Mini Test 2 Form B - lit-J 1|Nhich oi" the...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: lit-J 1|Nhich oi" the following is recorded by making a credit to Accounts receivable? 9 A. Sale of inventory on account. E. Collection of a customer account balance C. Estimating the annual allowance for doubt’r‘ul accounts. D. Recording Trade Discounts 1i. None of‘ the above Accrual accounting requires that the loss resulting from the failure of credit customers to pay their hills should A. not be recorded until cash is collected from the customer in settlement oftlte account because that is the only sure event. B. he estimated in the period in which sales are made httt should not he recorded until the customer defaults because of the matching principle. C. be estimated and recorded in the period in which sales are made so that periodic expenses are matched with periodic revenues. D. be recognized in the period in which the account receivable proves to be uncollectiblc because that is the only date when the loss will really be known. E. Hone ot‘the above is correct. Please consider the model salest’col lection cycle discussed in class and in the advance readings and identify which ot‘thc following statements are true. A. A. clerk in the mailroom should open the envelopes containing customer remittances [i.e. 3}. After counting the receipts the clerk should prepare a "control total" summarizing the dollar amount collected. The clerk should then locate a supervisor to verify the cash count and to double check tltc calculated control total. 13. Many companies "bond" the employees that work within the cash collections process. The act of bonding an employee is considered a colrective control. C. The {i} customer remittances collected (Ft by the mailroom. [ii] the customer remittance advice accompanying the payment and {iii} a copy of the control total prepared by the mailroom clerk should all three be sent directly to the accounting department. The accounting department should record the cash collected and deposit the money in the bank before the end of the business day. I}. All ot‘the above are true E. None ot'thc above are true Which ot‘thc tbllovving statements correctly describes tltc financial statement classification ot‘thc "deferred gross profit” account? A Income Statement; "other operating income" Balance Sheet; "contra-asset” B. C. Balance Sheet; "owner's equity“ {other comprehensive income] D. Income Statement; "contra—revenue" E. Balance Sheet: "liability" 4? ‘ c we was (n 55 Questions 5-9: Putt lCompany manufactures custom and standard golfcarts. The following table summarizes thc company‘s finished goods inventory of standard carts which were manufactured and available for sale during the first quarter of ltlflfi. The company maintains a perpetual? inventory system using the LIF't'JII cost-flow assumption. Putt advertises the standard carts at a list price of Sitltltl per unit. This unit price is subsequently adjusted down on a casc-by-case basis through the use ofa trade discount. For purposes of calculating the sales discount {if any}, please assume that the clock starts running at the point that title transfers. Extended Date Mfg a unit 5 Unit value Nov.15th2flfl? 51,1oo sitcom Dec. 15th soar ssi.oco Jan. 15th2oos siesta $105,DDD Feb 15th zoos $1,000 sso,oco March 15th zoos Saba Sascco On January l8”. Putt shipped | standard golfcart to a family in southern California {assume this is the first sale for EUUR}. The cart was shipped FGH—Shippiug Point [5] .flflfl of Freight collect} and arrived at th its location on .lanttary 2'? . The customer was offered a lit”: trade discount and Link's standard salcs discount of It'll] ni’3fl. Payment was received on February 21m. 011 what date should Putt record this sale‘? a. March 3] “l E. February 2'“1 C. January 23'“ D. January 27”" E. January I?" 1|tF-i’hich of the following would be recorded by Putt as part ofthe entries necessary to record the sale described in question #5? Debit to “cost of goods sold" for S] .flSfl. Debit to “sales discount" for ESU Debit to Transportation It{slut for Slflflfl Debit to Accounts Receivable for $5.9m E. Credit to "sales revenue" for 34.900 .5053?” 1|Nhich of the following statements is true regarding the $l.flflfl of freight [question 5)? A. [I would be treated as a selling expense and would therefore reduce the gross profit realized on the sale. l3. Putt would treat it as a product cost and capitalize it as part of inventory on the balance sheet. C. It would be classified on the financial statements in the same manner as bad debt expense ti.e. as a selling expense} D. [I would increase the amount owed by the customer ti.c. receivable] but would not impact the amount of revenue recorded. E. Because the shipping is the responsibility of the buyer. it would not be recorded on Putt‘s financial statements. S. For purposes of‘ this question alone. assume that On January 23m the customer {from question #5} called Putt and explained that the cart arrived dented. alter thinking it over. the ens-terrier agreed to keep the cart but on lp after I-‘utt a eecl to deduct $950 off the amount owed li.e. sales allowance}. Payment was received on February 2"“ . Given this fact. what gross profit will Putt realize on this sale‘.’ A. $2.950 B. $3.150 C. $2.910 D. $1.910 E. 3.050 011 Februaryr Ig'h. Putt shipped 7"0 eustom carts to a country-r eluh in Georgia for a total selling price of $600,000. The carts were shipped FOB-Destination [514.000 freight pre-paid] and arrived at their destination on February 20"]. The manufacturing cost olthe earls totaIEd $300000. The buyer was ot‘t‘ered the standard sales discount {for custom carts} oF ltlfl n.-’30. The customer returned one—third of the carts and then paid the balance due on February 261". Please identify the answer below that correctly shows the entrj,r to record the cash paid on Fehrualy 251m. A. (“ash Sales Relunis Sr. Alltlwanee fiales Revenue Cash Sales Revenue Accounts Receivable Cash Sales Discounts Accounts Receivable C‘ash Accounts Receivable E. None of the above D EBIT 4 | 0.000 4.000 D F.an 300.000 4.000 DEBJ'I' 414.000 l000.0'00 CREDIT 414.000 CR EDJT 400.000 L'Illifl'l'l' 4 14.000 l0. Rosco uses the allowance method ot'aceounting for bad debts. Upon completing an aging analysis of accounts receivable, the accountant for Rosco estimated that $5,000 of the current $93,000 of accounts receivable 1would he tmcollectible. The allowance for doubtful accounts had a $400 credit balance at year-end prior to adjustment. The amount of bad debt expense that should appear in Roseo‘s income statement for the year is A. $5,000. B. $5,400. (3. $4,600. D. $400 1:". Zero Collins, Inc. is a manufacturer ot‘charcoal grills. Collins reported the following items on its |2.-'31f2008 multi—step income statement. What is the dollar amount ol""sales revenue" being reported by Collins as of I28 132003? ("that ul'fioods Sold Gross Profit Net lncoino Net Sales lGenerating. tapense Soles Discounts Sales Returns :0 Allowances Sales Revenue A. $5,000,000 13. $10,000,000 C. $15,000,000 D. $20,000,000 E. $25,000,000 |5,000,000 5,000,000 1,500,000 '3 3,500,000 500,000 4.500.000 'Il IE. After taking in to aeeount the reported net ineoine ot'S |00,000, Splendid showed the following aeeount balanees in its Statement of Stockholders Equity: 1 ] 32003 ] 1"} | ."204'1'3 Retained Earnings: ll'll 50,1'III'H'II Fara-ital Stuck 50,000 50,000 1|iiihat was the amount ot‘diuidends declared during the year {if any]? A. 525,000 B. 550,000 C. $55,000 1}. 5125.000 E. No dividends were deelared during 2008. IS. The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: A. A eredit to a liability. B. A debit to an asset. C. A debit to a liability. D. A. credit to an asset. 15. None ot'the above l4. National Corporation ended 2005r with a credit balance of$ll5,000 in its Allowance for Uneolleetible Aeeounts and a $2,000,000 debit balance in its Aeeounts Receivable. The eotnpany estimates and records bad debt expense using the income statement method estimating 1% oferedit sales as uneolleetible. During 2008, National had sales totaling $20,000,000 [50% ot'whieh 1.iiere on eredit]. Natitinal‘s eolleetions tin receivables were strong this year, totaling $5,950,000 and actual write oils of' reeeivables were $50,000. 1|it"hat was the ending balanee of Aeeounts Receivable at the end of 2003‘? A. $5,900,000 l3. 5 15,000,000 C. $ 6,050,000 I}. Iii l0.150.000 E. 54,05 0,000 l5. Question rentot'ed— fill in “£1” for question 15 on your seantronl lo. Please consider tlte realization principle discussed in class and included in your assigned readings: identity the l'alse statement (il'anyl contained below. A. The timing of revcttuc recognitiott can in some cases. impact the timing of expense recognition. B. The realization principle requires that two criteria be satisfied bef'ore revenue catt be recognized on the books. C. Revenue recognition is in part tied to the earnings process. Though value is being generated and revenue is being earned throughout this process, revenue is {warranty recognized at one specific point in titne. D. Revenue can be recognized be are the actual customer order is shipped iffi} a valid custonter order has been received {ii} there is reasonable certainty as to the collectability ofthe amount owed and tiiil the goods [while waiting to be shipped] are clearly segregated it; marked in the warehouse. 1-5. All of the above are true statements IT. A company's year— end balance in accounts receivable is $500000. The allowance liar uncollectible accounts had a beginning-of-year credit balance ot‘SStlfltltl. An aging of accounts receivable at the end ot‘the year indicates a required allowance ot'$fifl,flflfl. It' bad debt expense was $20,000, what was the antount of bad debts written off during the year‘}1 A. $10,000 B. $20,000 C. $30,000 1). $40,000 E. None of the above l3. 1|Which of the following statements is true? A. fittl ot'the below are false H. In a publicly traded company, the largest shareholder is the individual with tlte most control over the content of the financial statements, the most control over other employees. and often the one that has the most to gain from financial statement fraud. C. The SEC requires publier traded companies to issue their financial statements in accordance with GAE-LP. Financial statement l‘raud is rare for these companies as generally accepted accounting procedures are clearlyr defined and management has very little discretionary freedom to influence choices being made about their financial reporting. D. A "sham sale" would include recording January sales in December. 1:". a debt covenant is part of the original loan contract and is used by the lender as a tool to help detect financial statement t'raud. Iii. Swisher lCompany has 35] 5 million dollars ot‘ receivables on its balance sltcet and is contemplating selling them to another company. Which ol'the following statements is true? A. Swisher may be doing this as a way to avoid the cost associated witlt pursuing collection of delinquent accounts. is. At a minimum, Swisher should expect $15 million dollars as the payment from the buyer. C. Swisher is "Factoring" its receivables. I]. All of the above are true E. A and C are true 2?}. Rosco uses the allowance method of‘aceounting for bad debts. The allowattce for doubtful accounts ltad a $411M debit balance at year-end prior to adjustment. The accountant for Rosco bases the cstintatc for bad debt on a “In of credit sales and using this method projected that 55.400 of the current year credit sales would be uncollectible. The amount of bad debt expense that should appear in Rosco‘s income statement for the year is A. $5.,tltltl. 13. $5,400. til. $4.fiflfl. D. $5,3IJIJ E. Zero Continued on next pagel Questions 21—23: On December 15, 2000, lttigshllr Sales Ce. seld merchandise that cost Siflflflfiflfl far 5 | {ltltltlflfltl The contract terms called fer a 25% dawn payment at $2.5UDfl-U-D with the balance awed being paid in five equal annual installments {Inf $1.5flflflflfl each} startng an December IS, Elli”. Ignare interest charges. Rigsby has a December 3| year-end. 2 |. Assuming that the cash was eelleeted as scheduled and that Rigsby uses the east-2'et-at=erJ- marked of revenue teeegnititm far this transaetian. Haw mueh grass pmfit weuld Rigsby reeegnize an its financial statements in 2000, EUUT, BUGS a 2tltl'9'.’ A. 2000 2002 200a 2000 0000.000 0 0 0 B. 000 2002 2000 000 0 0 0 1 000.000 C 2000 2002 2000 2000 salute 30.001 salute same I). 2000 2002 2000 2000 0 0 0 0 E 2000 2002 2000 2000 250.000 I 50.000 I 50.000 I 50.000 22. Assuming that the cash was collected as scheduled and that Rigsby uses the tnsrm'lmem sole method of revenue rccognition for this transaction. How much gross profit would Rigsby rccognizc on its financial statements in zoos, soar, sons 3: sons? A. ltltlfi :nnt loos ltltlEl Location a a o B. 20% 2007 2003 2009 a a a a {1. ions :nnt 1t:th :nns 25mm ssuuw 25mm ssuuw I}. soon and sons sous 25am tsanrm 15ft,me tsanrm E, sans snot saaa sans ssottnau Lsounou Lsottnau 1 saunas 23. Assuming that Rigslag.r uses the installment method to account for this sale. 1|What dollar amount would Rigshy report. m its December 31. 2003. balance sheet, for dct‘crrcd gross profit? A. Zero El. $15fl,flflfl C. $3flflflflfl D. $45fl,flflfl E. Sdttttttttt} 24. Gershwin Wallcot-ering lnc. shipped the wrong shade of paint to a customer who refused to accept the order. Lipon receipt of the paint back from the customer, Gershwin would credit accounts receivable and debit: A. Sales discount [contra revenue] El. Sales returns at allowances [contra asset] C. Sales revenue D. Sales discount [contra asset} E. Sales returns 3c allowances {contra revenue} 1D 25. Raintree Cosmetic l[Company sells its products to customers on a credit basis. During 2001'. one of Raintree’s largest clients lilcd for bankruptcy. m the time of the bankruptcy. the client owed Raintree $5,000 and on the advice of their legal counsel Raintree wrote off the entire balance owed to them as uncolleetiblc. After taking in to account the write off. Raintree had the following account balances at llfl 1.510070 Receivables. net ofallowanee for uneolleetible accounts of $50,000 $250,000 In early January ot'2008 Raintree unexpectedly received a 53.000 payment on this account. Assume that before pttblishing their financial statements Kaintree updates the l2f3|f2llfllf account balances provided above to reflect this collection. Which ofthe following statements {if any} are correct‘.l A. The net realizable valtte of receivables {reported on Raintree's financial statements} will not change as a result of this situation. 13. The customer’s accounts receivable balance will decrease as a result of this situation. til. The net realizable valtte of receivables {reported on Raintree's financial statements} will increase as a result of this situation. I]. The net realizable value of receivables {repoi1ed on Raintree's financial statements} will decrease as a result ofthis situation. E. None of the above are correct 26. Merchandise sold FOB destination indicates that: A. The buyer holds title for the goods while in transit and has ultimate responsibility for transportation COSTS B. The buyer is responsible for physically picking up and delivering the ntercbandise to their destination. C. [fthe goods are shipped with pre-paid ti‘eight. the seller is entitled to reimbursement from the buyer. D. The seller holds title for the goods while in transit and has ultimate responsibility for transportation COSTS- E. The common carrier holds title to the goods while in transit. 2?. The majority of all financial statement fraud crimes involve: ft. Understatement of liabilities. H. (lverstatement of assets and revenues. C. I:Zlverstatement ofeapital. D Alteration of source documents. E. All ofthe above 11 ...
View Full Document

Page1 / 10

Mini Test 2 Form B - lit-J 1|Nhich oi" the...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online