Mini Test 2 Form D Solutions - Mini Test 2 SP 2010 D Key 1....

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Mini Test 2 SP 2010 D Key 1. Which of the following statements about the direct write-off method is correct? A. It violates matching and overstates assets. B. It results in a more accurate bad debt estimate being booked in the year of sale. C. It violates matching and should be therefore be used only if bad debts are material. D. It understates assets and is more conservative than the income statement method. E. It improves matching and is more conservative than the balance sheet method. 2. Please consider the model Sales/Collection cycle discussed in lecture and contained in your assigned readings. Which of the following situations would be inconsistent with the ideal format? A. A clerk in the accounting department updates the accounts receivable subsidiary ledger for customer payments (using information obtained from the customer remittance advice). B. A clerk in the accounting department restrictively endorses the checks before providing them (along with a copy of the control total) to the individual who is making the bank deposit. C. A clerk in the mailroom prepares a daily cash collection summary or "control total" using the customer's remittance advice. D. A clerk in the accounting department compares the deposit ticket to the control total. E. All of the above statements are consistent with the model Sales/Collection cycle. 3. Please use this information to answer questions #3-#6: 8/26th : Hawthorne Manufacturing (the "buyer") places an order to purchase materials from High Quality Vendor ("HQV" i.e. the "seller"). The materials have an original cost to HQV of $12,000. The materials normally list for $20,000 but due to Hawthorne's buying history HQV gave them a 10% trade discount and the standard payment terms of 2/10, n/30 Hawthorne anticipates selling the items for $25,000. 8/28th: The materials are shipped FOB Destination from HQV's warehouse in California with $1,000 of freight prepaid. 9/2nd: The materials arrive at Hawthorne's facility. Upon inspection of the goods, half of the order is sent back & not accepted. 9/6th: Hawthorne pays HQV the amount owed. 9/9th : HQV receives Hawthorne's payment and deposits the money at the bank. On what date would the sales revenue be recorded by HQV? A. August 26th B. September 6th C. August 28th D. September 2nd E. September 9th
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4. Which of the following would be recorded by HQV as part of the entries necessary to record the return on Sept. 2nd. A. Credit to Sales Discount $180 B. Debit to Sales Revenue $10,000 C. Credit to Merchandise Inventory $6,000 D. Debit to Sales Returns & Allowances $9,000 E. Debit to cash $8,820 5. How should the $1,000 of freight be treated by HQV? A. It would be treated as a product cost incurred and would be capitalized as part of HQV's final inventory balance. B.
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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 Solutions - Mini Test 2 SP 2010 D Key 1....

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