Key Terms/Concepts
What are the advantages of the following three inventory methods
A. Weighted Average
B. FIFO
C. LIFO
A. Weighted Average smooths out price changes.
B. FIFO approximates ending inventory with the current replacement costs
C. LIFO better matches current costs in cost of goods sold with revenues
For 2011, Williamowsky Company reported sales of $900,000, cost of goods sold of $640,000, and a gross profit of $260,000. The merchandise inventory on January 1, 2011 was $150,000, and the merchandise inventory on December 31, 2011 was $100,000. Determine the 2011 inventory turnover.
5.12
Under GAAP, an entry should be made to the Bad Debt Expense account
A. when an account receivable with terms 2/10, n30 is past thirty days due.
B. when an account receivable previously written off is determined to be collectible
C. when an account receivable is determined not to be collectible and is written off.
D. in the period when a sale is made, and not when the receivable associated with the sale is determined to be uncollectible
D. in the period when a sale is made, and not when the receivable associated with the sale is determined to be uncollectible
At the end of the current accounting period, Kevin Company recorded depreciation of $15,000 on its equipment. The effect of this entry on the company's balance sheet is to:
Decrease owners’ equity and decrease net assets.
Which one of the following statements regarding the application of the lower of cost or market method is true?
A. The lower of cost or market method is most commonly used on a total inventory basis.
B. The lower of cost or market method is an exception to the historical cost principle.
C. When the lower of cost or market method is used, inventories are always valued at the net realizable value.
D. Generally, net realizable value is higher than the estimated selling price.
B. The lower of cost or market method is an exception to the historical cost principle.
Goodwill is...
(definition and formula)
An intangible asset created from favorable factors
Purchase Price - Fair Market Value of Assets
In its 2010 income statement, Risers Inc. reported cost of goods sold of $85,000. Later, Risers determined that beginning inventory for 2010 was understated by $23,000, and the ending inventory for 2010 was understated by $10,000. What should be the corrected amount for cost of goods sold for 2010?
$98,000
Tammy Company reported total sales for the current year to be $2,000,000, including cash sales of $500,000. Management estimates bad debts to be 5% of credit sales. The Allowance for Doubtful Accounts prior to adjustment has a debit balance of $10,000. The ending balance of the Allowance for Doubtful Accounts after adjustment will be:
$65,000
A company sells a plant asset that originally cost $180,000 for $60,000 on December 31, 2010. The accumulated depreciation account had a balance of $90,000 after the current year's depreciation of $15,000 had been recorded. The company should recognize a $_____ (gain/loss)
$30,000 loss on disposal
Accounts Receivable before adjustment on December 31, 2018 $334,000
Allowance for Doubtful Accounts - January 1, 2018 $17,000
Customer accounts written off as uncollectible during 2018 $12,000
If the company estimates 6% of its accounts receivables to be uncollectible, determine its bad debts expense for 2018.
$ 15,040
If beginning inventory is understated cost of goods sold and net income will be (under or overstated)
Cost of Goods Sold - Understated
Net Income - Overstated
Kendall Sporting Goods Company’s ending inventory consisted of the following items:
Baseballs 58 units; $12 Cost per unit; $10 Market value per unit
Soccer balls 36 units; $14 Cost per unit; $16 Market value per unit
Basketballs 47 units; $16 Cost per unit; $18 Market value per unit
Footballs 61 units; $18 Cost per unit; $14 Market value per unit
Using the lower-of-cost-or market method, inventory adjustment applied to the inventory taken as a whole will be:
$194
After posting net collections from customers for 2013, Caudle Company has an accounts receivable balance of $180,000. Management aged the accounts receivable and estimate for uncollected account percentages as follows:
$90,000 Current at 2%
$50,000 1-30 days past due at 5%
$30,000 31-60 days past due at 10%
$10,000 60+ days past due at 25%
The net realizable value of the accounts receivable is
$170,200
On May 1, 2010, Lumpkin Products purchased machinery for $66,000. The useful life of this machinery is estimated at 5 years, with a $16,000 residual value. The company uses the double-declining-balance method. Depreciation expense for the fiscal year ending on December 31, 2011 will be:
$19,360
Brita Company sold merchandise to a customer on November 1, 2017 for $6,000, and accepted a promissory note from the customer. The note has a term of 5 months and a stated interest rate of 8%. Brita Company’s accounting period ends on December 31, 2017. What amount should Brita Company recognize as interest revenue when the note matures on April 1, 2018?
$ 120
If costs are increasing over time
FIFO Gross Profit will be ______ LIFO Gross Profit
FIFO Ending Inventory will be ______ LIFO Ending Inventory
FIFO Cost of Goods Available will be ______ LIFO Cost of Goods Available
FIFO Gross Profit will be > LIFO Gross Profit
FIFO Ending Inventory will be > LIFO Ending Inventory
FIFO Cost of Goods Available will be = LIFO Cost of Goods Available
Cheap Mart Company’s inventory records for the month of September reveal the following:
September 1 Balance 300 units @$6.00
September 7, Purchase 500 units @$4.40
September 13, Sale 450 units @$11.00
September 18, Purchase 425 units @ $4.60
September 22, Purchase 275 units @$1.80
September 27, Sale 725 units @ $8.00
Determine Cheap Mart Company’s COST OF ENDING INVENTORY under PEREPETUAL Weighted Average method of inventory valuation?
$1,300
The following information is taken from the financial statements of Apple Inc. 09/24/2011 Net Sales: $108,249; Cost of sales $64,431; Accounts Receivable $5,369
09/25/2010 Net Sales: $65,225; Cost of sales $39,541; Accounts Receivable $5,510
Assuming all sales are on credit, compute the Average Collection Period of Apple, Inc. for the year ending on September 24, 2011.
18.34 days
Equipment costing $20,000 with a salvage value of $4,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years, and no change in the salvage value, the depreciation expense for Year 3 would be
$3,000
The balance sheet of Mignon Company’s reports the book value of its total assets as $800,000 and $900,000 at the beginning and end of the year, respectively. Net income and sales for the year are $85,000 and $1,700,000, respectively. What is the company’s fixed asset turnover ratio?
2.0 times
Capital expenditures affect _______ statement, the expense is _______ (recognized/deferred), current income and taxes will be _______ (higher/lower than with revenue expenses)
Capital expenditures affect balance sheet (debited), the expense is deferred, current income and taxes will be higher.
What is consigned inventory?
Goods that are shipped, but title remains with the seller.
Ropelewski Company received an $8,000 90-day, 9% note dated December 1, 2011. On December 31, 2011, the company made the necessary adjusting entry to accrue interest on the note. The journal entry to record the receipt of the note on March 1, 2012 will be:
Cash (D) 8,180
Interest receivable (C) 60
Interest revenue (C) 120
Notes receivable (C) 8,000
O’Keefe Advertising Company reported the following on its December 31, 2012, balance sheet:
Equipment $500,000
Accumulated depreciation—equipment $135,000
In a footnote, the company indicates that it uses straight-line depreciation over 10 years and estimates salvage value as 10% of cost. What is the average age of the equipment owned by the company?
3 years
Harsel Company purchased equipment at the beginning of 2015 for $650,000. In 2015 and 2016, the company depreciated the asset on a straight-line basis with an estimated useful life of 8 years and a $100,000 residual value. In 2017, due to changes in technology, the company revised the useful life to a total of six years (four more years) with zero residual value. What depreciation expense would the company record for the year 2017 on this equipment?
$128,125