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University of Alabama ACC 506 Chapter 5 Quiz 1)The practice of reporting the net realizable value of receivables in the financial statements is commonly called the: a

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University of Alabama

ACC 506

Chapter 5 Quiz

1)The practice of reporting the net realizable value of receivables in the financial statements is commonly called the:

a.            Direct write-off method of accounting for uncollectible accounts

b.            Cash flow method of accounting for uncollectible accounts

c.             Allowance method of accounting for uncollectible accounts

d.            Accrual method of accounting for uncollectible accounts

2.            Which of the following businesses is most likely to use a specific identification cost flow method?

a.            Roofing company

b.            Hardware store

c.             Car dealership

d.            Grocery store

3.            The percent of receivables method to estimate uncollectible accounts expense is also known as the:

a.            Credit sales approach

b.            Income statement approach

c.             Direct write-off approach

d.            Balance sheet approach

 

4.            Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

a.            The amount of the allowance of doubtful accounts decreases the net realizable value of a company’s receivables

b.            The account is increased when the company’s estimate of uncollectible accounts expense is recorded

c.             The account is a liability

d.            The account is a contra asset account

 

5.            Which of the following is not an advantage of accepting credit cards from retail customers?

a.            The credit card company performs credit worthiness assessments

b.            The credit card company assumes the cost of slow collections and write-offs

c.             The acceptance of credit cards tends to increase sales

d.            There are fees charged for the privilege of accepting credit cards

 

6.            The party that issues a promissory note is known as the:

a.            Borrower

b.            Maker

c.             Lender

d.            Borrower and maker

 

7.            How would accountants estimate the amount of a company's uncollectible accounts expense?

a.            Consult with trade association and business associates

b.            All of these answer choices are correct

c.             Consider new circumstances that are anticipated to be experienced in the future

d.            Compute as a percentage of credit sales

 

8.            The amount of accounts receivable that is actually expected to be collected is known as the:

a.            Uncollectible accounts expense

b.            Allowance for doubtful accounts

c.             Net realizable value

d.            Present value of accounts receivable

 

9.            In an inflationary environment:

a.            A company’s net income will be higher if it uses LIFO than if it uses FIFO

b.            A company’s assets will be lower if it uses LIFO as poosed to FIFO cost flow

c.             A company’s net income will be the same regardless of whether LIFO or FIFO is used

d.            A company’s cost of goods sold will be lower if it uses LIFO as opposed to FIFO

 

10.          The primary reason for a business to allow customers to purchase goods or services on account is to:

a.            Increase cash flow from financing

b.            Decrease the marketability of the company’s inventory

c.             Increase sales

d.            Decrease cost of goods sold

 

11.          Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method?

a.            Option B

 

b.            Option A

c.             Option C

d.            Option D

12.          When the cost of purchasing inventory is declining, which inventory cost flow method will produce the highest amount of cost of goods sold?

a.            LIFO, FIFO, and weighted average will all produce the same amount of cost of goods sold

b.            LIFO

c.             FIFO

d.            Weighted average

 

13.          Chase Company uses the perpetual inventory method. The inventory records for Chase reflected the following

 

 

 

 

 

Assuming Chase uses a FIFO cost flow method, the ending inventory on January 31 is:

a.            $2,625

b.   $4,720

c.             $2,550

d.   $3,540

 

14.          When prices are falling, LIFO will result in:

a.            Higher income and a higher inventory valuation than will FIFO

b.            Higher income and a lower inventory valuation than will FIFO

c.             Lower income and a higher inventory valuation than will FIFO

d.            Lower income and a lower inventory valuation than will FIFO

 

15.          Glasgow Enterprises started the period with 85 units in beginning inventory that cost $2.00 each. During the period, the company purchased inventory items as follows. Glasgow sold 375 units after purchase 3 for $2.00 each.

 

 

 

 

 

If the company uses the weighted average cost flow method, Glasgow's ending inventory would be approximately: (Round your intermediate calculations to 2 decimal places.)

a.            $585

b.   $934

 

c.             $592

d.   $441

16.          The Miller Company recognized $119,000 of service revenue earned on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $80,000 of cash from accounts receivable. The company estimates that it will be unable to collect 3% of its sales on account.

 

The net realizable value of Miller's receivables at the end of Year 2 was:

a.            $36,600

b.   $35,430

c.             $42,570

d. $39,000

17.          The Miller Company recognized $121,000 of service revenue earned on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $81,000 of cash from accounts receivable. The company estimates that it will be unable to collect 3% of its sales on account.

 

The amount of uncollectible accounts expense recognized on the Year 2 income statement was:

a.            $1,200

b. $40,000

c.             $3,630

d.   $2,430

 

18.          Melbourne Company uses the perpetual inventory method. Melbourne purchased 900 units of inventory that cost $5.00 each. At a later date the company purchased an additional 1,000 units of inventory that cost $5.50 each. If Melbourne uses a LIFO cost flow method, and sells 1,200 units of inventory, the amount of ending inventory appearing on the balance sheet will be:

a.            $3,500

b.   $3,675

c.             $6,500

d.   $3,850

 

19.          On January 1, Year 2, Grande Company had a $66,200 balance in the Accounts Receivable account and a $1,900 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $166,000 recognized service revenue on account. The company collected $185,700 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account.

 

The amount of uncollectible accounts expense recognized on the Year 2 income statement is:

a.            $1,400

b.   $1,660

c.             $662

d.   $1,857

20.          The Yankee Corporation has recently begun to accept credit cards. On July 7, Yankee made a credit card sale of $600. Assume that the credit card fee is recorded on the date of sale and that the credit card company charges a fee of 3%.

Which of the following correctly shows the effects of the sale on July 7?

a.            Option A

b.            Option C

c.             Option D

d.            Option B