Quiz 3R
1. Merchandise inventory includes: All goods owned by a company and held for sale [A]
2. Damaged and obsolete goods that can be sold: Are included in inventory at their net realizable
value [C]
3. Costs included in the Merchandise Inventory account can include all of the following except:
Damaged inventory that cannot be sold [E]
4. During a period of steadily rising costs, the inventory valuation method that yields the lowest
reported net income is: LIFO method [E]
5. The inventory valuation method that tends to smooth out erratic changes in costs is: Weighted
average [B]
6. The inventory valuation method that has the advantages of assigning an amount to inventory on
the balance sheet that approximates its current value, and also mimics the actual flow of goods
for most businesses is: FIFO [A]
7. The inventory turnover ratio is calculated as: Cost of goods sold divided by average
merchandise inventory [A]
8. Assume that the custodian of a $450 petty cash fund has $55.5 in coins and currency plus
$390.00 in receipts at the end of the month. The entry to replenish the petty cash fund will
include: A credit to Cash for $394.50 [D]
9. If a check correctly written and paid by the bank for $182 is incorrectly recorded in the
company’s books for $128, how would this error be treated on the bank reconciliation? Subtract
$54 from the book balance [E]
10. In the process of reconciling Marks Enterprises’ bank statement for September, Mr. Marks
compiles the following information:
Cash balance per company books on September 30
Deposits in transit at month-end
Outstanding checks at month-end
Bank charge for printing new checks
Note receivable and interest collected by bank on Marks behalf
A check given to Marks during the month by a customer is returned by the bank as NSF
$6,245
$1,360
$680
$75
$710
$540
The adjusted cash balance per the books on September 30 is: $6,340 [A]
11. A company had net sales of $30,700 and ending accounts receivable of $3,500 for the current
period. Its days’ sales uncollected equals (Use 365 days a year and round your final answer to
two decimal places): 41.61 days [B]
12. The interest accrued on $4,000 at 6% for 45 days is: (Use 360 days a year. Do not round
intermediate calculations): $30 [E]
13. Sorry, I do not have this!! ): However, it is very similar to number 12.
14. On December 31 of the current year, a company’s unadjusted trial balance included the
following: Accounts Receivable, debit balance of $97,600; Allowance for Doubtful Accounts,
credit balance of $1,001. What amount should be debited to Bad Debts Expense, assuming 5%
of outstanding accounts receivable at the end of the current year will be uncollectible? $3,879
[B]
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15. A company uses the percent of sales method to determine its bad debts expense. At the end of
the current year, the company’s unadjusted trial balance reported the following selected
amounts:
Accounts receivable
Allowance for uncollectible accounts
Net sales
$353,000 debit
620 credit
798,000 credit
All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be
uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry
is prepared? $4,788 [B]
16. A company uses the percent of sales method to determine its bad debts expense. At the end of
the current year, the company’s unadjusted trial balance reported the following selected
amounts:
Accounts receivable
Allowance for uncollectible accounts
Net sales
$350,000 debit
650 credit
795,000 credit
All sales are made on credit. Based on past experience, the company estimates 0.3% of credit sales to be
uncollectible. What adjusting entry should the company make at the end of the current year to record
its estimated bad debts expense? Debit Bad Debts Expense $2,385; credit Allowance for Doubtful
Accounts $2,385. [C]
17. Accounts receivable occur from credit sales to customers. True [A]
18. A promissory note is a written promise to pay a specified amount of money either on demand or
at a definite future date. True [A]
19. Sellers allow customers to use credit cards: All of these [E]
20. The accounts receivable turnover is calculated by: Dividing net sales by average accounts
receivable.
21. The allowance method based on the idea that a given percent of a company’s credit sales for
the period are uncollectible is: The percent of sales method [A]
22. Failure by a promissory note’s maker to pay the amount due at maturity is known as:
Dishonoring a note [C]
23. A properly designed internal control system: Lowers the company’s risk of loss [A]
24. When two clerks share the same cash register it is a violation of which internal control principle?
Establish responsibilities [A]
25.
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