 

  

$24,000.

 

Correct!

  

$28,000.

 


Quiz 8 Revised

 

Question 1

1 / 1 pts

On January 1, 2015, Dunlop Company purchased a copy machine. The machine costs $600,000, its estimated useful life is 8 years, and its expected salvage value is $40,000. 

What is the depreciation expense for 2016 using double-declining-balance method?

  

$ 95,000

  

$150,000

 

Correct!

  

$112,500

 

  

$ 70,000

Double-declining-balance rate = 1/8 × 2 = 25%.

Depreciation expense of year 2015 is $600,000 × 25% = $150,000

  

Depreciation expense of year 2016 is $450,000 × 25% = $112,500

  

 

Question 2

1 / 1 pts

Which of the following estimates are required when calculating depreciation expense? 

1.

Depreciation rate

 

2.

Useful life

 

3.

Expected maintenance costs

 

4.

Salvage value

 

 

Correct!

  

1, 2, and 4

 

  

1, 2, 3, and 4

 

  

2 and 4

 

  

2, 3, and 4

 

Expected maintenance costs are not capitalized, nor do they impact the amount of depreciation per period.

 

Question 3

1 / 1 pts

How is the gain (loss) on a plant asset sale calculated?

  

Asset sale price – Asset purchase cost

  

Book value on balance sheet – Asset sale price

Correct!

  

Asset sale price – Book value on balance sheet

  

Asset sale price – Total accumulated depreciation

The gain (loss) on the sale of a plant asset is computed as:
Asset sale price – book value of the asset

Quiz 2 – Ch 2

 

Question 1

1 / 1 pts

An accrual of wages expense would produce what effect on the balance sheet?

Correct!

  

Increase liabilities and decrease equity

 

  

Decrease liabilities and increase equity

 

  

Increase assets and increase liabilities

 

  

Decrease assets and decrease liabilities

 

An accrual of wages expense produces an increase in wages payable (liability) and a decrease in retained earnings (stockholders’ equity), resulting in a decrease of profit.

 

Question 2

1 / 1 pts

Assets are recorded in the balance sheet in order of:

  

Market value

 

  

Historic value

 

Correct!

  

Liquidity

 

  

Maturity

 

Liquidity refers to the ease of conversation to cash. Current assets are to be used during the current operating cycle (starting with cash, short-term investments, accounts receivables, inventories and other assets). Market value and historic value refer to the measurement of assets. Maturity refers to the order in which liabilities are recorded in the balance sheet.

 

Question 3

1 / 1 pts

Cash collected on accounts receivable would produce what effect on the balance sheet?

  

Increase liabilities and decrease equity

 

  

Decrease liabilities and increase equity

 

  

Increase assets and decrease assets

 

  

Decrease assets and decrease liabilities

 

Cash collected on accounts receivable produces an increase in cash and a decrease in accounts receivable, both asset accounts. There is no impact on profit and on equity.

 

Question 4

1 / 1 pts

Net working capital is defined as:

  

Assets – liabilities

  

Current assets

 

Correct!

  

Current assets – Current liabilities

  

Market value – Book value

Net working capital = Current assets – Current liabilities

 

Question 5

1 / 1 pts

Sales less cost of goods sold equals:

  

Net income

 

  

Net profit margin

 

Correct!

  

Gross profit

 

  

Gross profit margin

 

Sales – Cost of goods sold = Gross profit. 
The gross profit margin is gross profit divided by sales.

 

Question 6

1 / 1 pts

The Cash T-account has a beginning balance of $64,000. During the year, $488,000 was debited and $498,000 was credited to the account. What is the ending balance of cash?

  

($10,000)

 

You Answered

  

$74,000

 

  

$54,000

 

  

Cannot be determined from the information given.

 

$64,000 + $488,000 – $498,000 = $54,000

   

 

Question 7

1 / 1 pts

Which of the following is one effect of a purchase of $1,000 of inventory on credit?

  

It would increase liabilities by $1,000

 

  

It would decrease retained earnings by $1,000

 

  

It would decrease liabilities by $1,000

 

  

It would decrease cash asset $5,000

 

The purchase on credit creates an account payable. It would increase liabilities by $1,000. In addition, the inventory account in the asset section of the balance sheet would also increase.

 

Question 8

1 / 1 pts

Which of the following will properly record the payment of a one-year insurance policy?

You Answered

  

Increase assets and increase retained earnings

 

  

Increase liabilities and decrease retained earnings

 

  

Increase and decrease assets

 

  

Decrease assets and decrease liabilities

 

Prepaid insurance in increased and cash is decreased, both of which are assets.

 

Question 9

1 / 1 pts

Which one of the following is included in current assets?

Correct!

  

Accounts receivable

 

  

Taxes payable

 

  

Automobiles

 

  

Common stock

 

Accounts receivable is included in current assets as it represents amount owed by customers that are expected to be paid within one year or the operating cycle.

 

Question 10

1 / 1 pts

Which one of the following is not a current liability?

  

Taxes payable

 

  

Accounts payable

 

  

Wages payable

 

Correct!

  

Wage expense

 

Wages expense is an income statement account, not a balance sheet account. Current liabilities are amounts owed and due to be repaid within one year or within one operating cycle.


Quiz 1 – Ch 1

 

Question 1

1 / 1 pts

On which statement are assets, liabilities and equity reported?

Correct!

  

Balance sheet

 

  

Income statement

 

  

Statement of stockholders’ equity

  

Statement of cash flows

 

A balance sheet reports on investing and financing activities. It lists amounts for assets, liabilities, and equity at a point in time.

 

Question 2

1 / 1 pts

Which of the four basic financial statements would contain a line item for expenses?

  

Balance sheet

 

Correct!

  

Income statement

 

  

Statement of equity

 

  

Statement of cash flows

 

The income statement reports on the revenues less the expenses over the reporting period. Expenses only appear on the income statement.

 

Question 3

1 / 1 pts

Which of the following would be reported on a statement of stockholders’ equity?

  

Cash

 

  

Total expenses

 

Correct!

  

Dividends

 

  

Financing cash flows

 

Dividends are a return of capital to stockholders and are found only on the statement of stockholders’ equity. Cash is found on the balance sheet. Total expenses is an income statement amount Financing cash flows are found on the statement of cash flows.

 

Question 4

1 / 1 pts

Which of the following assumptions that underlies the preparation of financial statements assumes that companies will continue their operations over time?

  

Separate economic entity

 

Correct!

  

Going concern

 

  

Accounting period

 

  

Measuring unit

 

Under the going concern assumption, companies are assumed to have continuity in that they can be expected to continue in operations over time.

 

Question 5

1 / 1 pts

Which one of the following is not an external user of financial information?

  

Stockholders

 

  

Creditors

 

  

Internal Revenue Service

 

Correct!

  

Top company management

 

Decision makers outside the company include stockholders, creditors, and tax agencies such as the Internal Revenue Service.

 

Question 6

1 / 1 pts

How are the balance sheet and the statement of cash flows linked?

Correct!

  

By the cash balance

 

  

By the amount of total retained earnings

 

  

By the total shareholder equity

 

  

By the amount of net income

 

The balance sheet and the statement of cash flows are linked by the cash balance. The statement of cash flows shows the inflows and outflows of cash during the period. Then ending cash balance is on the balance sheet.

 

Question 7

1 / 1 pts

Data from the financial statements of The Grocer Company and FoodValu, Inc., two national grocery chains are presented below:

$ in thousands

The Grocer Co.

FoodValu, Inc.

 

 

Total liabilities, 2016 ………

$30,020

$20,064

 

 

 

Total liabilities, 2015 ………

36,414

24,836

 

 

 

Total assets, 2016 …………

46,952

24,106

 

 

 

Total assets, 2015 ………….

47,010

27,516

 

 

 

Revenue, 2016 …………….

180,478

72,200

 

 

 

Net income (loss), 2016…….

1,204

(2,080

 

)

 


To the nearest hundredth of a percent, what is the 2016 return on equity ratio for The Grocer Company?

  

4.00%

 

  

13.11%

 

Correct!

  

8.75%

 

  

Not enough information provided

 

ROE = Net income / Average stockholders’ equity
= $ 1,204 / [($16,932+ $ $10,596)/2] = $1,204 / 13,764= 8.75%

Shareholders’ equity 2016 = $46,952 – 30,020 = $16,932
Shareholders’ equity 2015 = $47,010 – 36,414 = $10,596

Question 8

1 / 1 pts

Data from the financial statements of The Grocer Company and FoodValu, Inc., two national grocery chains are presented below:

$ in thousands

The Grocer Co.

FoodValu, Inc.

 

 

Total liabilities, 2016 ………

$30,020

$20,064

 

 

 

Total liabilities, 2015 ………

36,414

24,836

 

 

 

Total assets, 2016 …………

46,952

24,106

 

 

 

Total assets, 2015 ………….

47,010

27,516

 

 

 

Revenue, 2016 …………….

180,478

72,200

 

 

 

Net income (loss), 2016…….

1,204

(2,080

 

)

 


To the nearest hundredth, what is the 2016 debt-to-equity ratio for The Grocer Company?

  

2.41

 

  

4.92

 

Correct!

  

1.77

 

  

44.16

 

= $30,020 / $16,932 = 1.77

Stockholders’ equity 2016 = $46,952 – 30,020 = $16,932

 

Question 9

1 / 1 pts

Which of the following statements is true regarding generally accepted accounting principles (GAAP)?

  

GAAP is a set of laws

 

Correct!

  

GAAP is subject to change as conditions warrant

 

 

Under GAAP, if two companies engage in the same transactions, they must choose the same accounting methods

  

U.S. GAAP is the same as GAAP in other countries

 

Specific rules under GAAP are altered or new practices are formulated to fit changes in underlying economic circumstances of business transactions.

 

Question 10

1 / 1 pts

Which of the following forms of business organizations exists as a legal entity?

  

A sole proprietorship

 

  

A partnership

 

Correct!

  

A corporation

 

  

A labor union

 

A corporation is a form of business organization that exists as a legal entity that issues shares of stock to its owners or shareholders in exchange for cash or other resources.

 


Quiz 3 – Ch 3

 

Question 1

1 / 1 pts

A company bills customers for services rendered on account. Which of the following is one part of recording this transaction?

  

Debit Service Revenue

 

  

Credit Cash

 

Correct!

  

Debit Accounts Receivable

 

  

Credit Unearned Revenue

 

The journal entry includes a debit to Accounts Receivable and a credit to Service Revenue.

 

Question 2

1 / 1 pts

Which one of the following is not a reason for which adjusting entries are made?

Correct!

 

To close the income statement accounts and ready them for the following year’s activity

 

To allocate used or expired assets to reflect expenses incurred in the period

 

 

To allocate the earned portion of unearned revenue to reflect revenues earned during the period

 

To accrue expenses to reflect expenses incurred in the period that are not yet paid or recorded

Adjusting entries are made for all the reasons above except to close out the accounts. Answer A describes closing entries.

 

Question 3

1 / 1 pts

Which of the following is a distinguishing characteristic of a deferral?

  

It affects at least one liability account

 

  

It always impacts the cash account

 

Correct!

 

It includes the adjustment of an amount previously recorded in a balance sheet account

 

It increases a balance sheet account and decreases an income statement account

A deferral adjusts an amount previously recorded in a balance sheet account.

 

Question 4

1 / 1 pts

A company provides services to clients during the period that are neither paid for, nor billed to the clients. What must the company do?

  

Bill the client prior to year-end in order to recognize the revenue

 

  

Record the revenues as a liability at the end of the year

 

Correct!

  

Accrue revenue by making an adjusting entry at the end of the period

 

  

All of the above are true

 

Services earned but not yet billed or collected require an accrual to recognize the revenue and the account receivable at the end of the period. The bill does not have to be sent prior to year-end and there is no liability at year end since money is owed to the company.

 

Question 5

1 / 1 pts

Magic Corporation has the following normal account balances in its general ledger at the end of a period:

Sales revenue

$1,060,000

Advertising expense

  180,000


Which of the following gives the correct entry required to close only the accounts above?

  

Advertising Expense

180,000

 

Retained Earnings

880,000

 

Sales Revenue

 

1,060,000

 

  

Retained Earnings

880,000

 

Net Income

 

880,000

 

Correct!

  

Sales Revenue

1,060,000

 

Advertising Expense

 

180,000

Retained Earnings

 

880,000

 

  

None of the above. These accounts are not closed.

The closing process requires that revenue accounts are debited and retained earnings are credited for the amount equal to the revenue balance. The closing process also requires that expense accounts are credited and retained earnings debited for an amount equal to the expense balance. The net amount of retained earnings credited in this problem is equal to $880,000 (or $1,060,000 – $180,000), since revenues are greater than expenses.

 

Question 6

1 / 1 pts

When adjusting for depreciation, which of the following is one effect of the adjustment?

  

Accumulated depreciation is debited

 

Correct!

  

The asset’s book value declines

  

The cost of the equipment declines

 

  

The market value of the equipment declines

 

The adjusting entry creates a credit to accumulated depreciation and a debit to depreciation expense. The credit causes the book value to decline because it increases the contra account that is shown as a deduction from the cost of the equipment on the balance sheet.

 

Question 7

1 / 1 pts

Which of the following is the correct order of the steps in the accounting cycle?

  

Adjust, report, analyze, record, and close

 

You Answered

  

Record, report, analyze, adjust, and close

 

  

Report, analyze, close, record, and adjust

 

Correct Answer

  

Analyze, record, adjust, report, and close

 

The steps in the cycle are to first analyze the transaction, the record it, then make any necessary adjustments, report the results, and finally to close the temporary accounts to ready them for the next period’s activity.

 

Question 8

1 / 1 pts

On the last day of December 2016, Camrey’s Trucks entered into a transaction that resulted in a receipt of $216,000 cash in advance related to services that will be provided during January 2017. During December of 2016, the company also performed $128,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $1,165,470 at December 31, 2016. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Camrey’s Trucks makes the appropriate adjusting entry, how much will service revenue will be reflected on the December 31, 2016 income statement?

  

$1,165,470

 

  

$1,715,000

 

  

$1,623,000

 

Correct!

  

$1,293,470

 

Service revenue = $1,165,470 + $128,000 = $1,293,470

 

 

Question 9

1 / 1 pts

On the last day of December 2016, Camrey’s Trucks entered into a transaction that resulted in a receipt of $216,000 cash in advance related to services that will be provided during January 2017. During December of 2016, the company also performed $128,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $1,165,470 at December 31, 2016. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Camrey’s Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as unearned revenue?

  

$ 90,000

Correct!

  

$216,000

 

  

$ 64,000

  

$ 98,000

Unearned revenue represents the amount collected in advance that the company has not yet earned.

 

Question 10

1 / 1 pts

On the last day of December 2016, Camrey’s Trucks entered into a transaction that resulted in a receipt of $216,000 cash in advance related to services that will be provided during January 2017. During December of 2016, the company also performed $128,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $1,165,470 at December 31, 2016. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Camrey’s Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as accounts receivable?

  

$108,000

 

  

$256,000

 

  

$ 64,000

Correct!

  

$128,000

 

Outstanding receivables are the amount earned but not yet received from customers.


Quiz 4 – Ch 4

Question 1

1 / 1 pts

The statement of cash flows explains changes in a firm’s:

  

Cash on hand and cash in the bank

 

Correct!

  

Cash and cash equivalents

 

  

Cash, cash equivalents, and accounts receivable

 

  

Working capital

 

Cash on hand and cash in bank are both considered to be cash. Accounts receivable is not part of cash or equivalents.

 

Question 2

1 / 1 pts

Which of the following is not a cash equivalent for purposes of preparing a statement of cash flows?

Correct!

  

Investment in common stock of other companies

 

  

Investment in Treasury bills

 

  

Investment in a money market fund

 

  

Investment in commercial paper

 

Cash equivalents must be easily convertible into a known cash amount and close to maturity so that their value is not affected by interest rate changes. Stock has no maturity date so it can never be a cash equivalent.

 

Question 3

1 / 1 pts

Which of the following is not a category for classifying cash flows in a statement of cash flows?

  

Operating activities

 

Correct!

  

Nonoperating activities

 

  

Financing activities

 

  

Investing activities

 

There are three activities: operating, investing, and financing.

 

Question 4

1 / 1 pts

A firm’s net cash flow from operating activities includes:

  

Cash received from sale of equipment

 

  

Cash received from issuance of common stock

 

Correct!

  

Cash received from sale of merchandise

 

  

Cash received as payment of loan from a borrower

 

Operating activities are cash in- and outflows from selling goods or rendering services. Selling equipment is an investing activity. Issuing stock and paying loans are financing activities.

 

Question 5

1 / 1 pts

A firm’s cash flows from investing activities include:

Correct!

  

Cash received from the sale of a plant asset

 

  

Cash paid as dividends

 

  

Cash received from the rendering of services to customers

 

  

Cash paid to retire bonds payable

 

Investing activities are those involving the acquisition and disposal of property, plant, and equipment and intangible assets, and the purchase and sale of investments in government securities and other companies.

Question 6

1 / 1 pts

A firm’s cash flow from financing activities includes:

Correct!

  

Cash paid to reacquire treasury stock

 

  

Cash paid for merchandise purchased

 

  

Cash received from sale of investment in bonds

 

  

Cash received as interest income

 

Financing activities involve receiving capital from owners, providing returns to owners, and borrowing and repaying amounts from creditors.

 

Question 7

1 / 1 pts

In a statement of cash flows, interest paid to creditors is classified as a cash flow from:

Correct!

  

Operating activities

 

  

Trading activities

 

  

Financing activities

 

  

Investing activities

 

Interest paid and received are both operating activities.

 

Question 8

1 / 1 pts

Nichole Company has an accrual basis net income of $260,000 and the following related items:

Depreciation expense

$76,000

Accounts receivable increase

  24,000

Inventory decrease

  28,000

Accounts payable decrease

16,000


How much is Nichole’s net cash flow from operating activities?

  

$248,000

 

Correct!

  

$324,000

 

  

$174,000

 

  

$320,000

 

$260,000 + $76,000  $24,000 + $28,000  $16,000 = $324,000

 

Question 9

1 / 1 pts

Which of the following is a required separate disclosure for firms using the indirect method in the statement of cash flows?

Correct Answer

  

Cash paid during the year for interest and income taxes

 

You Answered

  

All changes in cash equivalents

 

  

Total operating expenses

 

  

All of the above

 

Cash received from customers, cash paid for inventory, cash paid for interest, cash paid for income taxes, and cash paid for operating expenses are the major cash flows reporting under the direct method in the operating activities section.

 

Question 10

1 / 1 pts

With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?

 

Indirect method because it provides better information for decision making

 

  

Direct method because it is based on the accrual basis of accounting

 

 

Direct method because it requires a supplemental indirect method section

 

Correct!

  

Indirect method because it is less expensive to prepare

 

The indirect method is easier and cheaper because it takes less time. The direct method requires an additional step in that companies must also present a supplemental indirect method section.


Quiz 5

Question 1

1 / 1 pts

Liquidity refers to:

  

The life cycle of the company

 

  

The amount of receivables the company has in its balance sheet

 

  

The amount of financial leverage

 

Correct!

  

None of the above

 

Liquidity refers to cash, the amount on hand available to pay current obligations as they become due.

 

Question 2

1 / 1 pts

Which ratio provides an indication of the salability of the company’s products?

  

Account receivable turnover

 

  

Current ratio

 

Correct!

  

Inventory turnover

 

  

Gross profit margin

 

Inventory turnover measures the number of times during a period a company sells its inventory. Trends in this metric can provide an indication of the salability of the company’s products.

 

Question 3

1 / 1 pts

What does the current ratio measure?

  

Solvency

 

  

Profitability

 

  

Short-term debt paying ability

 

You Answered

  

Leverage

 

The current ratio is a measure of short-term debt paying ability. It measures a company’s ability to pay its current obligations as they become due.

 

Question 4

1 / 1 pts

Which of the following is one measure of liquidity?

  

Debt-to-equity ratio

 

  

Times interest earned

 

Correct!

  

Quick ratio

 

  

None of the above

 

The only measure of liquidity listed above is the quick ratio which is a variation of the current ratio (Current Ratio = Current assets / Current liabilities) to focus on quick assets (cash, securities, and receivables). The debt-to-equity ratio is a common measure of financial leverage, and the times interest earned ratio is a metric of solvency analysis.

 

Question 5

1 / 1 pts

K Grocers’ 2016 balance sheet shows average shareholders’ equity of $9,264 million, net income of $1,505 million, and common shares issued of $1,918 million. The company has no preferred shares issued. K Grocers’ return on common equity for the year is:

Correct!

  

16.25%

 

  

2.74%

 

  

36.5%

 

  

There is not enough information to calculate the ratio.

 

ROE = Net income/Average shareholders’ equity

 

= $1,505 million / $9,264 million = 16.245%

 

 

Question 6

1 / 1 pts

K Grocers’ 2016 financial statements show average shareholders’ equity of $9,264 million, net income of $1,505 million, interest expense of $870 million, and average total assets of $ 46,982 million. 

Assume that the statutory tax rate is 35%. How much is K Grocers’ return on assets for the year?  

  

16.2%

 

You Answered

  

5.1%

 

  

4.4%

 

  

There is not enough information to calculate the ratio.

 

ROA = EWI / Average total assets

 

= $1,505 + [$870 x (1 – .035)] / $46,982 million = 4.4%

 

 

Question 7

1 / 1 pts

K Grocers’ 2016 financial statements show interest expense of $870 million, net income of $1,505 million, sales of $225,935 million, and average total assets of $23,491 million. Assume that the statutory tax rate is 35%. 

How much is K Grocers’ profit margin for the year?

Correct!

  

0.92%

 

  

1.05%

 

  

8.81%

 

  

There is not enough information to calculate the ratio.

 

Profit margin = EWI / Sales 
= $1,505 million + [$870 million x (1 – 0.35)] / $225,935 million =   0.92%

 

Question 8

1 / 1 pts

Walkie Enterprises reported sales revenue totaling $1,120,000, $1,340,000, and $1,675,000 in the years, 2014, 2015, and 2016, respectively. Performing horizontal analysis, what is the percentage change for 2016?

Correct!

  

25.00%

 

  

38.16%

 

  

47.16%

 

  

14.11%

 

Change in revenue / Revenue in previous year 
= ($1,675,000 – $1,340,000) / $1,340,000 = 25.00%

 

Question 9

1 / 1 pts

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute the profit margin to the nearest hundredth of a percent.

 

Operating profit

before tax

Earnings without interest expense (EWI)

Average

total assets

Sales

Tax rate on

operating profit

$116,600

$233,500

$721,200

$1,703,130

33%

 

  

6.85%

 

  

32.38%

 

Correct!

  

13.71%

 

  

9.19%

 

Profit margin = EWI / Sales revenue 
= $233,500 / $1,703,130 = 13.71%

 

Question 10

1 / 1 pts

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute ROA to the nearest hundredth.

 

Operating profit

before tax

Earnings without interest expense (EWI)

Average

total assets

Sales

Tax rate on

operating profit

$116,600

$233,500

$721,200

$1,703,130

33%

 

  

27.30%

 

  

13.71%

 

  

16.17%

 

Correct!

  

32.38%

 

ROA = EWI / Average total assets 
= $233,500 / $721,200 = 32.38%

 


Quiz 6

 

Question 1

1 / 1 pts

Which of the below cases is not an example of potentially misleading reporting?

  

Channel stuffing

 

  

Overly optimistic estimates

 

Correct!

  

Recognizing revenue after goods are delivered

 

  

Mischaracterizing transactions as arm’s length

Revenue recognition requires that amounts be earned and realized, or realizable before recognizing as revenue.

 

Question 2

1 / 1 pts

Caroline’s Collectibles estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Caroline’s Collectible computes a total of $6,720 in estimated losses as of December 31, 2016. Its Accounts Receivable account has a balance of $ 225,600 and its Allowance for Uncollectible Accounts has an unused balance of $960 before adjustment at December 31, 2016. 

How much is bad debt expense that Caroline’s Collectibles will report in 2016?

  

$   960

  

$7,680

 

  

$6,720

 

Correct!

  

$5,760

 

To bring the allowance to the desired balance of $6,720, the company will need to increase the allowance account by $5,760 (or $6,720 – $ 960) resulting in bad debt expense of that same amount.

 

Question 3

1 / 1 pts

On which financial statement and at what amount are accounts receivable reported?

  

Balance sheet at the amount owed by customers

 

  

Income statement at the net uncollectible amount

 

  

Income statement at the amount written off

 

Correct!

  

Balance sheet at the net realizable value

 

Accounts receivable are reported on the balance sheet at the amount expected to be collected which is accounts receivable less allowance for uncollectible accounts, also known as net realizable value.

 

Question 4

1 / 1 pts

At what amount will accounts receivable be reported on the balance sheet if the gross receivable balance is $94,000 and the allowance for uncollectible accounts is estimated at 8% of gross receivables?

  

$99,760

 

Correct!

  

$86,480

 

  

$90,240

 

  

$56,400

 

Receivables are reported net of the allowance account. 
In this case, $94,000 – ($94,000 x 8%) = $86,480.

 

Question 5

1 / 1 pts

Which of the following does not occur when a company receives additional information that requires it to increase its expectations of uncollectible accounts receivable?

  

Accounts receivable (net) is reduced

 

  

Bad debt expense is increased

 

  

Net income is reduced

 

Correct!

  

The allowance account is decreased

 

The allowance account is increased, resulting in additional expense and a reduction of profit and retained earnings.

 

Question 6

1 / 1 pts

Which of the following formula computes the average collection period?

  

Average daily sales / Account receivable

 

  

Account receivable / Average daily sales

 

  

Sales / Average accounts receivable

 

Correct!

  

Average accounts receivable / Average daily sales

 

Average collection period = Average accounts receivable / Average daily sales

 

Question 7

1 / 1 pts

If the collection period lengthens compared to historic figures and industry averages, what might the reason be?

  

Deterioration of collectibility of receivables

 

  

A change in sales mix to longer paying customers

 

  

A decrease in the amount of sales generated

 

Correct!

  

A and B

 

  

All of the above

 

A lengthened collection period means that receivables turnover slows Answers A and B are reasons for a slowdown in the receivables turnover.

 

Question 8

1 / 1 pts

Which of the following journal entries correctly records bad debt expense?

  

Bad debt expense                   xxx

    Accounts receivable                        xxx 

  

Allowance for doubtful accounts           xxx

     Bad debt expense                                         xxx

  

Allowance for doubtful accounts              xxx

     Accounts receivable                                        xxx

Correct!

  

Bad debt expense                                   xxx

    Allowance for doubtful accounts                    xxx

 

 

 

 

 

 

 

Question 9

1 / 1 pts

Which of the following journal entries correctly records the write off of an uncollectible account receivable when using the allowance method?

Correct!

  

Allowance for doubtful accounts          xxx

     Accounts receivable                                     xxx

  

Bad debt expense                                   xxx

     Allowance for doubtful accounts                   xxx

  

Bad debt expense                  xxx

     Uncollectible sales                       xxx   

  

Allowance for doubtful accounts            xxx

     Bad debt expense                                        xxx               

 

Question 10

1 / 1 pts

Superior Company has provided you with the following information before any year-end adjustments:

Net credit sales are $120,000.
Historical percentage of credit losses is 2%.
Allowance for doubtful accounts has a credit balance of $300.
Accounts receivables ending balance is $47,000.

What is the estimated bad debt expense using the percentage of credit sales method?

  

$940.

 

  

$2,700.

 

  

$2,400.

 

You Answered

  

$2,100.

 Quiz 7

 

Question 1

1 / 1 pts

On which financial statement would you look to find the total costs of merchandise that remains and the total that has flowed through a company’s accounting system?

  

Balance sheet and statement of cash flows

 

Correct!

  

Income statement and balance sheet

 

  

Statement of cash flows and balance sheet

 

  

Statement of stockholders’ equity and balance sheet

When inventories are used up in production or are sold, their costs are transferred from the balance sheet (inventory account) to the income statement as cost of goods sold.

 

Question 2

1 / 1 pts

Garfield’s Goods purchases $80,000 of inventory during the period, has beginning of the period inventory of $12,000, and sells $72,000 of inventory during the period for $120,000. 

What is the company’s inventory balance to be reported on its balance sheet at year end?

  

$36,000

 

Correct!

  

$20,000

 

  

$10,000

 

  

$12,000

 

$12,000 + 80,000 ‒ $72,000 = $20,000

 

Question 3

1 / 1 pts

Assuming rising prices, which method will give the highest dollar value for cost of goods sold on the income statement?

  

FIFO

 

  

Average Cost

 

Correct!

  

LIFO

 

  

All of these give equal values for cost of goods sold

 

Under LIFO, the most costly units are the ones last purchased. LIFO matches these higher cost items against sales as cost of goods sold.

 

Question 4

1 / 1 pts

The following data refer to Cambridge Company’s ending inventory: 

Item code

Quantity

Unit Cost

Unit Market

Small

120

$228

$232

Medium

420

152

176

Large

610

168

176

Extra-Large

220

268

256


How much is the inventory if the lower of cost or market rule is applied to each item of inventory?

Correct!

  

$250,000

 

  

$252,640

 

  

$265,440

 

  

None of the above

 

(120 x $228) + (420 x $152) + (610 x $168)+ (220 x $256) = $250,000

 

Question 5

1 / 1 pts

The following hammers were available for sale during the year for Felicity Tools:

Beginning inventory ……………..

10 units at $160

First purchase ……………………

15 units at $220

Second purchase ………………..

30 units at $280

Third purchase ……………………

25 units at $260


Felicity has 30 hammers on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the first-in, first-out method?

  

$5,100

 

  

$5,950

 

Correct!

  

$7,900

 

  

$7,800

 

The ending inventory is made up of 25 units in the third purchase plus 5 units in the second purchase. (25 × $260) + (5 × $280) = $7,900

 

Question 6

1 / 1 pts

The following hammers were available for sale during the year for Felicity Tools:

Beginning inventory ……………..

10 units at $160

First purchase ……………………

15 units at $220

Second purchase ………………..

30 units at $280

Third purchase ……………………

25 units at $260


Felicity has 45 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method?

  

$10,550

 

Correct!

  

$ 7,700

  

$ 6,600

  

$ 7,600

(10 + 15 + 30 + 25 units) – 45 units = 35 units sold. 
Cost of goods sold = (10 units × $160) + (15 units × $220) + (10 units × $280) = $ 7,700

 

Question 7

1 / 1 pts

Wonderland Company imports and sells a product produced in Canada. In the summer of 2016, a natural disaster disrupted production, affecting its supply of product. On January 1, 2016, Wonderland’s inventory records were as follows:

Year purchased

Quantity (units)

Cost per unit

Total cost

2014

4,000

$160

$   640,000

2015

10,000

$220

2,220,000

Total

14,000

 

$2,840,000


Through mid December of 2016, purchases were limited to 16,000 units, because the cost had increased to $320 per unit. Wonderland sold 18,400 units during 2016 at a price of $392 per unit, which significantly depleted its inventory. 

Assume that Wonderland makes no further purchases during 2016. Wonderland uses the LIFO inventory method. Compute Wonderland’s gross profit for 2016.

  

$1,762,400

 

Correct!

  

$1,564,800

 

  

$2,494,000

 

  

$1,714,400

 

Sales revenue

18,400 x $392 =

$7,212,800

Cost of goods sold

(16,000 × $320) + (2,400 × $220) =

5,648000

Gross profit

 

$1,564,800

 

 

Question 8

1 / 1 pts

The following amounts and costs of platters were available for sale by Cari’s Ceramics during 2016:

Beginning inventory ….

10 units at $164

First purchase …………

15 units at $220

Second purchase …….

30 units at $280

Third purchase ……….

25 units at $260


Cari’s Ceramics has 60 platters on hand at the end of the year. 

What is the dollar amount of inventory at the end of the year according to the average cost method?

Correct!

  

$14,880

 

  

$ 6,200

  

$11,500

 

  

$ 9,720

(10 units × $164) + (15 units × $220) + (30 units × $280) + (25 units × $260) = $19,840
$19,840 / 80 units = $248.00
60 units × $248124 = $14,880

 

Question 9

1 / 1 pts

The following amounts and costs of platters were available for sale by Cari’s Ceramics during 2016:

Beginning inventory ….

10 units at $164

First purchase …………

15 units at $220

Second purchase …….

30 units at $280

Third purchase ……….

25 units at $260


Cari’s Ceramics has 60 platters on hand at the end of the year. 

How much is cost of goods sold in dollars at the end of the year according to the average cost method?

  

$ 9,920

Correct!

  

$ 4,960

  

$ 6,200

  

$11,500

 

(10 units × $164) + (15 units × $220) + (30 units × $280) + (25 units × $260) = $19,840
$19,840 / 80 units = $248.00

(10 + 15 + 30 + 25 units) – 60 units = 20 units sold
20 units × $248 = $4,960

 

Question 10

1 / 1 pts

Red Company and White Company reported the following information in their financial statements, prior to their merger:

 

Red Company

White Company

$millions

Sales

COGS

Inventories

Sales

COGS

Inventories

2016

$57,000

$48,250

$13,340

$88,560

$80,250

$33,800

2015

55,000

34,240

17,880

92,100

56,800

31,800


To the closest hundredth, how much is the 2016 inventory turnover for Red Company?

  

3.65

 

  

4.27

 

Correct!

  

3.09

 

  

3.62

 

$48,250 / [($13,340 + $17,880) / 2] = 3.09


Bonus Quiz

 

Question 1

1 / 1 pts

Flyer Company has provided the following information prior to any year-end bad debt adjustment:

  • Cash sales, $150,000
    • Credit sales, $450,000
    • Selling and administrative expenses, $110,000
    • Sales returns and allowances, $30,000
    • Gross profit, $490,000
    • Accounts receivable, $110,000
    • Sales discounts, $14,000
    • Allowance for doubtful accounts credit balance, $1,200

Flyer prepares an aging of accounts receivable and the result shows that 5% of accounts receivable is estimated to be uncollectible. How much is bad debt expense?

  

$4,240.

 

  

$5,500.

 

  

$6,700.

 

Correct!

  

$4,300.

 

 

Question 2

1 / 1 pts

Which of the following is correct when bad debt expense is recorded at year-end?

Correct!

  

Income from operations will decrease.

 

  

Current assets will increase.

 

  

Current liabilities will decrease.

 

  

Gross profit will decrease.

 

 

Question 3

1 / 1 pts

Superior Company has provided you with the following information before any year-end adjustments:

Net credit sales are $120,000.
Historical percentage of credit losses is 2%.
Allowance for doubtful accounts has a credit balance of $300.
Accounts receivables ending balance is $47,000.

What is the estimated bad debt expense using the percentage of credit sales method?

  

$2,700.

 

  

$940.

 

You Answered

  

$2,100.

 

  

$2,400.

 

 

Question 4

1 / 1 pts

The Rye Corporation has provided the following information:

  • Total sales were $1,200,000.
    • Beginning net accounts receivable was $45,000.
    • Ending net accounts receivable was $65,000.
    • Sales returns and allowances totaled $100,000.

What was Rye’s receivables turnover ratio?

You Answered

  

21.8

 

  

10.0

 

  

20.0

 

  

18.5

 

 

Question 5

1 / 1 pts

Which of the following statements is false?

  

The journal entry to record bad debt expense decreases current assets.

 

Correct!

 

The journal entry to write off an uncollectible account receivable decreases operating income.

 

The journal entry to write off an uncollectible account receivable does not affect current assets.

 

The journal entry to record bad debt expense decreases retained earnings.

 

 

Question 6

1 / 1 pts

Coleman Company has provided the following information: beginning inventory, $100,000; cost of goods sold, $450,000; and ending inventory, $80,000. How much were Coleman’s inventory purchases?

  

$450,000.

 

Correct!

  

$430,000.

 

  

$410,000.

 

  

$420,000.

 

 

Question 7

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the LIFO cost flow assumption under a periodic inventory system?

  

$770,000.

 

Correct!

  

$640,000.

 

  

$880,000.

 

  

$840,000.

 

 

Question 8

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the FIFO cost flow assumption under a periodic inventory system?

  

$880,000.

 

Correct!

  

$840,000.

 

  

$640,000.

 

  

$960,000.

 

 Question 9

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the average cost flow assumption under a periodic inventory system?

  

$840,000.

 

  

$880,000.

 

Correct!

  

$770,000.

 

  

$640,000.

 

 

Question 10

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date

Transaction

Number of Units

Cost per Unit

1/1

Beginning Inventory

400

$3,200

6/6

Purchase

800

$3,600

9/10

Purchase

1,200

$4,000

11/15

Purchase

800

$4,200

During the year, RJ sold 3,000 units.

What was cost of goods sold using the LIFO cost flow assumption under a periodic inventory system?

  

$11,480,000.

 

Correct!

  

$11,680,000.

 

  

$11,590,000.

 

  

$11,550,000.

 

 

Question 11

1 / 1 pts

Which of the following accounts would not be considered a tangible asset?

  

Buildings

 

  

Land

 

Correct!

  

Copyright

 

  

Equipment

 

 

Question 12

1 / 1 pts

Which of the following statements is incorrect?

  

Additions and improvements to a depreciable asset occur infrequently.

 

  

Ordinary repairs and maintenance decrease net income.

 

  

Ordinary repairs and maintenance are recurring in nature.

 

Correct!

  

Capital expenditures decrease assets.

 

 

Question 13

1 / 1 pts

On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000.

If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect?

  

The December 31, 2018 accumulated depreciation balance was $18,000.

 

Correct!

  

The December 31, 2017 book value was $24,000.

 

  

The annual depreciation expense is $6,000.

 

  

The December 31, 2016 book value was $35,000.

 

 

Question 14

1 / 1 pts

Warren Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost $800,000. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years.

Assuming the first year’s depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?

  

$64,000.

 

  

$30,720.

 

Correct!

  

$58,880.

 

  

$32,000.

 

 

Question 15

1 / 1 pts

On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value.

What is the vehicle’s book value as of December 31, 2017, assuming Wasson uses the straight-line depreciation method?

  

$12,000.

 

  

$30,000.

 

  

$24,000.

 

Correct!

  

$28,000.

 


Quiz 8 Revised

 

Question 1

1 / 1 pts

On January 1, 2015, Dunlop Company purchased a copy machine. The machine costs $600,000, its estimated useful life is 8 years, and its expected salvage value is $40,000. 

What is the depreciation expense for 2016 using double-declining-balance method?

  

$ 95,000

  

$150,000

 

Correct!

  

$112,500

 

  

$ 70,000

Double-declining-balance rate = 1/8 × 2 = 25%.

Depreciation expense of year 2015 is $600,000 × 25% = $150,000

  

Depreciation expense of year 2016 is $450,000 × 25% = $112,500

  

 

Question 2

1 / 1 pts

Which of the following estimates are required when calculating depreciation expense? 

1.

Depreciation rate

 

2.

Useful life

 

3.

Expected maintenance costs

 

4.

Salvage value

 

 

Correct!

  

1, 2, and 4

 

  

1, 2, 3, and 4

 

  

2 and 4

 

  

2, 3, and 4

 

Expected maintenance costs are not capitalized, nor do they impact the amount of depreciation per period.

 

Question 3

1 / 1 pts

How is the gain (loss) on a plant asset sale calculated?

  

Asset sale price – Asset purchase cost

  

Book value on balance sheet – Asset sale price

Correct!

  

Asset sale price – Book value on balance sheet

  

Asset sale price – Total accumulated depreciation

The gain (loss) on the sale of a plant asset is computed as:
Asset sale price – book value of the asset

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