ACTG 2010 Chapter Notes - Chapter 7: Weighted Arithmetic Mean, Fixed Asset, Internal Control
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17 accounting 1 questions! HELP
9. The following amounts and costs of platters were availablefor sale by Corpus Christy Ceramics during 2016:
Beginning inventory | 10 units at $41 |
First purchase | 15 units at $55 |
Second purchase | 30 units at $70 |
Third purchase | 25 units at $65 |
Corpus Christy Ceramics has 35 platters on hand at the end ofthe year.
What is the dollar amount of inventory at the end of the yearaccording to the weighted-average cost method?
Select one:
A. $4,340
B. $9,920
C. $3,465
D. $6,200
32. Santa Fe Corporation uses the perpetual inventory method. OnMarch 1, it purchased $60,000 of merchandise inventory, terms 2/10,n/30. On March 3, Santa Fe returned goods (not damaged) that cost$6,000. On March 9, Santa Fe paid the supplier.
On March 9, Santa Fe should credit:
Select one:
A. Purchase discounts for $1,200
B. Purchase discounts for $1,080
C. Inventory for $1,080
D. Inventory for $1,200
33. Rocky Company has beginning equity of $600,000, net incomeof $100,000, dividends of $60,000 and investments by owners inexchange for stock of $20,000. Its ending equity is:
Select one:
A. $660,000
B. $480,000
C. $536,000
D. $446,000
35. On September 1, 2016, Chopper, Inc. reported RetainedEarnings of $272,000. During the month of September, Choppergenerated revenues of $40,000, incurred expenses of $24,000,purchased equipment for $10,000 and paid dividends of $12,000.
What is the balance in Retained Earnings on September 30,2016?
Select one:
A. $272,000 debit
B. $276,000 credit
C. $ 16,000 credit
D. $274,000 credit
36. Savannah Company purchases $120,000 of inventory during theperiod and sells $36,000 of it for $60,000. Beginning of the periodinventory was $6,000.
What is the companyâs inventory balance to be reported on itsbalance sheet at year end?
Select one:
A. $36,000
B. $90,000
C. $ 4,000
D. $ 6,000
37. Assuming rising prices, which method will give the highestdollar value for cost of goods sold on the income statement?
Select one:
A. FIFO
B. Average Cost
C. LIFO
D. All of these give equal values for cost of goods sold
38. Kali Company began the period with $20,000 in inventory. Thecompany also purchased an additional $20,000 of inventory andreturned $2,000 for a full credit. A physical count of theinventory at yearâend revealed an inventory on hand of $16,000.What was Kaliâs cost of goods sold for the period?
Select one:
a. $50,000
b. $22,000
c. $48,000
d. $16,000
39. The periodic inventory system differs from the perpetualinventory system:
Select one:
because the periodic system is not compatible with moderntechnology.
because the periodic system continually updates inventory, whilethe perpetual inventory system only updates inventory at the end ofthe period.
because the perpetual system continually updates inventory,while the periodic inventory system only updates inventory at theend of the period.
because the periodic system is more complex and costly.
40. Which one of the following is included in currentassets?
Select one:
A. Common stock
B. Accounts receivable
C. Taxes payable
D. Automobiles
41. For the balance sheet to be in balance, the following mustexist:
Select one:
Total assets must be less than total liabilities
Total assets must be greater than total liabilities
Total assets must equal total liabilities plus stockholders'equity
Total liabilities must equal total stockholders' equity
43. Using a perpetual inventory system, the buyerâs journalentry to record the freight costs includes a:
Select one:
A. Debit to Purchases
B. Debit to Inventory
C. Debit to Freight In
D. Debit to Cost of Goods Sold
44. Joshua records purchases at invoice price and uses theperpetual inventory system. On July 5, Joshua returned $6,000 ofgoods purchased on account to the seller.
How would Joshua record this transaction?
Select one:
A.
Accounts Payable | 6,000 | ||
Purchases | 6,000 | ||
B.
Accounts Receivable | 6,000 | ||
Inventory | 6,000 | ||
C.
Accounts Payable | 6,000 | ||
Inventory | 6,000 | ||
D.
Cash | 6,000 | ||
Purchases | 6,000 | ||
45. Smith & Sons purchased $5,000 of merchandise from theClaremont Company with terms of 3/10, n/30. How much discount isSmith & Sons entitled to take if it pays within the alloweddiscount period of 10 days?
Select one:
$100
$50
$300
$150
46. The accounting record for Max III Company reported thefollowing selected information:
Operating Expenses | $180,000 |
Sales Returns and Allowances | 52,000 |
Sales Discounts | 24,000 |
Sales Revenue | 700,000 |
Cost of Goods Sold | 268,000 |
Determine Max III Company's gross profit.
Select one:
A. $332,000
B. $280,000
C. $308,000
D. $356,000
48. Using a a perpetual inventory system, the sellerâs journalentry to record the payment for merchandise, received from thebuyer, within the discount period includes a:
Select one:
A. Debit to Accounts Receivable
B. Debit to Cost of Goods Sold
C. Credit to Sales Discounts
D. Debit to Sales Discounts
49.Geraldoâs Groceries purchased milk cartons at an invoiceprice of $6,000 and terms of 2/10, n/30. On arrival of the goods,Geraldoâs realized that half of the milk was past the expirationdate, and returned them immediately to the supplier.
If Geraldoâs pays the remaining amount of the invoice within thediscount period, the amount paid should be:
Select one:
A. $2,880
B. $5,880
C. $2,940
D. $6,000
50. Which one of the following is not a current liability?
Select one:
A. Wages payable
B. Accounts payable
C. Wage expense
D. Taxes payable
Periodic inventory system. Each of the following four horizontal lines represents data taken from a separate multiple-step income statement. Insert the missing amounts in the space (empty box) provided. Indicate any net loss by placing brackets around the amount.
Hint: Not all parts of the income statement are shown, so be careful with your arithmetic.
| Beginning Inventory | Purchases | Cost of Goods Available for Sale | Ending Inventory | Cost of Goods Sold | |
| a. | $180,000 | $325,000 | $80,000 |
| Sales (Revenue) | Cost of Goods Sold | Gross Profit | Operating Expenses | Net Income | |
| b. | $240,000 | $145,000 | $32,000 |
| Revenue (Sales) | Cost of Goods Available for Sale | Ending Inventory | Cost of Goods Sold | Gross Profit | Operating Expenses | Net Income | |
| c. | $515,000 | $240,000 | $145,000 | $225,000 | $145,000 |
. For each question below, circle the best answer from the choices given. (
1 : Under the periodic inventory system the purchases of merchandise are recorded at their selling prices.
a. True b. False
2 : Inventory shrinkage does not include the loss of merchandise through shoplifting.
a. True b. False
3 : Only under the periodic inventory system is a physical count of the inventory necessary.
a. True b. False
4 : It is not possible to have more inventory at the end of a period then at the beginning of a period.
a. True b. False
5) True and false. Indicate whether each of the following is True (T) or False (F). (5 POINTS)
T F 1. US Treasury bills that mature within 120 days are cash equivalents.
T F 2. Financial assets describe not just cash, but all assets that are easily and directly convertible into known amounts of cash.
T F 3. Good cash mgmt. dictates that any cash and checks received each day should be deposited the same day.
T F 4. The income statement approach to estimating Bad debts Expense emphasizes the aging of accounts receivable and the adjustment of the Allowance for Doubtful Accounts account to the level of the estimated uncollectible amount.
T F 5. When I use the allowance method for accounts receivable, I will recognize a Bad Debt Expense at the same time the account is taken off the Accounts Receivable Subsidiary Ledger.
. For each question below, circle the best answer from the choices given.
1. Which of the following items would cause the ending balance on the bank statement to be larger than the ending balance of cash shown in the accounting records (checkbook)?
A) Bank service charges.
B) Deposits in transit.
C) Outstanding checks.
D) NSF check from one of the depositor's customers.
2. When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the companyâs records are:
A) To correct errors made by the bank in recording the dollar amounts of cash transactions during the period.
B) To reconcile items explaining the difference between the balance per books and the balance per bank stmt.
C) To record outstanding checks and bank service charges.
D) To record items explaining the difference between the balance per accounting records and the adj. cash bal.
3. The Allowance for Doubtful Accounts represents:
A) Cash set aside to make up for bad debt losses.
B) The amount of uncollectible accounts written off to date.
C) The difference between total credit sales and collections on credit sales.
D) The difference between the face value of A/R and the net realizable value of A/R.
4. In preparing a bank reconciliation, a service charge shown on the bank statement should be:
A) Added to the balance per the bank statement.
B) Deducted from the balance per the bank statement.
C) Added to the balance per the depositor's records.
D) Deducted from the balance per the depositor's records.
5. During preparation of a bank reconciliation, outstanding checks should be:
A) Added to the balance per the bank statement.
B) Deducted from the balance per the bank statement.
C) Added to the balance per the depositor's records.
D) Deducted from the balance per the depositor's records.
Bank reconciliation. Indicate what effect each situation will have on the bank reconciliation process (Match the situation with the bank reconciliation process below by placing the number of the process next to the situation). Note that there are more situations than processes, so some processes may be used more than once, but not all processes have to be used. Only one process is required for each situation. Hint: Determine if Cash is increasing or decreasing
Process
Deduct from bank balance 2. Add to bank balance
3. Deduct from checkbook balance 4. Add to checkbook balance
Situation
_______ Bank received $2,750 from one of your customers (Terms: Cash in advance)
_______ Bank collection (wire) fee was $15
_______ Check number 111 was outstanding for $55
_______ A $400 check was written, but recorded on the books as $40
_______ Interest received from your bank for the month was $16.55
Problems: For partial credit, work must be shown in an orderlyfashion. Answers will be graded based on their ability tocommunicate the problem solvingprocess. 30 points
Required: Prepare a multiple-step income statement in good form.
Calculate retained earnings as of December 31.
Prepare a classified balance sheet ingood form.
Calculate the providedratios 20 points
Additional Information:
Assume that all taxes are at 30% unless otherwise indicated. Theincome tax expense on continuing operations and the income taxliability have not yet been recorded.
Line Item 1 refers to a loss of $70,000 on uninsured damagedfrom a meteor that crashed into a plant facility in New Mexico. Themeteor is considered BOTH UNUSUAL AND INFREQUENT. The applicabletax rate was 35%.
Line Item 2 is income from the publishing division of the firmprior to May 1, 2016. On May 1, management decided to spin-off[discontinue] the operations.
Line Item 3 is also related to the publishing division mentionedin âcâ above. Actual losses on the divisions operations after May 1totaled $50,000. Management further expected additional losses of$30,000 on operations and a loss of $220,000 on the sale of thedivisionâs assets.
Line Item 4 arose from the sale of long-term investments. Theportfolio that originally cost $250,000 was sold for $284,000.
Line Item 5 arose from discovery of equipment, costing $600,000that had been written off in 2014 as an operating expense. As ofthe beginning of the 2016 the accumulated depreciation was$100,000. The book value of the equipment was $500,000.
Line Item 6 refers to restructuring costs.
Line Item 7 refers to inventory that was on Hand on December 31,and was discovered to be obsolete during the year-end count onJanuary 15, 2017.
The investment account represents two portfolios. The firstportfolio cost $200,000 and is worth $215,000. These stocks andbonds are available currently for sale to raise cash resources. Theother investment, costing $1,000,000 and worth $1,000,000, will beheld indefinitely [long-term] by management.
Included in goodwill is an amount equal to $100,000 thatmanagement âcreatedâ after a successful advertising campaign. Theoffsetting credit was to paid-in capital in excess of par value:common.
During 2016, management decided that the usefulness of thefranchise would only last four of the remaining five years.Consequently, management increased the amortization by $100,000 or25 percent in 2016. The new estimate was used in 2016 and would becontinued for the remaining three years.
Inventory on December 31, 2016 was $200,000 after consideringthe decline from line item 7.
The state authorized 100,000 shares of 8 % preferred stock witha par value of $100 of which 8,000 shares have been issued.
The state also authorized 2,000,000 shares of common stock, witha par value of $10 par value. There are no shares in treasury.
The bonds will be refinanced when they are due in 2017.
Foreign currency translation losses were $ 3,000.
Thornhill Company | ||||
Trial Balance | ||||
as of December 31, 2016 | ||||
Account Title | Debit | Credit | ||
8 %, Preferred Stock | $ - | $ 1,000,000.00 | ||
Accounts Payable | 120,000 | |||
Accounts Receivable | 300,000 | |||
Accumulated Depreciation: building | 970,000 | |||
Accumulated Depreciation: equipment | 3,550,000 | |||
Administrative Expenses | 400,000 | |||
Bond Payable | 4,000,000 | |||
Building | 2,000,000 | |||
Cash | 100,000 | $ - | ||
Common Stock (200,000 shares outstanding) | 5,550,000 | |||
Discount on Bonds Payable | 125,000 | |||
Dividends | 300,000 | |||
Equipment | 5,000,000 | |||
Franchise | 340,000 | |||
Freight-in | 15,000 | |||
Goodwill | 785,000 | |||
Income Taxes Expenses | 88,200 | |||
Income taxes Payable | 88,200 | |||
Interest Expense | 700,000 | |||
Inventory | 170,000 | |||
Investments | 1,200,000 | |||
Land | 800,000 | |||
Long-term Notes Payable | 2,500,000 | |||
Net Sales | 5,300,000 | |||
Paid-in Capital in excess of par value: common | 300,000 | |||
Plant Facilities under Construction | 8,000,000 | |||
Prepaid Expenses | 60,000 | |||
Purchase Discounts | 65,000 | |||
Purchase Returns and Allowances | 125,000 | |||
Purchases | 2,575,000 | |||
Retained Earnings | 747,500 | |||
Selling Expenses | 650,000 | |||
Item 1 (net of taxes of $24,500) | 45,500 | |||
Item 2 (net of taxes of $6,000) | 14,000 | |||
Item 3 (net of taxes of $90,000) | 210,000 | |||
Item 4 | 34,000 | |||
Item 5 (net of taxes of $150,000) | 350,000 | |||
Item 6 | 840,000 | |||
Item 7 | 10,000 | |||
Total | $ 24,713,700 | $ 24,713,700 | ||
Financial Ratios
Current Ratio = Current Assets /Current Liabilities.
Quick Ratio = (Cash + MarketableSecurities + Receivables) / Current Liabilities.
Working Capital = Current Assets -Current Liabilities.
Total debt to total assets = Total Liabilities / TotalAssets.
Gross Profit Rate = Gross Profit/ Net Sales
Netincome as a percentage of sales = Net Income / Net Sales
Return on assets= Operating Income
[Beginning Total Assets + Ending Total Assets]/2
Assume that beginning assets were $13,720,000
Return on stockholdersâ equity=
Net Income
[BeginningTotal Stockholdersâ Equity + Ending Total StockholdersâEquity]/2
Assume that beginning stockholdersâequity was $7,947,500
Price-Earnings Ratio = MarketPrice per Commons Share
Earnings per Common Share
Assume a market price of $ 1.00
Accounts Receivable Turnover = NetSales
Assume that beginning accounts receivable were $ 300,000
Average Collection Period = 365 days/ Accounts Receivable Turnover Ratio
Inventory Turnover = Cost of Goods Sold
Average Sales Period = 365 days /Inventory Turnover Ratio
Operating Cycle = The AverageCollection Period + The Average Sales Period.
i need you to prepare a completeclassified balance sheet based on the trial balance and theadditional information. Next, I need you to prepare a multi-stepincome statement based on the same information. Then, calculate thefinancial ratios provided.
