Accounting 350, Fall 2009 Quiz, Chpts 7,8 & 9 1.

Lawrence Company has cash in bank of $15,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of A) $13,000. B) C) $15,000. $18,000.

D) $19,000. 2. AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue? A) $ 9,800. B) C) $ 9,900. $10,000.

D) $10,100. 3. Wellington Corp. has outstanding accounts receivable totaling $2.54 million as of December 31 and sales on credit during the year of $12.8 million. There is also a debit balance of $6,000 in the allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? A) $ 25,400. B) C) $ 31,400. $122,000.

D) $134,000. 4. The following information is available for Murphy Company: Allowance for doubtful accounts at December 31, 2009 Credit sales during 2010 Accounts receivable deemed worthless and written off during 2010 $ 8,000 400,000 9,000

As a result of a review and aging of accounts receivable in early January 2011, however, it has been determined that an allowance for doubtful accounts of $5,500 is needed at December 31, 2010. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2010? A) $4,500 B) $5,500
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C)

$6,500

D) $13,500 5. Vasguez Corporation had a 1/1/10 balance in the Allowance for Doubtful Accounts of $20,000. During 2010, it wrote off $14,400 of accounts and collected $4,200 on accounts previously written off. The balance in Accounts Receivable was $400,000 at 1/1 and $480,000 at 12/31. At 12/31/10, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2010? A) $4,000. B) C) $14,200. $18,400.

D) $24,000. 6. On December 31, 2010, Flint Corporation sold for $75,000 an old machine having an original cost of $135,000 and a book value of $60,000. The terms of the sale were as follows: $15,000 down payment $30,000 payable on December 31 each of the next two years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2010 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.) A) $52,773. B) C) $67,773. $60,000.

D) $105,546. 7. Moon Inc. factors $1,000,000 of its accounts receivables with recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair value of the recourse liability at $100,000. What would be the debit to Cash in the journal entry to record this transaction? A) $1,000,000. B) C) $960,000. $880,000.

D) $780,000.

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8. In preparing its August 31, 2010 bank reconciliation, Bing Corp. has available the following information: Balance per bank statement, 8/31/10 Deposit in transit, 8/31/10 Return of customer's check for insufficient funds, 8/30/10 Outstanding checks, 8/31/10 Bank service charges for August At August 31, 2010, Bing's correct cash balance is A) $22,800. B) C) $22,200. $22,100. $21,650 3,900 600 2,750 100

D) $20,500.

9. Bell Inc. took a physical inventory at the end of the year and determined that $475,000 of goods were on hand. In addition, the following items were not included in the physical count. Bell, Inc. determined that $60,000 of goods were in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count).The company sold $25,000 worth of inventory f.o.b. destination. What amount should Bell report as inventory at the end of the year? A) $475,000. B) C) $535,000. $500,000.

D) $560,000. 10. The following information is available for Naab Company for 2010: Freight-in Purchase returns Selling expenses Ending inventory $ 30,000 75,000 150,000 260,000

The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods available for sale? A) $600,000. B) C) $890,000. $815,000.

D) $860,000.

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11. Emley Company has been using the LIFO method of inventory valuation for 10 years, since it began operations. Its 2010 ending inventory was $40,000, but it would have been $60,000 if FIFO had been used. Thus, if FIFO had been used, Emley's income before income taxes would have been A) $20,000 greater over the 10-year period. B) C) $20,000 less over the 10-year period. $20,000 greater in 2010.

D) $20,000 less in 2010. 12. Milford Company had 500 units of Tank in its inventory at a cost of $4 each. It purchased, for $2,800, 300 more units of Tank. Milford then sold 400 units at a selling price of $10 each, resulting in a gross profit of $1,600. The cost flow assumption used by Johnson A) is FIFO. B) C) is LIFO. is weighted average.

D) cannot be determined from the information given.

Use the following to answer question 13: Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2009. Its inventory at that date was $220,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows: Inventory at Current Date Current Prices Price Index December 31, 2010 $256,800 107 December 31, 2011 290,000 125 December 31, 2012 325,000 130 13. What is the cost of the ending inventory at December 31, 2011 under dollar-value LIFO? A) $232,000. B) C) $231,400. $232,840.

D) $240,000. 14. What is the cost of the ending inventory at December 31, 2012 under dollar-value LIFO? A) $256,240. B) $254,800.

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C)

$250,000.

D) $263,400. 15. On June 1, 2010, Penny Corp. sold merchandise with a list price of $20,000 to Linn on account. Penny allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made f.o.b. shipping point. Penny prepaid $400 of delivery costs for Linn as an accommodation. On June 12, 2010, Penny received from Linn a remittance in full payment amounting to A) $10,976. B) C) $11,368. $11,376.

D) $11,196.

16. Kerr Co.'s accounts payable balance at December 31, 2010 was $1,500,000 before considering the following transactions:
Goods were in transit from a vendor to Kerr on December 31, 2010. The invoice price

was $70,000, and the goods were shipped f.o.b. shipping point on December 29, 2010. The goods were receive 2011. Goods shipped to Kerr, f.o.b. shipping point on December 20, 2010, from a vendor were lost in transit. The invoice price was $50,000. On January 5, 2011, Kerr filed a $50,000 claim against the common carrier. In its December 31, 2010 balance sheet, Kerr should report accounts payable of A) $1,620,000. B) C) $1,570,000. $1,550,000.

D) $1,500,000.

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17. Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Historical cost Replacement cost Estimated cost to dispose Estimated selling price Product #1 $40.00 45.00 10.00 80.00 Product #2 $ 70.00 54.00 26.00 130.00

In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Oslo use for products #1 and #2, respectively? A) $40.00 and $65.00. B) C) $46.00 and $65.00. $46.00 and $60.00.

D) $45.00 and $54.00. 18. Given the acquisition cost of product Dominoe is $86.62, the net realizable value for product Dominoe is $76.98, the normal profit for product Dominoe is $8.63, and the market value (replacement cost) for product Dominoe is $81.36, what is the proper per unit inventory price for product Dominoe? A) $81.36. B) C) $68.35. $76.98.

D) $86.62. 19. The following information is available for October for Barton Company. Beginning inventory Net purchases Net sales Percentage markup on cost $ 50,000 150,000 300,000 66.67%

A fire destroyed Barton's October 31 inventory, leaving undamaged inventory with a cost of $3,000. Using the gross profit method, the estimated ending inventory destroyed by fire is A) $17,000. B) C) $77,000. $80,000.
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D) $100,000.

20. A markup of 40% on cost is equivalent to what markup on selling price? A) 29% B) C) 40% 60%

D) 71%

21. Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 25%. The following account balances are available: Inventory, March 1 Purchases Purchase returns Sales during March $220,000 172,000 8,000 300,000

The estimate of the cost of inventory at March 31 would be A) $84,000. B) C) $144,000. $159,000.

D) $112,000. 22. Dicer uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $130,000 ($198,000), purchases during the current year at cost (retail) were $685,000 ($1,100,000), freight-in on these purchases totaled $43,000, sales during the current year totaled $1,050,000, and net markups (markdowns) were $24,000 ($36,000). What is the ending inventory value at cost? A) $153,164. B) C) $156,165. $157,412.

D) $236,000.

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The following data concerning the retail inventory method are taken from the financial records of Welch Company. Cost Retail Beginning inventory Purchases Freight-in Net markups Net markdowns Sales $ 49,000 224,000 6,000 $ 70,000 320,000 20,000 14,000 336,000

23. The ending inventory at retail should be A) $74,000. B) C) $60,000. $64,000.

D) $42,000.

24. Keen Company's accounting records indicated the following information: Inventory, 1/1/10 Purchases during 2010 Sales during 2010 $ 600,000 3,000,000 3,800,000

A physical inventory taken on December 31, 2010, resulted in an ending inventory of $700,000. Keen's gross profit on sales has remained constant at 25% in recent years. Keen suspects some inventory may have been taken by a new employee. At December 31, 2010, what is the estimated cost of missing inventory? A) $50,000. B) C) $150,000. $200,000.

D) $250,000.

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Answer Key
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. B B C C B A C A C D A C C A C A A C A A B A B A

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