PPE
Inventory & Merch
Potpourri
Receivables
Liabilities
100
TRUE or FALSE

Research costs are an example of intangible assets
What is FALSE

They are expensed as the company has no certainty of success
100
TRUE or FALSE

Sales Returns and Allowances is a contra-asset account
What is FALSE

Contra revenue
100
TRUE or FALSE

Generally, control activities over cash payments are more effective when payments are made by cheque rather than cash
What is TRUE
100
TRUE or FALSE

When an account is written off under the allowance method, bad debt expense is debited
What is FALSE

Debit is to Allowance for Doubtful Accounts
100
TRUE or FALSE

Sales tax payable is a current liability account
What is TRUE
200
Which of the following should NOT be included in the cost of equipment

- insurance after equipment is in use

- installation of equipment

- testing of equipment

- freight paid by purchaser to deliver equipment
What is insurance after equipment is in use
200
Which two accounts are credited

A customer returns undamaged goods to Tyee Lake General Merchandising on Account

They were originally sold for $200

The original cost of goods sold was $125

A perpetual inventory system was used
What is Accounts Receivable and Cost of Goods Sold
200
The account that is credited when closing the dividend account at year end
What is Dividends

It is normally in a debit balance.
200
What is credit to A/R at year end?

Yellow Hula's owed $21,000 to Hoops Unlimited

During the year they paid 50% of the amount owing

At the end of the year the negotiated to write off $5,000 of the receivable and paid the remaining balance
What is $10,500

The amount being written off plus the amount paid at year end.
200
TRUE or FALSE

Organizations that collect PST are working as agents for the federal government
What is FALSE

Provincial Government
300
Calculate gain or loss

The equipment was acquired on January 1, 2011 at a cost of $500,000 and has an estimated useful life of 12 years and an estimated residual value of $20,000. Straight line basis is used for depreciation.

Sold on April 1, 2015 for $330,000
What is zero

$330,000 - {[(500,000-20,000)/12]x 4.25 }
300
Names three accounts you would not find in the chart of accounts of a services business that you would find in a merchandising business
What are (any three of the following)

Sales (called revenue or services revenue in services business)

Sales returns and allowances

Sales discounts

Transportation expense

Inventory

COGS (if perpetual)

Purchases (periodic)

Purchase returns and allowances (periodic)

Freight-in (periodic)
300
What is the debit side of the year-end entry?

On June 1, purchased one year of insurance for $1,200 and recorded the amount to insurance expense
What is Prepaid Insurance $500

Jan to May of the following year.
300
Which company has better control of their receivables?

Company A

A/R turnover 15.3

Days sales in receivables 23.9

Company B

A/R turnover 14.7

Days sales in receivables 24.8
What is Company A

Better to have a low days sales in receivables and a higher A/R turnover
300
What is the take home pay?

John Smith received a bi-weekly gross salary of $2,000

Income taxes are $218

CPP employee portion is $90

EI employee portion is $30

Union Dues are $50
What is $1,612.00

2000 - (218 + 90 + 30 + 50)
400
Calculate amortization on a straight line basis

A widget press has a cost of $51,875 and an estimated residual value of $5,000. The estimated useful life is 25 years.
What is $1,875

(51,875 - 5000)/25

400
Calculate amount paid on invoice

Sale date is January 1

Merchandise invoice is $10,000

Freight paid by seller $100

FOB destination

2/10, n/30

Paid on January 9
What is 9,800

10,000 - (10,000 x .02)

Freight is FOB destination, not paid
400
Which three of the following items should not be included in sustainable earnings?

A. Loss attributable to labour strike

B. Gain on sale of equipment

C. Operating loss from fertilizer division, which we sold

D. Loss from sale of marketable securities

E. Cumulative effect of change in accounting principle

F. Gain on sale of fertilizer division
What is C, E and F
400
The net realizable value of the Accounts Receivable is $21,000 before the write off of a $1,500 account. What is the net realizable value after the write off?
What is $21,000

No change to the NRV
400
Finish this statement

Under IFRS, if a company can determine a reasonable estimate of an expected loss from a lawsuit and it is probable it will lose the suit, it should....
Accrue (record) the loss on the statements

-current obligation from a previous occurrence -can be estimated -probable that loss will occur
500
Calculate depreciation using double diminishing balance for 2015

Tyra Services has purchased a delivery truck on January 1, 2014 at a cost of $43,000.

The truck is expected to have a residual value of $3,000 at the end of its four-year useful life.

Tyra has a Dec 31 y/e
What is 10,750

2014 = 43,000 - [43,000 x (100/4x2)] = 21,500

2015 = (43,000 - 21,500) x .5 = 10,750

500
Calculated COGS

Beginning inventory $12,000

Purchases $152,000

Sales returns and allowances $9,000

Purchase returns and allowances $4,000

Ending inventory $15,000
What is $145,000

12,000 + (152,000 - 4,000) - 15,000
500
Is the company liquidity improving or deteriorating?

CY current ratio 1.52:1

PY current ratio 1.23:1

CY receivables turnover 9

PY receivables turnover 12

CY inventory turnover 6

PY inventory turnover 9

What is deteriorating

Only current ratio has improved.
500
Calculate bad debt estimate

Balance at year end is $500,000 in each category

Estimated uncollectible

0-30 days 5%

30-60 days 10%

60-90 days 15%

Over 90 days 20%
What is $250,000

$500,000 x (.05 + .10 + .15 + .20)
500
Which company is more solvent?

Company A

Debt to total assets = 66.7%

Times Interest Earned = 3.1 times

Company B

Debt to total assets = 84.8%

Times Interest Earned = 2.2 times

What is Company A

Debt to total assets is lower and times interest earned higher.
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