Acct 557 midterm exam Part 2

Question 1.

Jukebox Company had checks outstanding totaling $10,800 on its June bank reconciliation. In July, Jukebox Company issued checks totaling $77,800. The July bank statement shows that $76,600 in checks cleared the bank in July. A check from one of Jukebox Company's customers in the amount of $1,000 was also returned marked "NSF." The amount of outstanding checks on Jukebox Company's July bank reconciliation should be

                       

$1,200.

                       

$11,000.

                       

$12,000.

                       

$13,000

 

Question 2.

If the month-end bank statement shows a balance of $54,000, outstanding checks are $15,000, a deposit of $6,000 was in transit at month end, and a check for $900 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

                       

$44,100.

                       

$45,000.

                       

$45,900.

                       

$62,100.

 

Question 3.

Maximum benefit from independent internal verification is obtained when

                       

it is made on a pre-announced basis.

                       

it is done by the employee possessing custody of the asset.

                       

discrepancies are reported to management.

                       

it is done at the time of the audit.

 

Question 4.

Bank errors:

                       

occur because of time lags.

                       

must be corrected by debits.

                       

are infrequent in occurrence.

                       

are corrected by making an adjusting entry on the depositor's books

 

Question 5.

A petty cash fund of $100 is replenished when the fund contains $4 in cash and receipts for $93. The entry to replenish the fund would

                       

credit Cash Over and Short for $3.

                       

credit Miscellaneous Revenue for $3.

                       

debit Cash Over and Short for $3.

                       

debit Miscellaneous Expense for $3.

 

Question 6.

In the month of November, Kinsey Company Inc. wrote checks in the amount of $27,750. In December, checks in the amount of $37,974 were written. In November, $25,404 of these checks were presented to the bank for payment, and $32,649 were presented in December. What is the amount of outstanding checks at the end of December?

                       

$2,346

                       

$7,245

                       

$7,671

                       

$10,224

 

Question 7.

Which one of the following is not an objective of a system of internal controls?

                       

Safeguard company assets

                       

Overstate liabilities in order to be conservative

                       

Enhance the accuracy and reliability of accounting records

                       

Reduce the risks of errors

 

Question 8.

Allowing only designated personnel to handle cash receipts is an example of

                       

establishment of responsibility.

                       

segregation of duties.

                       

documentation procedures.

                       

independent internal verification

 

Question 9.

Short-term notes receivable are reported at

                       

cash (net) realizable value.

                       

face value.

                       

gross realizable value.

                       

maturity value

 

Qquestion 10.

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

                       

debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.

                       

debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.

                       

debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

                       

debit to Loss on Credit Sales Revenue and a credit to Accounts Receivable.

 


Question 11.

A cash discount is usually granted to all of the following except

                       

retail customers.

                       

retailers.

                       

wholesalers.

                       

All of these answers are correct.

 

Question 12.

An aging of a company's accounts receivable indicates that $14,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

                       

debit to Bad Debt Expense for $14,000.

                       

debit to Allowance for Doubtful Accounts for $12,900.

                       

debit to Bad Debt Expense for $12,900.

                       

credit to Allowance for Doubtful Accounts for $14,000.

 

Question 13.

Two bases for estimating uncollectible accounts are:

                       

percentage of assets and percentage of sales.

                       

percentage of receivables and percentage of total revenue.

                       

percentage of current assets and percentage of sales.

                       

percentage of receivables and percentage of sales.

Question 14.

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.

What is the amount of the finance charge?

                       

$8

                       

$20

                       

$80

                       

$240

 

Question 15.

Claims for which formal instruments of credit are issued as proof of the debt are

                       

accounts receivable.

                       

interest receivable.

                       

notes receivable.

                       

other receivables.

 

Question 16.

If a company sells its accounts receivables to a factor,

                       

the seller pays a commission to the factor.

                       

the factor pays a commission to the seller.

                       

there is a gain on the sale of the receivables.

                       

the seller defers recognition of sales revenue until the account is collected.

 

Question 17.

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the

                       

Inventory account will be increased.

                       

Inventory account will not be affected.

                       

seller will bear the freight cost.

                       

carrier will bear the freight cost.

 

Question 18.

 

McKendrick Shoe Store has a beginning inventory of $45,000. During the period, purchases were $195,000; purchase returns, $6,000; and freight-in $15,000. A physical count of inventory at the end of the period revealed that $30,000 was still on hand. The cost of goods available for sale was

                       

$189,000.

                       

$204,000.

                       

$219,000.

                       

$249,000.

 

Question 19.

The Inventory account balance appearing in a perpetual inventory worksheet represents the

                       

ending inventory.

                       

beginning inventory.

                       

cost of merchandise purchased.

                       

cost of merchandise sold.

 

Question 20.

A merchandising company that sells directly to consumers is a

                       

retailer.

                       

wholesaler.

                       

broker.

                       

service company.

 

Question 21.

Which of the following should be included in the physical inventory of a company?

                       

Goods held on consignment from another company.

                       

Goods in transit to another company shipped FOB shipping point.

                       

Goods in transit from another company shipped FOB shipping point.

                       

Goods in transit to or from another company shipped FOB shipping point.

 

Question 22.

Indrisano's Used Cars uses the specific identification method of costing inventory. During March, Indrisano purchased three cars for $12,000, $14,400, and $19,200, respectively. During March, two cars are sold for a total of $34,600. Indrisano determines that at March 31, the $14,400 car is still on hand. What is Indrisano’s gross profit for March?

                       

$1,000.

                       

$3,400.

                       

$4,200.

                       

$8,200.

 

Question 23.

Inventoriable costs include all of the following except the

                       

freight costs incurred when buying inventory.

                       

costs of the purchasing and warehousing departments.

                       

cost of the beginning inventory.

                       

cost of goods purchased.

 

Question 24.

If beginning inventory is understated by $13,000, the effect of this error in the current period is

        Cost of Goods Sold               Net Income

                       

Understated                      Understated

                       

Overstated                         Overstated

                       

Understated                      Overstated

                       

Overstated                         Understated

 

Question 25.

If goods in transit are shipped FOB destination

                       

the seller has legal title to the goods until they are delivered.

                       

the buyer has legal title to the goods until they are delivered.

                       

the transportation company has legal title to the goods while the goods are in transit.

                       

no one has legal title to the goods until they are delivered.

 


Answer

CHAPTER 8

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