ACCT 2113 1st Edition Exam 2 Study Guide Self Study Questions Chapter 5 1 On March 17 Marburger McConnell sold 15 000 of bricks to Trippet Tierra with terms of 2 10 net 30 What amount of net revenue net sales did Marburger McConnell ultimately realize on the sale of these bricks Note Trippet Tierra paid for the bricks on March 25 2 a 15 000 c 14 700 b 12 000 d 11 700 e Zero The entry to record the write off of an account receivable will include a a credit to Bad Debt Expense b no entry because an allowance for uncollectible accounts was established in an earlier period c a credit to Accounts Receivable d a debit to Allowance for Uncollectible Accounts e both c d 3 The direct write off method is generally not permitted for financial reporting purposes because a b Compared to the allowance method it would allow greater flexibility to managers in manipulating reported net income This method is primarily used for tax purposes c It is too difficult to accurately estimate future bad debts d Expenses bad debts are not properly matched with the revenues credit sales that they help to generate These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 4 5 6 Jasmine s Jewelers reported the following amounts at the end of 2012 total sales 550 000 sales discounts 12 000 sales returns 36 000 sales allowances 17 000 What was the company s net sales for 2012 a 489 000 c 477 000 b 485 000 d 499 000 At the beginning of 2012 Coatney Coxsey Cutright CCC had accounts receivable of 64 000 At the end of 2012 the company had accounts receivable of 78 000 During 2012 CCC had total sales of 1 000 000 all of which were credit sales What was this company s average collection period for 2012 a 12 82 c 23 6 days b 14 09 d 25 9 days e 28 5 days Barfield s Bagels had the following balances on December 31 2012 before any adjusting entries Accounts Receivable 100 000 Allowance for Uncollectible Accounts 4 100 credit Barfield s estimates uncollectible account expenses based on an aging of accounts receivable as shown below Estimated Percent Age Group Not yet due Accts Rec ble 50 000 Uncollectible 4 0 30 days past due 20 000 8 31 60 days past due 18 000 20 More than 60 days past due 12 000 40 What amount of bad debt expense did Barfield s record in its December 31 2012 adjusting entry a 10 200 d 6 100 7 b 12 000 c 16 100 e some other amount Provide services on account Indicate how this transaction would affect the following five financial statement items Stockholders Assets Liabilities 8 Equity Revenues Net Income a Increase No effect Increase Increase No effect b Increase No effect Increase Increase Increase c Increase No effect Increase Increase Decrease d No effect No effect No effect No effect No effect e Decrease No effect Decrease Increase No effect Collect account receivable previously written off Indicate how this transaction would affect the following five items Stockholders Assets Liabilities 9 Equity Revenues Net Income a No effect No effect No effect No effect No effect b Increase Decrease Increase Decrease No effect c Increase No effect Increase Increase Decrease d Increase No effect Increase Increase No effect e Decrease No effect Decrease Increase No effect Suppose that the balance of a company s allowance for uncollectible accounts was 6 200 credit at the end of 2009 prior to any adjusting entries The company estimated that the total of uncollectible accounts in its accounts receivable was 44 300 at the end of 2009 Total accounts receivable were 150 000 on December 31 2009 and total credit sales for 2009 were 330 000 The company grants credit terms of 2 10 net 30 to its customers What amount of bad debt expense appeared in the company s 2009 income statement 10 a 38 100 c 33 000 b 105 700 d 50 500 Pea Ridge Plumbers offers a 20 trade discount when providing 2 000 or more of plumbing services to its customers In March 2012 Pea Ridge provided 4 000 of plumbing services to El Dorado Hills Thrills and 1 500 of services to Yorba Linda Estates Each of these customers was granted credit terms of 2 10 net 30 If both customers paid for the plumbing services within the discount period what was the net sales figure for these two transactions a 5 500 d 4 606 b 4 312 e 5 500 c 4 486 Chapter 6 Facts for Questions 11 15 During 2012 Panhandle Pancakes sold 750 pancakes The selling price per pancake was 50 The company had the following beginning inventory and inventory purchase transactions during 2012 Inventory January 1 2012 Units 100 Purchase February 14 2012 150 Unit Cost 10 10 Purchase April 19 2012 200 15 Purchase August 8 2012 20 20 Purchase December 17 2012 350 30 11 12 13 14 What was this company s gross profit for 2012 assuming that it uses the average cost method a 7 500 b 25 000 c 20 000 d 22 500 e 15 000 What was this company s ending inventory for 2012 assuming that it uses the LIFO method a 5 000 d 12 500 b 7 500 e 17 500 c 2 500 What was this company s cost of goods sold for 2012 assuming it uses the FIFO cost method a 17 500 d 12 500 b 25 000 e 15 000 c 20 000 Under which inventory cost flow assumption did Panhandle Pancakes report the lowest total gross profit on the sale of waffles during 2012 a LIFO b FIFO c Average cost d The total gross profit would have been the same under all three methods 15 Assume that Panhandle Pancakes only purchased 250 pancakes on December 17th rather than 350 pancakes the purchase price was still 30 per waffle Which of the following statements would be true assuming that the company applied the LIFO cost flow assumption a The company s cost of goods available for sale in terms of dollars would be unaffected b The average cost per unit of the company s ending inventory would be unaffected c The company s cost of goods sold in terms of dollars would be unaffected d The company s gross profit in dollars would be unaffected e None of the above 16 During 2012 Kellyville Inc reported net sales of 250 000 operating expenses of 40 000 an average inventory balance of 50 000 cost of goods sold of 150 000 and interest expense of 10 000 What was Kellyville s gross profit ratio for 2012 a 40 b 20 17 c 24 d 30 e none of these The Reagan Rattlers had the following inventory data at the end of 2012 prior to any adjusting entries Inventory Item Quantity Fangs 80 Necks 70 Zechs Cost Market 50 60 …