Inventories & Cost of Sales
The 4 methods of inventory costing include:
What are LIFO, FIFO, Weighted Average and Specific Identification?
The five principles of accounting information systems are:
What are: control, relevance, compatibility, flexibility, and cost-benefit.
The entry to record reimbursement of the petty cash fund for postage expense would be:
Debit to Postage Expense.
Credit to Petty Cash
A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:
A note receivable.
Contingent liabilities are recorded or disclosed in the financial statement notes unless they are:
Remote (very unlikely).
The IRS rule that requires that when LIFO is used for tax reporting, it must also be used for financial reporting is known as:
What is the LIFO conformity rule?
Which of the accounting principles prescribes that an accounting information system report useful, understandable, and timely information for decision making?
What is the relevance principle?
On a bank reconciliation, a bank fee for check printing not yet recorded by the company is:
Deducted from the book balance of cash.
A 90-day note issued on April 10 matures on:
July 9.
April - 20 days
May - 31 days
June - 30 days
July - 9 days
The formula to compute annual straight-line depreciation is:
(Cost minus salvage value) divided by the useful life in periods.
When costs to purchase inventory regularly decline, which method of inventory costing will yield the lowest gross profit and income?
A journal that is used to record and post transactions of a similar type is:
What is a special journal?
Define an internal control system.
An internal control system is policies and procedures used to: protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies.
The allowance method that assumes a percent of a company's credit sales for the period is uncollectible is:
The percent of sales method.
Total compensation earned by an employee before any deductions is defined as:
Gross pay
Use the following information for Davis Company to compute inventory turnover for Year 2.
Year 2 Year 1
Cost of goods sold 279,504 291,810
Ending inventory 47,700 49,350
What is 5.76?
Inventory Turnover = Cost of Goods Sold/Average Inventory
Inventory Turnover = $279,504/[($47,700 + $49,350)/2]
Inventory Turnover = $279,504/$48,525 = 5.76
The sales journal is used to record:
Sales of inventory on credit.
List 4 of the 7 principles of internal control
Establish responsibilities, maintain adequate records, insure assets and bond key employees, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, perform regular and independent reviews.
Using the allowance method for bad debts, the end of the period adjusting entry for estimated bad debts is:
Debit Bad Debts Expense and credit Allowance for Doubtful Accounts.
On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)
$75
Interest Expense = Principal × Interest Rate × Time
$15,000 × 0.06 × 30/360 = $75
A company has the following inventory purchases during the year:
Jan 1: 100 units @ $10 each
Mar 1: 100 units @ $12 each
June 1: 100 units @ $14 each
At year-end, 150 units were sold. Using the LIFO (Last-In, First-Out) method, what is the Cost of Goods Sold (COGS)?
What is $2,000?
Jan 1: 100 units @ $10 = $1,000
Mar 1: 100 units @ $12 = $1,200
June 1: 100 units @ $14 = $1,400
Total available: 300 units
Units sold: 150
1️⃣ 100 units from June 1 @ $14 = 100 × $14 = $1,400
2️⃣ Remaining 50 units from Mar 1 @ $12 = 50 × $12 = $600
COGS = $1,400 + $600 = $2,000
If a company issues a check for $2,750 in payment of the salaries expense for the last half of the month, the transaction will be recorded in which journal?
Cash payments journal.
The following information is available for B Company at 12/31:
Cash in registers $ 2,790
Investment maturing in 9 years $ 10,000
Accounts receivable $ 1,475
Cash in bank account $ 21,430
Cash in petty cash fund $ 200
Inventory of postage stamps $ 24
U.S. Treasury bill maturing in 15 days $ 5,000
Based on this information, B Company should report Cash and Cash Equivalents on 12/31 of:
$29,420
Add $2,790 of cash in registers + $21,430 of cash in bank + $200 of cash in petty cash fund + $5,000 of U.S. Treasury bill with maturity of less than three months = $29,420.
On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?
Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300.
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?
$544
Depreciation Expense = Beginning of Year Book Value × Double Straight-line Rate
Year 1 = $3,400 × (2 × 10%) = $680
Year 2 = ($3,400 − $680) × (2 × 10%)