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Unformatted text preview: March 6, 2006 Anderson ECON 136A 8AM Midterm #2 v. 1 Name _________________________ Answer questions $1-25 on your green scantron and the problems in your blue book (in ink if you would like to retain the right to regrade).------------------------- 1. Which of the following methods of determining bad debt expense does not properly match expense and revenue? a. Charging bad debts with an amount derived from aging accounts receivable under the allowance method. b. Charging bad debts as accounts are written off as uncollectible. c. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. d. Charging bad debts with a percentage of sales under the allowance method. 2. The cash account shows a balance of $38,000 before reconciliation. The bank statement does not include a deposit of $2,300 made on the last day of the month. The bank statement shows a collection by the bank of $940 and a customer's check for $220 was returned because it was NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $79 was recorded as $97. The correct balance in the cash account was a. $40,948. b. $38,612. c. $38,648. d. $38,828.------------------------------ A trial balance before adjustments included the following: Debit Credit Sales $425,000 Sales returns and allowance $14,000 Accounts receivable 53,000 Allowance for doubtful accounts 760 3. If the estimate of uncollectibles is made by taking 1% of net sales, the amount of the adjustment is a. None of the above b. $4,000. c. $4,111. d. $4,250. Midterm #2 v. 1--Page 2 4. In a period of rising prices, the inventory method which tends to give the highest reported cost of goods sold is a. none of these. b. FIFO. c. average cost. d. LIFO. 5. If a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices, a. an appropriation of retained earnings is necessary. b. this fact must be disclosed. c. disclosure is required only if prices have declined since the date of the order. d. disclosure is required only if prices have since risen substantially. 6. A company using the percentage of sales method has gone through its normal process of allowing for doubtful accounts, and written off certain accounts. Subsequently one of the balances they wrote-off has been paid by the customer! This should: a. Increase the bad debt expense b. Result in a credit to the income statement c. Reduce the allowance for bad debts d. Increase the allowance for bad debts 7. When calculating the cost ratio for the retail inventory method, a. if it is the conventional method, the beginning inventory is excluded and markdowns are not deducted....
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This note was uploaded on 05/18/2011 for the course ECON 136A taught by Professor Anderson during the Spring '08 term at UCSB.
- Spring '08