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Chapter 6
43. A 90-day, 8% note for $10,000 dated May 1 is received from a customer on account. The maturity value of the note is
(Assume 360 days in a year):
a.
$10,000.
b.
$10,800.
c.
$10,200.
d.
$9,800.
44. Taxes receivable is classified as:
a.
other receivable.
b.
notes receivable.
c.
accounts receivable.
d.
trade receivables.
Chapter 6
45. A transaction in which a company sells its receivables and immediately receives cash for operating and other needs is
called _____.
a.
adjusting
b.
assigning
c.
factoring
d.
discounting
46. The two methods of accounting for uncollectible receivables are the:
a.
direct method and the indirect method.
b.
allowance method and the direct write-off method.
c.
cash method and the accrual method.
d.
percent of sales method and the analysis of receivables method.
Chapter 6
47. Jack Inc. offers a credit term of n/30. This means that the company:
a.
receives money from the customers 30 days after the of sale of the goods.
b.
offers a 30-day loan to the suppliers.
c.
expects to collect receivables every 30 days.
d.
pays its creditors within 30 days of the purchase of raw materials.
48. Days' sales in receivables estimates the average number of days it takes to:
a.
collect cash sales.
b.
convert inventory to sales.
c.
collect accounts receivables.
d.
convert raw material to inventory.
Chapter 6
49. Georgia Inc. reported operating income of $156,000 and sales of $1,300,000 for the current year end. Determine the
company's return on sales.
a.
10%
b.
8%
c.
15%
d.
12%
50. Which of the following statements is a correct representation of the effect of the reinstatement of an accounts
receivable account previously written off?
a.
Days' sales in receivables increases by the reinstatement of the account.
Chapter 6
b.
Return on sales decreases by the reinstatement of the account.
c.
Days' sales in receivables is not affected by the reinstatement of the account.
d.
Return on sales is not affected by the reinstatement of the account.
51. One of the weaknesses of the direct write-off method is that it:
a.
understates accounts receivable on the balance sheet.
b.
violates the matching principle.
c.
adjusts allowance account the end of the year.
d.
is based on estimates.
52. The analysis of receivables method of costing inventory is based on the assumption that:
Chapter 6
a.
the uncollectible accounts can be estimated as a percentage of credit sales.
b.
the bad debt expense is recorded by estimating uncollectible accounts at the end of the accounting period.
c.
the bad debt expense is recorded only when an account is determined to be worthless.
d.
the longer an account receivable is outstanding, the less likely that it will be collected.
53. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of
$500,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts
receivable?
a.
$25,000
b.
$525,000
c.
$500,000
d.
$475,000
Chapter 6
54. What type of account is Allowance for Doubtful Accounts?
a.
Contra asset account
b.
Asset account
c.
Liability account
d.
Expense account
55. Allowance for Doubtful Accounts has an unadjusted balance of $800 at the end of the year, and an analysis of
accounts in the customers' ledger indicates doubtful accounts of $15,000. Which of the following records the proper
provision for doubtful accounts?
a.
Increase Uncollectible Accounts Expense, $800; increase Allowance for Doubtful Accounts, $800
b.
Increase Uncollectible Accounts Expense $15,000; increase Allowance for Doubtful Accounts, $15,000
c.
Increase Uncollectible Accounts Expense, $14,200; increase Allowance for Doubtful Accounts, $14,200
d.
Increase Uncollectible Accounts Expense, $15,800; increase Allowance for Doubtful Accounts, $15,800
Chapter 6
56. Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and an analysis of
accounts in the customers' ledger indicates doubtful accounts of $15,000. Compute the adjusted balance in the allowance
for doubtful accounts?
a.
$15,000
b.
$14,500
c.
$14,000
d.
$15,500
57. At the end of the current year, Jackson Inc. has an Accounts Receivable balance of $200,000 and Allowance for
Doubtful Accounts has a negative balance of $(60,000). What is the net realizable value of the receivables?
a.
$60,000
b.
$260,000
c.
$200,000
d.
$140,000
Chapter 6
58. Allowance for Doubtful Accounts has an unadjusted balance of $1,100 at the end of the year, and an analysis of
customers' accounts indicates doubtful accounts of $12,900. Which of the following records the proper provision for
doubtful accounts?
a.
Increase Uncollectible Accounts Expense, $14,000; increase Allowance for Doubtful Accounts, $14,000
b.
Decrease Allowance for Doubtful Accounts, $14,000; decrease Uncollectible Accounts Expense, $14,000
c.
Decrease Allowance for Doubtful Accounts, $11,800; decrease Uncollectible Accounts Expense, $11,800
d.
Increase Uncollectible Accounts Expense, $11,800; increase Allowance for Doubtful Accounts, $11,800
59. Ariel Inc. uses the allowance method of accounting for uncollectible accounts receivable and estimates that 2% of the
credit sales of $1,650,000 for the year ended will be uncollectible. Allowance for Doubtful Accounts has a negative
unadjusted balance of $(1,600) at the end of the year. Determine the amount of the adjustment to record the provision for
doubtful accounts.
a.
$33,000
b.
$31,400
c.
$34,600
d.
$30,000
Chapter 6
60. Allowance for Doubtful Accounts has an unadjusted balance of $400 at the end of the year, and uncollectible accounts
expense is estimated at 1% of net sales. If net sales are $300,000, compute the amount of the adjustment to record the
provision for doubtful accounts.
a.
$400.
b.
$3,400.
c.
$3,000.
d.
$2,600.
61. The presentation of net accounts receivable on the balance sheet will be most accurate under the:
a.
direct write-off method.
b.
cash basis accounting.
c.
estimate based on analysis of receivables.
d.
allowance method.
Chapter 6
62. When the allowance method for recognising uncollectible accounts receivable is used, the allowance account will
have a positive balance at the end of the period if:
a.
the write-offs during the period exceed the beginning balance.
b.
the write-offs are equal to the balance of the account at the beginning of the period.
c.
the write-offs during the period are less than the beginning balance.
d.
the write-offs are equal to the difference between the beginning and the ending balance of the account.
63. The inventory costing method that considers the ending inventory to be composed of units of the merchandise
acquired earliest is called:
a.
first-in, first-out.
b.
highest-in, first-out.
c.
lowest-in, first-out.
Chapter 6
d.
last-in, first-out.
64. Inventory costing methods place primary emphasis on assumptions about:
a.
flow of goods.
b.
flow of costs.
c.
flow of goods or costs depending on the method.
d.
flow of values.
65. When merchandise sold is assumed to be in the order in which the expenditures were made, the inventory costing
method is called:
a.
first-in, last-out.
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b.
last-in, first-out.
c.
first-in, first-out.
d.
average cost.
66. Under which method of inventory costing is the ending inventory assumed to be composed of the most recent costs?
a.
Average cost
b.
Last-in, first-out
c.
First-in, last-out
d.
First-in, first-out
67. The inventory costing method that assigns the most recent costs to cost of good sold is:
Chapter 6
a.
FIFO.
b.
LIFO.
c.
average cost.
d.
specific identification.
68. Under which method of inventory costing is the cost flow assumed to be in the reverse order in which the expenditures
were made?
a.
Average cost
b.
Last-in, first-out
c.
First-in, first-out
d.
Specific identification method
Chapter 6
69. The following data is available for an item of JNC Inc. for the month of March:
March 1
Inventory
15 units at $10 each
15
Purchase
30 units at $18 each
31
Purchase
24 units at $15 each
Sale
30 units
Using the first-in, first-out method, what is JNC Inc.'s cost of ending inventory for March?
a.
$630
b.
$510
c.
$420
d.
$360
70. The following data is available for an item of LCC Inc. for the month of March:
March 1
Inventory
15 units at $10 each
15
Purchase
30 units at $18 each
31
Purchase
20 units at $15 each
Sale
30 units
Using the last-in, first-out method, what is ABC Inc.'s cost of ending inventory for March?
a.
$450
b.
$630
c.
$540
d.
$510
Chapter 6
71. Use the following data to calculate the cost of ending inventory under the FIFO method.
September 1
Beginning Inventory
15 units at $20 each
September 10
Purchase
20 units at $25 each
September 20
Purchase
25 units at $28 each
September 30
Ending Inventory
30 units
a.
$825
b.
$750
c.
$675
d.
$840
72. Use the following data to calculate cost of merchandise sold under FIFO method.
September 1
Beginning Inventory
15 units at $20 each
September 10
Purchase
20 units at $25 each
September 20
Purchase
25 units at $28 each
Chapter 6
September 30
Ending Inventory
30 units
a.
$825
b.
$750
c.
$675
d.
$600
73. Use the following data to calculate the cost of ending inventory using the LIFO method.
September 1
Beginning Inventory
15 units at $20 each
September 10
Purchase
20 units at $25 each
September 20
Purchase
25 units at $28 each
September 30
Ending Inventory
30 units
a.
$825
b.
$750
c.
$675
d.
$600
Chapter 6
74. Use the following data to calculate the cost of ending inventory under average cost method.
September 1
Beginning Inventory
20 units at $10 each
September 10
Purchase
25 units at $20 each
September 20
Purchase
40 units at $25 each
September 30
Ending Inventory
35 units
a.
$992
b.
$400
c.
$875
d.
$700
75. Blue Jay Inc. reported the following transactions for the month of March:
1
Beginning inventory
15 units at $6 each
5
Purchase
29 units at $9 each
13
Purchase
25 units at $12 each
20
Purchase
15 units at $14 each
31
Ending inventory
30 units
Calculate the cost of ending inventory using the FIFO method.
a.
$420
b.
$390
c.
$216
d.
$510
Chapter 6
76. ABC Inc. provided the following data for the year end:
Cost of goods sold
$4,680,000
Inventory at the beginning of the year
678,000
Inventory at the end of the year
570,000
What is ABC Inc.'s days' sale in inventory? (Assume 360 days in a year)
a.
95 days
b.
13 days
c.
60 days
d.
48 days
