Mini Test 2 Form D - 05m 3 I Gershwin Wallcovct‘ing lnc...

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Unformatted text preview: 05m 3 I. Gershwin Wallcovct‘ing lnc. shipped the wrong shade ot'paint to a customer who refused to accept the . order. Upon receipt or" the paint back From the customer, Gershwin would credit accounts receivable and m I pl 1 debit: A. Sales discount {contra revenue] El. Sales returns 3r. allowances [contra rcvcnuc} C. Sales revenue D. Sales discount (contra asset} E. Sales returns 3t allowances {contra asset] 2. Merchandise sold FOB destination indicates that: A. The buyer holds title for the goods while in transit and has ultimate responsibility for transportation costs It. The buyer is responsible for physically picking up and delivering the merchandise to their destination. C. If‘ the goods are shipped with pre—paid freight. the seller is entitled to reimbursement From the buyer. D. The comtnon carrier holds title to the goods while in transit. E. The seller holds title For the goods while in transit and has ultimate responsibility for transportation costs 3. Question rcrnoved- fill in “C” for question 3 on your scantron! 4. A company's year- end balance in accounts rcccivable is $500000. The allowance for uncollcctiblc accounts had a beginning—of—year credit balance 113113501000. An aging of accounts receivable at the end of the year ittdieatcs a required allowance of $o0.flflfl. If bad debt expense was $20,000. wltat was the amount of bad debts written offduring the year?l $40,000 330.000 $20,000 . $10,000 E. None of the above wees 5. Collins. Inc. is a manufacturer of charcoal grills. ISollins reported the following items on its DBL-0008 multi-step income statement. What is the dollar amount of “net sales“ being reported by Collins as of 12:0 02008? (Lost of Lioods Sold 15.000.000 lfliross t'rotit 5.000.000 lsct Incornc 2.500.000 Net Sales '3‘ Operating Es pent-a: 2.500.000 Rules Discounts 500.000 Sales Returns .5: Allowances 4.500.000 -:I Rules Revenue A. $5.000.000 B. $10.000.000 C . 315.000.000 1]. $2 0.000.000 E. 525.000.000 t3. Raintrce Cosmetic Company sells its products to customers on a credit basis. During 2007!. one of Raintree’s largest clients filed for bankruptcy. At the time of the bankruptcy. the client owed Raintree 355.000 and on the advice of their legal counsel Raintree wrote off the entire balance owed to them as ttncollectible. After taking in to account the write off. Raintrec had the following account balances at 128 0200?: Receivables. net of allowance for one ollectible accounts of$50.000 3250.000 In early January of 2008 Raintree unexpectedly received a $3,000 payment on this account. Assume that before publishing their financial statements Raintrcc updates the 1233 | .3200? account balances provided above to reflect this collection. Which of the following statements [ifany] are correct? A. The net realizable value of receivables {reported on Raintree‘s financial statements] will decrease as a result of this situation. B. The customer"s accounts receivable balance will decrease as a result of this situation. C. The net realizable value of receivables {reported on Raintrcc‘s financial statements} will increase as a result of this situation. 11 The net realizable value of receivables {reported on Raintree‘s financial statements] will not change as a result ofthis situation. E. None of the above are correct 7". Please consider tlte model salestcollection cycle discussed in class and in the advance readings and identify which of the following statements are true. A. A clerk in the mailroom should open the envelopes containing customer remittances (Lo. 5}. After cottnting the receipts the clerk should prepare a "control total'I summarizing the dollar amount collected. The clerk should then locate a supervisor to verify the cash count and to double check the calculated control total. B. The {i} customer remittances collected {Fl-i} by the mailroom, {ii} the customer rentittance advice accompanying the payment and {iii} a copy ot‘thc 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. C. Many companies "bond" the employees that work within the cash collections process. The act of bonding an employee is considered a corrective control. 13'. All of the above are trttc E. None ofthe above are true 8. Rosco uses the allowance method ot'aceounting for bad debts. The allowance for doubtful accounts had a $41313 debit balance at year—end prior to adjustment. The accountant for Rosco bases the estimate For bad debt on a % of credit sales and using this method projected that 55.400 of the current year credit sales would be uncollectible. The atnount of bad debt expense that should appear in Rosco's income statement for the year is A. $5.flflfl. El. $5.300. C. 34.6%. I}. $5.4M E. Ecro Continued on next page! ‘J. It}. Questions 1Ell—I 3: Putt Company manufactures custom and standard golf carts. The following table summarizes tlte company‘s finished goods inventory of standard carts which were manufactured and ayailable for sale during the first quarter onflflE. The company maintains a perpetual? inventory system using the LIFO cost-fl ow assumption. Putt advertises the standard carts at a list price of $5.000 per unit. This unit price is subsequently adjusted down on a ease-by-easc basis through the use ot‘a trade discount. For purposes of calculating the sales discount [if any}, please assume that the clock starts ntnning at the point that title transters. it Eaten de d_ lttl’alue On January ISm, Putt shipped l standard golf cart to a Family in southern California [assume this is the first sale for Ell-D8). The eart was shipped FOE-Shipping Point {51.000 of freight pre-paid] and arriyed at its location on January 27th. The customer was offered a I% trade discount and Links standard sales discount of if It] n.-"3tl. Payment was reeciyed on February 2"“. Do what date should Putt record this sale? A. March 3|“r 13. February 2'” C. January Hi1" D. January 2?“ E. January 23” Which of the following would be recorded by Putt as part of the entries necessary to record the sale described in question #9“? A. Debit to “sales discount“ for Fuji] B. Debit to "cost oi" goods sold" for 3900. {1, Debit to Transportation IDut For 3] film D. Debit to Accounts Receiyable for $5,95fl E. Credit to “sales revenue” for 34,900 I I. Which of the following statements is true regarding the $l,flflfl of freight {from question #9) A. It would be treated as a selling expense and would therefore reduce the gross profit realized on the sale. B. The shipping cost will not impact the gross profit realized on the sale. C. It would be classified on the financial statements in the same manner as bad debt expense tie. as a selling cs pense} D. It will increase the cost of goods sold recorded and would therefore reduce the gross profit realized on the sale. E. Putt would treat it as a product cost and capitalize it as part ofinventory on the balance sheet. l2. For purposes of this question alone, assume that On January 2th the customer {from question #9} called Putt and explained that the cart arrived dented. After thinking it over, the customer agreed to keep the can but only after Putt a sent to deduct $95!] off the amount owed (its. sales allowance). Payment was received on February 2 . Given this fact, what gross profit will Putt realize on this sale‘ir $1.950 $3.9m $2.9m _ $1.9m E. 52.953 coma L'oiuinued on nest page! 13. On Februaryr 18"“, Putt shipped T0 custom carts to a country club in Georgia for a total selling price of 5600.000. The earts were shipped FOE-Destination {314.000 freight pro-paid) and arrived at their destination on February 2011‘. The manufacturing cost of the carts totaled $300,000. The buyer was offered the standard sales discount [tier custom carts} of l.-']0 1030. The customer returned one-third of the carts and then paid the balance due on Februaryr 26”“. Please identifyr the answer below that correctlyr shows the entrj.P to record the cash paid on February 20m. A. M CREDIT C'ash 400.000 Sales Returns 3-: Allowance 200.000 Sales Revenue ammo H. DEBIT CREDI'I' C'ash 410.000 Sales Revenue 4.000 Accounts Receivable 4 i 4.000 C . DEBIT CREDIT Cash 300.000 Saiea Discounts 4.000 Accounts Receivable 400.000 D. DEBIT CREDIT L‘ash 414.000 accounts Receivable 4] 4.000 E. None of the above l4. The majority of all financial statement fraud crimes involve: A. Uverstatement of assets and revenues. B. l[irverstatement of capital. C. Understaternent of liabilities. D. Alteration of source documents. E. All cfthe above l5. After taking in to account the reported net income of liltHl,tl-ll-ll, Splendid showed the following account balances in its Statement of Stockholders Equity: lilflflflfi 133 I 32005 Retained Earnings ll'll TSIH'H'I Capital Stock 501000 50.0'0l'l What was the amount of dividends declared during the year {it any}? A. 325.000 l3. $50,000 C. $35,000 I}. fill 25.000 E. No dividends were declared during 2008. Iti. The adjusting entry required when amounts previously recorded as uncamcd revenues are canted includes: A. A credit to a liability. B. A debit to a liability. C. A debit to an asset. D. A credit to an asset. E. None of the above IT. National Corporation ended 200?Ir with a credit balance of $121000 in its Allowance for Uncolleetihle Accounts and a $2,000,000 debit balance in its Accounts Receivable. The company estimates and records bad debt expense using the income statement method estimating 1% of credit sales as uncollectible. During 2003, National had sales totaling $20,0-LHJ,0-0-0 {50% ofwhieli were on credit]. National‘s collections on receivables were strong this year1 totaling $5.950.000 and actual write oils of receivables were $50,000. What was the ending balance of Accounts Receivable at the end of 2003‘? A. $5,900,000 H. 36.150.000 C. $6,050,000 D. $6,000,000 E. 34.050000 IS. Which oftlte following is recorded by making a credit to Accounts receivable?r A. None ot'the below E. Sale of inventory on account. C. Estimating the annual allowance for doubtful accounts. 1'}. Recording Trade Discounts E. Collection of a customer account balance I'll. Please consider tlte realization principle discussed in class and included in your assigned readings: identify the false statement {ifany} contained below. A. The timing of revenue recognition can in some cases. impact the timing of expense recognition. B. Revenue can be recognized before the actual customer order is shipped iffi} a valid customer order has been received {ii} there is reasonable certainty as to the colleetabilitv of the amount owed and {iiil the goods [while waiting to be shipped} are clearly segregated 3c marked in the warehouse. 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 opts-alts recognized at one specific point in time. D. The realization principle requires that two criteria be satisfied before revenue can be recognized on the book s. E. All of tlte above are true statements 20. 1|lvliieh of the following statements is true‘l1 A. All of the below choices are false E. A “sham sale“ would include recording January sales in December. C‘. The SEC requires publicly traded companies to issue their financial statements in accordance with GAAP. Financial statement fraud is rare for these companies as generally,r accepted accounting procedures are clearly defined and management has very little discretionary freedom to influence choices being made about their financial reporting. D. ]n a publier traded company, the largest shareholder is the individual with the 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. E. A debt covenant is part ofthe original loan contract and is used by the lender as a tool to help detect financial statentent fraud. 2]. Rosco uses the allowance method of accounting for bad debts. Upon completing an aging analysis of accounts receivable, the accountant for Rosco estitnatcd that $5,000 of the current $03,000 ofaccounts receivable would be uncollectible. 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 Rosco‘s income statement for the year is A. $4,600. El. $5,400. (3. $5,000 D. S400 H. zero 22. Swislter Companyf has $15 million dollars of receivables on its balance sheet and is contemplating selling them to another company. Which of the following statements is true? A. Swisher mav be doing this as a way to avoid the cost associated with pursuing collection of delinquent accounts. B. At a minimum, Swisher should expect $15 million dollars as the payment froin the buyer. C. Swisher is "factoring" its receivables. I}. All ofthe above are true E. A and C are true 23. Accrual accounting requires that the loss resulting from the failure of credit customers to pay their bills should A. not he recorded until cash is collected from the customer in settlement otithc account because that is the only,r sure event. B. be estimated in the period in which sales are made but should not be recorded until the customer defaults because of the matching principle. C. be recognized in the period in which the account receivable proves to be uncollectihle because that is the only date when the loss will reallyf be known. D. be estimated and recorded in the period in which sales are made so that periodic expenses are matched with periodic revenues. E. None of the above is correct. 24. which of the following statements correctly describes the financial statement classification of the "dcfcrrcd gross profit" account? A. Balance Sheet; "contra-asset" B. Balance Sheet; rrlialaility'" C. Balance Sheet; "owner's equity“ (other comprehensive income] D. Income Statcmcnt; "contra-revenue“ E. Income Statement; 1‘other operating income" lCcnttinticd. on next page. 143 Questions 25—28: On December 151 Ellilll'llli:1 Rigsby Sales Co. sold merchandise that cost $9,1’H‘H‘lfiflfi for $lfl,flflfl,flflfl. The contract terms called for a 25% down payment of $2,5flflfiflfi with the balance owed being paid in five equal annual installments {of $1.5flfltflflfl each} starting on December Ii Eflfl'i'. ignore interest charges. Fligslogir has a December 3| year-end. 25. Assumin g that the cash was collected as scheduled and that Rigsby uses the emf—recovery riierhoo' of revenue recognition for this transaction. How much gross profit would Rigsla},f recognize on its financial statements in EDGE. lflfl'i'. EDGE 3:: MW? A. zoos zooz zoos zoos ootmoo o o o B. zoos zooz zoos zoos o o o I .oouooo C. zoos znnz zoos znna zsonoo zsaooo zsoooo zsaooo D. zoos zooz zoos zoos o o o o E. zoos zoo:r zoos zoos zsoooo Isaooo Isacoo Issues 11 26. Assuming that the sash 1was collected as scheduled and that Rigshy uses the installment sole method of revenue recognition for this transaction. How much gross profit would Rigshy recognize on its financial statements in EGGS, EGGT, EGGS 3; 2000? A. suns 1am suns sons zsuuuo I some I sumo I snow E. EGGE'I 2001' EGGS 20G? o a o t: {1' sons 1am zoos zoos ,, _ 2so_ono 250ml) 2so_ono Jam [1 sons 2am zoos soon I n n n E. sans 2am sans znna 3.5nn.nnn 1,500,000 1,500,000 1,500,000 2?. Assuming that Rigsby uses the installment method to aeeount for this sale. What dollar amount would litigate.r report, m its December 3 l, 2009, tan-tones sheet, for deferred gross profit? A. Zero Et. $150,000 (.2. $300,000 D. $450,000 H. $600,000 12 ...
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This note was uploaded on 02/14/2011 for the course ACCY 202 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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Mini Test 2 Form D - 05m 3 I Gershwin Wallcovct‘ing lnc...

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