Which of the following transactions would not result in an entry to the inventory account in the buyer’s accounting records under a perpetual inventory system? a. Purchase of merchandise on credit b. Return of merchandise to the supplier c. Payment of a credit purchase of merchandise within the discount period d. Payment of freight by the seller for goods received from a supplier
> Selected balance sheet accounts for Gardner Company are presented below. Prepaid Insurance May 5 4,300 ? 1,250 Wages Payable ? 5,400 Unearned Sales Revenue ? 9,500 May 10 2,250 Interest Receivable ? 825 Required
> Reynolds Computer Service offers data processing services to retail clothing stores. The following data have been collected to aid in the preparation of adjusting entries for Reynolds Computer Service for 2019: a. Computer equipment was purchased from IB
> Allentown Services Inc. is preparing adjusting entries for the year ending December 31, 2019. The following data are available: a. Interest is owed at December 31, 2019, on a 6-month, 8% note. Allentown borrowed $120,000 from NBD on September 1, 2019. b.
> The downtown location of Chicago Clothiers purchases large quantities of supplies, including plastic garment bags and paper bags and boxes. At December 31, 2019, the following information is available concerning these supplies: Supplies inventory, 1/1/2
> JDM Inc. made the following prepayments for expense items during 2019: a. Prepaid building rent for 1 year on April 1 by paying $6,600. Prepaid rent was debited for the amount paid. b. Prepaid 12 months’ insurance on October 1 by paying $4,200. Prepaid i
> What is meant by ‘‘tone at the top’’? Why is it so important to an effective system of internal controls?
> Ray’s beginning and ending accounts receivables balances are $147,990 and $142,720, respectively. Ray’s sold $3,745,060 of merchandise, of which 50% was on credit. Required: Determine the amount of cash collections for the period.
> Greensboro Properties Inc. owns a building in which it leases office space to small businesses and professionals. During 2019, Greensboro Properties engaged in the following transactions: a. On March 1, Greensboro Properties paid $10,500 in advance to Pa
> Faraday Electronic Service repairs stereos and DVD players. During 2019, Faraday engaged in the following activities: a. On September 1, Faraday paid Wausau Insurance $4,860 for its liability insurance for the next 12 months. The full amount of the prepa
> Sentry Transport Inc. of Atlanta provides in-town parcel delivery services in addition to a full range of passenger services. Sentry engaged in the following activities during the current year: a. Sentry received $5,000 cash in advance from Rich’s Depart
> Medina Motor Service is preparing adjusting entries for the year ended December 31, 2019. The following items describe Medina’s continuous transactions during 2019: a. Medina’s salaried employees are paid on the last day of every month. b. Medina’s hourl
> Conklin Services prepares financial statements only once per year using an annual accounting period ending on December 31. Each of the following statements describes an entry made by Conklin on December 31 of a recent year. a. On December 31, Conklin com
> Carrico Advertising Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico’s activities during 2019. a. At the beginning of 2019, customers owed Carrico $45,800 for advertising services performed
> Treadway Dental Services gives each of its patients a toothbrush with the name and phone number of the dentist office and a logo imprinted on the brush. Treadway purchased 15,000 of the toothbrushes in October 2019 for $3,130. The toothbrushes were deliv
> Omega Transportation Inc., headquartered in Atlanta, Georgia, uses accrual-basis accounting and engaged in the following transactions: . Billed customers $3,580,000 for transportation services . Collected cash from customers in the amount of $2,479,000 .
> The records of Summers Building Company reveal the following information for 2019. a. Cash receipts during 2019 (including $50,000 paid by stockholders in exchange for common stock) were $273,500. b. Cash payments during 2019 (including $8,000 of dividen
> Electronic Repair Company repaired a high-definition television for Sarah Merrifield in December 2019. Sarah paid $80 at the time of the repair and agreed to pay Electronic Repair $80 each month for 5 months beginning on January 15, 2020. Electronic Repa
> XYZ Corp sells widgets to consumers for $20 each. Its beginning accounts receivable balance was $24,975, and it sold 12,376 widgets throughout the year. The total cash collections for the year amounted to $217,750. Required: Calculate the ending account
> What are the five components of internal control?
> Each of the following situations relates to the recognition of revenue: a. A store sells a gift card in December which will be given as a Christmas present. The card is not redeemed until January. b. A furniture store sells and delivers furniture to a cu
> The following information is taken from the accrual accounting records of Kroger Sales Company: a. During January, Kroger paid $9,150 for supplies to be used in sales to customers during the next 2 months (February and March). The supplies will be used e
> Businesses must decide whether to issue credit to customers. Required: Describe how selling to customers on credit affects the operating cycle.
> Richter Industries has the following items: Currency..................................................................................................... $27,500 Customer checks that have not been deposited........................................ 850 U.
> Canary Inc. maintains a petty cash fund with a balance of $1,800. During the month of September, Canary’s employees made routine expenses using cash from the petty cash fund totaling $1,150. At the end of September, Canary replenishes the petty cash acco
> Kingery Inc. maintains a balance of $3,000 in its petty cash fund for routine purchases such as supplies. During the year, Kingery’s employees paid for various office supplies and food purchases for office birthdays. As a result, Kingery’s petty cash acc
> Milner Department Store has one cash register on which it performs daily cash counts. Recently, the cash count indicated that there was $9,218.47 in the register after deducting and removing the opening change amount of $50. However, the cash register ta
> What accounts are used to record inventory purchase transactions under the periodic inventory system? Why aren’t these accounts used in a perpetual inventory system?
> Why do sales transactions under a perpetual inventory system require two journal entries?
> Hart Inc. began the year with $315,700 of accounts receivable. During the year, Hart sold a considerable amount of merchandise on credit and collected $2,427,000 of its credit sales. At the end of the year, the accounts receivable balance is $16,800 lowe
> Internal control systems include policies and procedures designed to provide reasonable assurance that the corporation’s objectives are being met in three areas: (a) Effectiveness and efficiency of operations, (b) Reliability of financial reporting, an
> Refer to the information for Morgan Inc. above. If Morgan uses a periodic inventory system, what is the cost of ending inventory under average cost at April 30? (Note Use four decimal places for per-unit calculations and round all other numbers to the ne
> Refer to the information for Morgan Inc. above. If Morgan uses a periodic inventory system, what is the cost of ending inventory under LIFO at April 30? a. $32,800 b. $38,400 c. $63,600 d. $69,200 Units Purchased at Cost Units Sold at Retail 1,200 u
> Refer to the information for Morgan Inc. below. If Morgan uses a periodic inventory system, what is the cost of goods sold under FIFO at April 30? a. $32,800 b. $38,400 c. $63,600 d. $69,200 Units Purchased at Cost Units Sold at Retail 1,200 units a
> Which of the following statements is true for a company that uses a periodic inventory system? a. The purchase of inventory requires a debit to Inventory. b. The return of defective inventory requires a debit to Purchase Returns and Allowances. c. The pa
> At the end of each day, Spangle counts the cash in its cash registers. Spangle then compares the physical amount of cash to the amount of cash that the register tape indicates should be in the cash drawer. On a recent day, Spangle Company obtained the fo
> Ignoring taxes, if a company understates its ending inventory by $10,000 in the current year: a. Assets for the current year will be overstated by $10,000. b. Net income for the subsequent year will be overstated by $10,000. c. Cost of goods sold for the
> An increasing inventory turnover ratio indicates that a company: a. Has reduced the time it takes to purchase and sell inventory. b. Is having trouble selling its inventory. c. May be holding too much inventory. d. Has sold inventory at a higher profit.
> Which of the following statements is true with regard to the gross profit ratio? 1. An increase in cost of goods sold would increase the gross profit rate (assuming sales remain constant). 2. An increase in the gross profit rate may indicate that a compa
> Which of the following statements regarding the lower of cost or market (LCM) rule is true? a. The LCM rule is an application of the historical cost principle. b. When the net realizable value of inventory drops below the historical cost of inventory, an
> Which method results in a more realistic amount for income because it matches the most current costs against revenue? a. FIFO b. Average cost c. Specific identification d. LIFO
> Hannah purchased a laptop computer from Perry Corp. for $1,500. Hannah’s receivable has been outstanding for over 180 days, and Perry determines that the total amount is uncollectible and writes off all of Hannah’s debt. Hannah later receives a windfall
> When purchase prices are rising, which of the following statements is true? a. LIFO produces a higher cost of goods sold than FIFO. b. LIFO produces a higher cost for ending inventory than FIFO. c. FIFO produces a lower amount for net income than LIFO. d
> Refer to the information for Morgan Inc. below. If Morgan uses a perpetual inventory system, what is the cost of ending inventory under average cost at April 30? (Note: Use four decimal places for per-unit calculations and round to the nearest dollar.)
> Refer to the information for Morgan Inc. below. If Morgan uses a perpetual inventory system, what is the cost of goods sold under LIFO at April 30? a. $37,500 b. $38,400 c. $63,600 d. $64,500 Units Purchased at Cost Units Sold at Retail 1,200 units
> Refer to the information for Morgan Inc. below. If Morgan uses a perpetual inventory system, what is the cost of ending inventory under FIFO at April 30? a. $32,500 b. $38,400 c. $63,600 d. $69,500 Units Purchased at Cost Units Sold at Retail 1,200 u
> U-Save Automotive Group purchased 10 vehicles during the current month. Two trucks were purchased for $20,000 each, two SUVs were purchased for $31,000 each, and six hybrid cars were purchased for $27,000 each. A review of the sales invoices revealed tha
> Zing Corp. prepares monthly bank reconciliations as part of its cash controls. Zing’s bank provided the following amount about Zing’s cash balance at the bank for during the month of April 2020: Balance, April 30, 2020...................................
> Which of the following transactions would not result in an adjustment to the inventory account under a perpetual inventory system? a. Sale of merchandise for cash b. Sale of merchandise on credit c. Receipt of payment from a customer within the discount
> Briggs Company purchased $15,000 of inventory on credit with credit terms of 2/10, n/30. Briggs paid for the purchase within the discount period. How much did Briggs pay for the inventory? a. $14,700 b. $14,850 c. $15,000 d. $15,300
> If beginning inventory is $20,000, purchases are $185,000, and ending inventory is $30,000, what is cost of goods sold as determined by the cost of goods sold model? a. $135,000 b. $175,000 c. $195,000 d. $235,000
> Ingrid Inc. has strict credit policies and only extends credit to customers with outstanding credit history. The company examined its accounts and determined that at January 1, 2019, it had balances in Accounts Receivable and Allowance for Doubtful Accou
> ‘‘For each inventory costing method, perpetual and periodic systems yield the same amounts for ending inventory and cost of goods sold.’’ Do you agree or disagree with this statement? Explain.
> How does an error in the determination of ending inventory affect the financial statements of two periods?
> What is the LIFO reserve, and when is it used?
> What do the gross profit and inventory turnover ratios tell company management about inventory?
> What is the effect on the current period income statement and the balance sheet when inventories are written down using the lower of cost or market method? What is the effect on future period income statements and balance sheets?
> Why are inventories written down to the lower of cost or market?
> Garrison Corporation was closing its books on May 31, 2020. Garrison’s accountant prepared a bank reconciliation as of May 31, 2020, and has found the following possible reconciling items between its book balance and its cash balance per the bank: Garri
> The Sarbanes-Oxley Act increased top management’s responsibility for what?
> How would the balance sheet accounts be affected if LIFO rather than FIFO were used when purchase prices are rising? When purchase prices are falling?
> How would reported income differ if LIFO rather than FIFO were used when purchase prices are rising? When purchase prices are falling?
> Firebird Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for February 2019 indicated the following: Balance, February 28, 2019 …………………………………………………….. $87,392 Service charge for February …………………………………………………
> If inventory prices are rising, which inventory costing method should produce the smallest payment for taxes?
> The costs of which units of inventory (oldest or newest) are allocated to ending inventory or cost of goods sold using the FIFO, LIFO, and average cost methods?
> Why do the four inventory costing methods produce different amounts for the cost of ending inventory and cost of goods sold?
> Describe the difference between F.O.B. shipping point and F.O.B. destination.
> Identify the accounting items for which adjustments are made to the invoice price of goods when determining the net cost of purchases.
> Why are adjustments made to the invoice price of goods when determining the cost of inventory?
> Why are perpetual inventory systems more expensive to operate than periodic inventory systems? What conditions justify the additional cost of a perpetual inventory system?
> How do the perpetual and periodic inventory accounting systems differ from each other?
> Samba Corporation operates in an industry with a high collectability issues. Recently, one of Samba’s customers wrote a check for $235 for services performed. Samba’s bank later informed Samba that its customer did not have cash available in his account
> How is cost of goods sold determined?
> Spotted Singer sells karaoke machines to businesses and consumers via the Internet. On January 1, 2019, Spotted Singer Inc. has an Accounts Receivable balance of $997,000 and a credit balance in its Allowance for Doubtful Accounts of $24,000. During 2019
> What are the components of cost of goods available for sale and cost of goods sold?
> Compare the flow of inventory costs between merchandisers and manufacturers.
> Describe the types of inventories used by manufacturers and merchandisers.
> What are the differences between merchandisers and manufacturers?
> The information for Mathis and Reece companies given below. Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April: a. On April 1, Mathis purchased merchandise on account from R
> Hempstead Company has the following data for 2019: Required: 1. How many units were sold? 2. Using the cost of goods sold model, determine the cost of goods sold. Item Units Cost Inventory, 12/31/2018 Purchases 940 4,510 $10,340 49,610 Inventory, 12/
> Spartan Inc. regularly provides services to Grieder Supply on terms 3/10, n/40 and records sales at gross. During a recent month, the two firms engaged in the following transactions: a. Spartan sold merchandise with a list price of $250,000. b. Spartan s
> Selected information from Small Company’s financial statements follows. Required: 1. Calculate the following ratios for 2018 and 2019: (a) Gross profit margin, (b) Operating margin, (c) Net profit margin, and (d) Accounts receivable
> Sloan Systems sells voice mail systems to small businesses. Sloan engaged in the following activities involving notes receivable (round to nearest dollar): a. On October 1, 2019, Sloan sold an $8,000 system to Majors Company. Majors gave Sloan a 7-month,
> Engle, a furniture company, made an error in recording a check received from a customer. Last month, Engle’s customer bought a table for $909. Upon receiving the check from the customer, Engel entered the check as an increase of cash of $990. Required:
> King Enterprises had 27 customers utilizing its financial planning services in 2019. Each customer paid King $25,000 for receiving King’s assistance. King estimates that 2% of its $675,000 credit sales in 2019 will be uncollectible. During 2020, King wro
> At the beginning of the year, Lennon Electronics had an accounts receivable balance of $34,800 and a balance in the allowance for doubtful accounts of $3,640 (credit). During the year, Lennon had credit sales of $891,420, collected accounts receivable in
> Carol Simon, the manager of Handy Plumbing has provided the following aging schedule for Handy’s accounts receivable: Carol indicates that the $125,200 of accounts receivable identified in the table does not include $9,400 of receivable
> Kelly’s Collectibles sells nearly half its merchandise on credit. During the past 4 years, the following data were developed for credit sales and losses from uncollectible accounts: * Losses from uncollectible accounts are the actual lo
> Johnson Tires has three stores. Each store manager is paid a salary plus a bonus on the sales made by his or her store. On January 5, 2020, Kevin Sampson, manager of one of the stores, resigned. Kevin’s store had doubled its expected December 2019 sales,
> Smithson Products sells legal supplies to law firms. Gross sales in 2019 were $2,750,600 (Smithson’s list price) on terms 3/10, n/30. Customers paid for $2,427,900 (Smithson’s list price) of the merchandise within the discount period and the remaining $3
> Parker Electronics sells cell phones. During 2019, Parker sold 1,500 units at an average of $500 per unit. Each unit cost Parker $350. At present, Parker offers no sales discounts. Parker’s controller suggests that a generous sales discount policy would
> Mary Wade owns a small business that rents parking spaces to students at the local university. Mary’s typical rental contract requires the student to pay the year’s rent of $720 ($60 per month) in advance. When Mary prepares financial statements at the e
> Katie Vote owns a small business that rents computers to students at the local university for the 9-month school year. Katie’s typical rental contract requires the student to pay the year’s rent of $1,800 ($200 per month) in advance. When Katie prepares
> Sims Company regularly provides services to Lauber Supply on terms 1/15, n/30 and records sales at gross. During a recent month, the two firms engaged in the following transactions: a. Sims provided services with a list price of $85,000. b. Sims provided
> Selected information from Bigg Company’s financial statements follows: Required: 1. Calculate the following ratios for 2018 and 2019: (a) Gross profit margin, (b) Operating margin, (c) Net profit margin, and (d) Accounts receivable
> Roeker Company provides information systems consultation services to large companies in the Chicagoland area. Due to a dip in the economy, Roeker has increased the percentage of credit sales which it believes will be uncollectible from 3.0% to 3.2% for 2
> Hula Corp. utilizes J.P. Morgan Chase in its banking transactions. For the month of August, 2019, J.P. Morgan Chase presented Hula with its bank statement as follows: Balance, August 31, 2019..............................................................
> Yarnell Electronics sells computer systems to small businesses. Yarnell engaged in the following activities involving notes receivable: a. On September 1, 2019, Yarnell sold a $10,000 system to Ross Company. Ross gave Yarnell a 6-month, 7% note as paymen
> At the beginning of the year, Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the allowance for doubtful accounts of $2,980 (credit). During the year, Tennyson had credit sales of $624,300, collected accounts receivable
> Cindy Bagnal, the manager of Cayce Printing Service, has provided the following aging schedule for Cayce’s accounts receivable: Cindy indicates that the $121,100 of accounts receivable identified in the table does not include $4,600 of
> The Glass House, a glass and china store, sells nearly half its merchandise on credit. During the past 4 years, the following data were developed for credit sales and losses from uncollectible accounts: * Losses from uncollectible accounts are the actual
