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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

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Question 61

Multiple Choice

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To record estimated uncollectible accounts using the allowance method for uncollectible accounts, the adjusting entry would be a debit to?

A) Loss on Credit Sales and a credit to Trade Accounts Receivable.
B) Trade Accounts Receivable and a credit to Allowance for Doubtful Accounts.
C) Allowance for Doubtful Accounts and a credit to Trade Accounts Receivable.
D) Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

E) None of the above
F) A) and B)

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Question 62

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Credit terms "2/10, n/30" mean that if payment is made in two days, a 10% discount will be given; if not paid within two days, the full invoice price will be due in thirty days.

A) True
B) False

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Question 63

Multiple Choice

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In 2013, C Co. reported net sales revenues of $19.8 billion and cost of goods sold for $6.0 billion. What was their gross profit percentage for 2013?

External auditors are usually employees of the company.

The cash records of Kupper Corp show the following: 1. The June 30 bank reconciliation indicated that deposits in transit totalled $300. During July, the general ledger account, Cash, shows deposits of $9,700, but the bank statement indicates that only $9,540 in deposits were received during the month. 2. The June 30 bank reconciliation also reported outstanding cheques of $1,800. During July, Kupper Corp's books show that $11,170 of cheques were issued, yet the bank statement showed that $11,500 of cheques cleared the bank in July. There were no bank debit or credit memoranda and no errors were made by either the bank or Kupper Corp. Required: (a) Calculate the dollar amount of the deposits in transit at July 31. (b)Calculate the dollar amount of the outstanding cheques at July 31.

The December 31, 2013 statement of financial position of Howson Limited had Trade Accounts Receivable of $450,000 and a credit balance in Allowance for Doubtful Accounts of $45,000. During 2013, the following transactions occurred: service revenue billed on account, $1,500,000; collections from customers, $1,300,000; accounts written off $37,000; previously written off accounts of $4,000 were collected. Required: (a) Record the 2013 transactions. (b) If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 5% of trade accounts receivable, what is the adjusting entry at December 31, 2013?

On December 31, 20A, Carter Corporation had the following account balances related to credit sales and receivables prior to recording adjusting entries:

An authorized signing officer should sign a cheque only after reviewing the appropriate supporting documentation.

When using the percentage of completion method, revenue is recognized when work on the contract is completed.

Bad Debts Expense is a contra account for Trade Accounts Receivable.

A customer purchased a $200 item at Best Bike Shop, paying with a credit card (VISA) . The merchant is charged a 2% fee by the credit card company. When recording this sale, the merchant would do which of the following?

The following information was available to the accountant of Dove Company when preparing the monthly bank reconciliation: What was the cash balance per books of Dove Company prior to beginning the bank reconciliation?

Under the allowance method for uncollectible accounts, Bad Debts Expense is debited when an account is deemed uncollectible and must be written off.

Indicate the effect on a monthly bank reconciliation of each of the items listed below by placing the appropriate letter to the left of each item. A. Addition to the balance in the company's Cash account. B. Deduction from the balance in the company's Cash account. C. Addition to the balance on the bank statement. D. Deduction from the balance on the bank statement. E. Does not affect the reconciliation.

Under the percentage of completion method, the amount of work completed in a particular year is typically determined by comparing which of the following?

Managers, analysts, and creditors use this gross profit percentage to assess the effectiveness of the company's product development, marketing, and production strategy.

Central Company sold goods for $5,000 to Western Company on March 12 on credit. Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the transaction by debiting trade receivables for $5,000 and crediting sales revenue for $5,000. Western paid the balance due, less the discount, on March 21. To record the March 21 transaction, Central would debit which of the following?

Why is the reconciliation of a company's cash account to the bank statement so important for effective internal control for cash?

Journal entries made to update the cash account, after a bank reconciliation has been prepared, should affect the "Bank Statement" part of the reconciliation rather than the "Depositor's Books" part of the reconciliation.

The trade receivable turnover ratio is computed by dividing net sales by net trade receivables at the end of the year.