Practice quiz 2 accounting PDF

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QUESTION 1 1.

Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. A company using the LIFO inventory method reports a LIFO reserve at year-end of $85,000, which is $20,000 lower than the prior year. If the company had used FIFO instead of LIFO in that year, the company’s financial statements would have reported:

A A higher cost of goods sold, but a lower inventory . balance.

A lower cost of goods sold, but a higher inventory B balance. .

Both a higher cost of goods sold and a higher C inventory balance. .

1 points

1.

Q UEST I O N 2 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. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

$6,700. $4,240. $4,300. $5,500. 1 points

1.

Q UEST I O N 3 Newark Company has provided the following information: • Cash sales, $450,000 • Credit sales, $1,350,000

• Selling and administrative expenses, $330,000 • Sales returns and allowances, $90,000 • Gross profit, $1,360,000 • Increase in accounts receivable, $55,000 • Bad debt expense, $33,000 • Sales discounts, $43,000 • Net income, $1,030,000 How much is Newark's cost of sales? A $307,000 .

B $252,000. .

C $340,000. .

D $440,000. . 1 points

Q UEST I O N 4 1.

Lauer Corporation provided the following information about one of its laptop computers:

Date

Number of Units

Transaction

Cost per Unit

1/1

Beginning Inventory

100

$

800

5/5

Purchase

200

$

900

8/10 Purchase

300

$

1,000

10/15 Purchase

200

$

1,100

2.

During the year, Lauer sold 750 laptop computers.

3.

What was cost of goods sold using the LIFO cost flow assumption?

4. 5. A $720,000. .

B $740,000. .

C $725,000. .

D $735,000. . 1 points

Q UEST I O N 5 1. Which of the following is correct when bad debt expense is recorded at year-end?

Current assets will increase. Current liabilities will decrease.

Gross profit will decrease. Income from operations will decrease. 1 points

Q UEST I O N 6 1.

Carey Company adheres to U.S. GAAP, whereas Jonathan Company adheres to IFRS. It is least likely that:

A . B .

Jonathan has reversed an inventory write-down. Carey has reversed an inventory write-down.

Jonathan and Carey both use the FIFO inventory C accounting method. .

1 points

Q UEST I O N 7 1. Which of the following describes the impact on the balance sheet when cash is received from the collection of an account receivable? Current assets will not change.

Total assets will increase. Current assets will increase. Stockholders' equity will increase. 1 points

Q UEST I O N 8 1.

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? A $5,500 .

B $4,300 .

C $6,700 .

D $4,240 . 1 points

Q UEST I O N 9 1. Under the FIFO cost flow assumption during a period of rising costs, which of the following is false? A Income tax expense will be higher under FIFO than . under LIFO. B Ending inventory will be lower under FIFO than under . LIFO.

C Cost of goods sold will be lower under FIFO than . under LIFO. D Net income will be higher under FIFO than under . LIFO. 1 points

Q U E S T I O N 10 1.

Newark Company has provided the following information: • Cash sales, $450,000 • Credit sales, $1,350,000 • Selling and administrative expenses, $330,000 • Sales returns and allowances, $90,000 • Gross profit, $1,360,000 • Increase in accounts receivable, $55,000 • Bad debt expense, $33,000 • Sales discounts, $43,000 • Net income, $1,030,000 How much cash was collected from customers? A Cash flow increased $1,745,000 . B Cash flow increased $1,405,000. . C Cash flow increased $1,295,000 .

Cash flow decreased

D $1,855,000. .

1 points

Q U E S T I O N 11 1. When using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet at the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will: A Have no effect on the net realizable value of the . accounts receivable. B Have an effect that is not determinable from the . information given. C Decrease the net realizable value of the accounts . receivable. D Increase the net realizable value of the accounts . receivable. 1 points

Q U E S T I O N 12

1.

Lauer Corporation provided the following information about one of its laptop computers:

Date

Number of Units

Transaction

Cost per Unit

1/1

Beginning Inventory

100

$

800

5/5

Purchase

200

$

900

8/10 Purchase

300

$

1,000

10/15 Purchase

200

$

1,100

2.

During the year, Lauer sold 750 laptop computers.

3.

What was cost of goods sold using the FIFO cost flow assumption?

4. 5. A $735,000. .

B $720,000. .

C $740,000. .

D $725,000. . 1 points

Q U E S T I O N 13 1.

Fernando’s Pasta purchased inventory and later wrote it down. The current net realizable value is higher than the value when written down. Fernando’s inventory balance will most likely be: A Higher if it complies with . IFRS. B Higher if it complies with U.S. . GAAP The same under U.S. GAAP and

C IFRS. .

1 points

Q U E S T I O N 14 1. Newark Company has provided the following information: • Cash sales, $450,000 • Credit sales, $1,350,000 • Selling and administrative expenses, $330,000 • Sales returns and allowances, $90,000 • Gross profit, $1,360,000 • Increase in accounts receivable, $55,000 • Bad debt expense, $33,000 • Sales discounts, $43,000 • Net income, $1,030,000

How much are Newark's net sales?

A $1,800,000 .

B $1,634,00 . 0

C $1,745,000 .

D $1,667,000 . 1 points

1.

Q U E S T I O N 15 Under the LIFO cost flow assumption during a period of rising costs, which of the following is false? A Net income will be lower under LIFO than under . FIFO. B Cost of goods sold will be lower under LIFO than . under FIFO. C Income tax expense will be lower under LIFO than . under FIFO. D Ending inventory will be lower under LIFO than . under FIFO. 1 points

Q U E S T I O N 16 1.

Eric’s Used Bookstore prepares its financial statements in accordance with IFRS. Inventory was purchased for £1 million and later marked down to £550,000. One of the books, however, was later discovered to be a rare collectible item, and the inventory is now worth an estimated £3 million. The inventory is most likely reported on the balance sheet at:

A .

£3,000,000.

B . £550,000.

C . £1,000,000. 1 points

Q U E S T I O N 17 1.

Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. The year-end balances in a company’s LIFO reserve are $56.8 million in the company’s financial statements for both 2017 and 2018. For 2018, the measure that will most likely be the same regardless of whether the company uses the LIFO or FIFO inventory method is the: A .

Gross profit margin. Amount of working capital.

B . C . Inventory

turnover. 1 points

Q U E S T I O N 18

1.

When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What percent (rounded) would this savings amount to on an annual basis?

C 20.0%. .

B 29.2%. .

A 36.5%. .

D 18.2%. . 1 points

1.

Q U E S T I O N 19 Lauer Corporation has provided the following information about one of its laptop computers: Number Date

Transaction

of Units

Cost per Unit

1/1

Beginning Inventory

100

$

800

5/5

Purchase

200

$

900

8/10 Purchase

300

$

1,000

10/15 Purchase

200

$

1,100

2.

During the year, Lauer sold 750 laptop computers.

3.

What was ending inventory using the FIFO cost flow assumption?

4. 5. B $40,000 .

A $55,000 .

C $45,000 .

D $60,000 . 1 points

1.

Q U E S T I O N 20 Cinnamon Corp. started business in 2007 and uses the weighted average cost method. During 2007, it purchased 45,000 units of inventory at €10 each and sold 40,000 units for €20 each. In 2008, it purchased another 50,000 units at €11 each and sold 45,000 units for €22 each. Its 2008 cost of sales (€ thousands) was closest to: A $490 .

B .

$491

C $495 . 1 points

Q U E S T I O N 21 1.

Lauer Corporation has provided the following information about one of its laptop computers: Number Date

Transaction

of Units

Cost per Unit

1/1

Beginning Inventory

100

$

800

5/5

Purchase

200

$

900

8/10 Purchase

300

$

1,000

10/15 Purchase

200

$

1,100

2.

During the year, Lauer sold 750 laptop computers.

3.

What was ending inventory using the LIFO cost flow assumption?

4. 5. 6. A $40,000 .

B $45,000 .

C $60,000 .

D $55,000 ....