33. The balance sheet presentation of accounts receivable net of the allowance for doubtful
accounts has the effect of stating accounts receivable at:
34. A firm has used LIFO for several years during which costs have trended higher. The effect
on 2014 net income using LIFO, relative to FIFO, will be:
35. One of the most important reasons for having a system of internal control is to:
36. A firm has used LIFO for several years during which costs have trended higher. If this firm
achieves a substantial reduction in inventory quantities in 2014 by selling more merchandise than
it purchases, the effect on 2014 net income of the inventory reduction, compared to having no
change in inventory quantity from the beginning to the end of 2014, is:
37. The amount of cash related to a particular bank checking account that is shown on the
balance sheet at December 31 is:
38. The valuation of short-term marketable securities on the balance sheet is likely to be for
an amount that is approximately equal to the cost of these investments because:
39. Which of the following is (are) true regarding cost flow assumptions?
40. Which of the following is NOT an example of an inventory account a manufacturing firm
might use?
41. The reason for recording a prepaid expense as a current asset is:
42. Assume that on September 1, 2013, a 6-month rent payment for $3,000 per month (for a
total of $18,000) was made with respect to a commercial lease that the company entered into on
that date as a tenant. The company took occupancy of the rented space immediately. The lease
term will expire on February 28, 2014. The $18,000 payment was recorded as a debit to Prepaid
Rent on September 1, 2013. The adjusting entry on December 31, 2013, is as follows:
43. On January 1, 2014, the balance in Great Lakes Co.’s Allowance for Bad Debts account
was $5,200. During the year, a total of $3,500 of delinquent accounts receivable were written off
as bad debts. The balance in the Allowance for Bad Debts account at December 31, 2014, was
$7,300.
(a.) What was the total amount of bad debts expense recognized during the year?
(b.) As a result of a comprehensive analysis, it is determined that the December 31, 2014,
balance of Allowance for Bad Debts should be $6,300. Show, in general journal format the
adjustment required.
44. Prepare a bank reconciliation for Show Me, Inc., as of June 30 from the following
information:
(a.) The June 30 balance shown on the bank statement is $2,898.
(b.) Outstanding checks at June 30 totaled $165.
(c.) A deposit of $212 made on June 30 was not included in the balance shown on the bank
statement.
(d.) The bank statement contained an adjustment of $205 for a note receivable collected by the
bank on behalf of Show Me, Inc. ($191 principal and $14 interest).
(e.) A bank charge of $17 was made to the account during June. Although the company was
expecting a charge, the amount was not known until the bank statement arrived.
(f.) The bank erroneously charged a $170 check of Shirt, Inc., against the Show Me, Inc., bank
account.
(g.) The June 30 balance in the general ledger Cash account, before reconciliation, is $3,013.
(h.) The bank statement included a notice that a customer’s check for $86 that had been
deposited on June 14 had been returned NSF.
Required:
(1.) Prepare the bank reconciliation for Show Me, Inc., as of June 30.
(2.) Prepare the appropriate adjusting entry(ies) or show the reconciling items in a horizontal
model, for Show Me, Inc., related to the bank reconciliation.
45. The following is a portion of the current assets section of the balance sheets of The
Sweet Cafe at December 31, 2014 and 2013:
(a.) If bad debts expense for 2014 totaled $16,400, what was the amount of accounts receivable
written off during the year?
(b.) The December 31, 2014, Allowance account balance includes $8,400 for a past due account
that is not likely to be collected. This account has not been written off. If it had been written off,
what would have been the effect of the write off on:
(1.) The current ratio at December 31, 2014?
(2.) Net income and ROE for the year ended December 31, 2014?
(c.) What do you suppose was the level of The Sweet Cafe’s sales in 2014, compared to 2013?
Explain your answer.
46. Prepare a bank reconciliation for Grace, Inc., as of January 31, from the following
information:
(a.) The January 31 cash balance in the general ledger is $2,544.
(b.) The January 31 balance shown on the bank statement is $2,272.
(c.) Checks issued but not returned with the bank statement were No. 435 for $226 and No. 448
for $91.
(d.) A deposit made on January 31 for $640 was included in the general ledger balance but not in
the bank statement balance.
(e.) Interest credited to the account during January but not recorded on the company’s books
amounted to $36.
(f.) A bank charge of $12 for printing new checks was made to the account during January.
Although the company was expecting a charge, the amount was not known until the bank
statement arrived.
(g.) In the process of reviewing canceled checks, it was determined that a check issued to a
supplier in payment of an account payable of $125 was recorded as a $152 cash disbursement.
Required:
(1.) Prepare the bank reconciliation for Grace, Inc., as of January 31.
(2.) Prepare the appropriate adjusting entry(ies) or show the reconciling items in a horizontal
model for Grace, Inc., related to the bank reconciliation.
47. The following are data available for Blue Grass for the month of June:
(a.) Calculate cost of goods sold and ending inventory under the following cost flow assumptions:
(1.) Weighted-average
(2.) FIFO
(3.) LIFO
(b.) Assume net income using the weighted average cost flow assumption was $6,400. Calculate
net income under FIFO and LIFO.
48. The following are data available for Richards Co. for the month of May:
Calculate cost of goods sold and ending inventory under the following cost flow assumptions:
(1.) Weighted average
(2.) FIFO
(3.) LIFO
