Financial Accounting Exam II, Quiz Questions

23 Questions | By Mm8167 | Updated: Mar 22, 2022 | Attempts: 472

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1.

On April 1, 2012, Nelson Inc. accepts a $100,000, 8% note. The note receivable and interest are receivable on March 31, 2013. On March 2013, Nelson Inc. will record interest revenue of
- A.
  
  $8000
- B.
  
  $0
- C.
  
  $6000
- D.
  
  $2000
2.

A sales discount is recorded by the seller as
- A.
  
  A liability
- B.
  
  A contra revenue
- C.
  
  A contra asset
- D.
  
  An expense
3.

Th entry to record the estimate for uncollectible accounts includes:
- A.
  
  A debit to Allowance for Uncollectible accounts.
- B.
  
  A debit to Bad Debt Expense
- C.
  
  A credit to Accounts Receivable
- D.
  
  A debit to Sales Revenue
4.

Which of the following is true for a company who uses the allowance method of accounting for uncollectible accounts?
- A.
  
  Bad debt expense is recorded when a specific account is known to be uncollectible.
- B.
  
  Bad debt expense is recorded after all of the current year's credit sales are collected.
- C.
  
  Bad debt expense is recorded during the year of the credit sale
- D.
  
  Bad debt expense is only recorded if they exceed 10% of credit sales.
5.

The allowance method is required under G.A.A.P., because it is consistent with:
- A.
  
  Cash-basis accounting.
- B.
  
  The revenue recognition principle.
- C.
  
  Properly recognizing the net realizable value of assets.
- D.
  
  Good business practice
6.

Schmidt company's accounts receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4000, and its bad debt expense is $3800. The net realizable value of accounts receivable is:
- A.
  
  $96000
- B.
  
  $96200
- C.
  
  $104000
- D.
  
  $100000
7.

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account,
- A.
  
  The effect on net account receivables depends on the relationship between the allowance account balance and the amount of the write off.
- B.
  
  Net accounts receivable decrease
- C.
  
  Net accounts receivable do not change.
- D.
  
  Net accounts receivable increase.
8.

Weiner Company's net credit sales were $500,000 during 2010. On december 21, the accounts receivable ending balance is $80,000. Assume the unadjusted balance of allowance for uncollectible accounts is a debit of $500 and that Weiner estimates that 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on Decmeber 31 will be:
- A.
  
  $5000
- B.
  
  $6100
- C.
  
  $5100
- D.
  
  $5600
9.

Weiner Company's net credit sales were $500,000 during 2010. On december 21, the accounts receivable ending balance is $80,000. Assume the unadjusted balance of allowance for uncollectible accounts is a credit of $500 and that Weiner estimates that 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on Decmeber 31 will be:
- A.
  
  $6100
- B.
  
  $5100
- C.
  
  $5600
- D.
  
  $5000
10.

When a company collects a previously written off account:
- A.
  
  The balance of Accounts Receivable will increase.
- B.
  
  The balance of Bad Debt Expense will decrease.
- C.
  
  The balance of Allowance for Uncollectible Accounts will increase
- D.
  
  The balance of Service Revenue will increase.
11.

On April 1, 2012, Nelson Inc. accepts a $100,000, 8% note. The note receivable and interest are receivable on March 31, 2013. On December 31, 2012, Nelson Inc. will record interest revenue of
- A.
  
  $2000
- B.
  
  $6000
- C.
  
  $0
- D.
  
  $8000
12.

In times of rising inventory costs, which inventory method generally results in the highest ending inventory?
- A.
  
  LIFO
- B.
  
  FIFO
- C.
  
  Weighted-Average
- D.
  
  Lower-of-cost-or-market
13.

Fan company purchases inventory on account for $2500. The entry to record this purchase using a perpetual inventory system would include a:
- A.
  
  Debit to inventory
- B.
  
  Credit to accounts receivable.
- C.
  
  Debit to Accounts Payable.
- D.
  
  Debit to Purchases
14.

Weiss Company's beginning inventory was $10000. During the year, Weichtel purchases inventory costing $100000. Based on a physical count at the end of the year, Weichtel determines that the ending inventory is $8000. How much is cost of goods available for sale?
- A.
  
  $110,000
- B.
  
  $100,000
- C.
  
  $102,000
- D.
  
  $98,000
15.

Which of the following is generally found in the balance sheet of a manufacturing company?
- A.
  
  Finished goods.
- B.
  
  Work in process.
- C.
  
  Raw materials
- D.
  
  All three accounts are found in a manufacturer's balance sheet
16.

Schnell Company purchases inventory for $100,000 on account. Shipping terms are FOB destination; Schnell pays shipping cost of $5000. Prior to paying for the purchase, Schnell discovers that some of the inventory was damaged and receives an allowance of $7000. Net purchases are:
- A.
  
  $100,000
- B.
  
  $107,000
- C.
  
  $98,000
- D.
  
  $105,000
17.

At the end of the year, Marline Corporation determines that its ending inventory ahs a cost of $2000 and a market value of $1900. What would the effect(s) of the adjustment to write-down inventory to market value?
- A.
  
  Increase to net income.
- B.
  
  No effect on net income and ending inventory
- C.
  
  Increase in cost of ending inventory
- D.
  
  Decrease in net income
18.

Weichtel Company's beginning inventory was $20,000. During the year, Weichtel purchases inventory costing $100,000. Based on a physical count at the end of the year, Weichtel determines that the ending inventory is $28,000. How much was cost of goods sold for the year?
- A.
  
  $148,000
- B.
  
  $108,000
- C.
  
  $92,000
- D.
  
  $100,000
19.

Snow company's net sales revenue is $200,000, its cost of goods sold is $110,000 and its operating income is $20,000. How much are Snow Company's operating expenses?
- A.
  
  $90,000
- B.
  
  $70,000
- C.
  
  $20,000
- D.
  
  $50,000
20.

Winner Company purchases 100 units of inventory from Neue Company for $1000 on account. To encourage early payment, Neue Company offers the terms 2/10, n/30, If Winner pays nine days after the purchase, the cost of its purchase will be:
- A.
  
  $1020
- B.
  
  $1000
- C.
  
  $980
- D.
  
  $1080
21.

For a manufacturing company, the cost of items not yet complete at the end of the period are shown in the
- A.
  
  Work in process account
- B.
  
  Cost of goods sold account
- C.
  
  Finished goods account
- D.
  
  Raw materials account
22.

Suppose that Witchel Company's ending inventory is understated by $500 at the end of the year. If the error is not discovered, the company's gross profit for the year will be
- A.
  
  Overstated
- B.
  
  The effect of the error will depend on the sales price of the inventory
- C.
  
  Stated correctly
- D.
  
  Understated
23.

Which cost flow assumption generally results in the lowest reported amount of net income in periods of rising inventory costs?
- A.
  
  Weighted-Average
- B.
  
  Income will be the same under each assumption
- C.
  
  LIFO
- D.
  
  FIFO