Int rmediate I Test 3 Fall 2012 1 What is the normaljoumal entry for recordingbad debtexpenseunderthe allowancemethod A Debit Allowance for Doubtful Accounts credit AccountsReceivable DebitAllowancefor DoubtfulAccounts creditBadDebtExpense DebilBadDebtE pense creditAllowMce for DoubtfulAccounrs D Debit AccountsReceivable credit Allowance for Doubtful Accounts 2 Why is the allowancemethodpreferredover the direct write off methodof accountsfor bad debts A Allowance methodis usedfor tax purposes B Estimatesare used C Detemining worthlessaccountsunderdirect write off methodis difficult to r do Dj lmproved matchingof bad debtexpensewith rcvenue 3 Whichofthe followingis not considered cashfor financialrcportingpurposes A Pettycashfundsandchangefunds B Moneyorders certifiedchecks andpersonalchecks Q Coin cunency andavailablefunds checks andI O U s f D Posldaled 4 Whatis a compensating balance A Savingsaccountbalances B Margin accountsheld with brokers C Temporaq investmentsservingascollateral for outstandingloans D Minimumdepositsrequiredto be maintained in connection with a borrowins arangement 5 Underwhichsectionof thebalancesheetis cashrestrictedfor pl rntexpansion reported A Currentassets LB Non curent assets C Cuffentliabilities D Stockholders equity 6 WetlinStonCorp hasoutstanding accounts receivable totaling 2 54million asof December 31 andsaleson creditdudngtheyearof 12 8million Thereis alsoa debitbalanccof 6 000in the allowancefor doubtfulaccounts Ifthe company estimales that 17oof its netcreditsaleswill beuncollectible whatwill be the balancein theallowancefor doubtfulaccounts aftertheyear end adjustment to recordbaddebtexpense A 25 100 A 31 400 c l 122 000 D 134 000 7 Whichof tbefbllowingis a characteristic of a pcrpetualinventorysystem A Inventorypurchases aredebitedto a purchases account Inventory records are not kept for every item F C Costof goodssoldis recordedwirh eachsale D Costofgoodssoldis determincd astheamountofpurchases lessthechange in inventory 8 Whereshouldgoodsin transitthatwererecentlypqlqbased FOB destination be includedon thebalancesheet A Accounts Payable B Inventory Equipment D Not on thebalancesheet At thecloseof its first yearof operations December 3l 2012 Ming Company hadaccounts receivable of 540 000 alterdeductingtherelatedallowancefor doubtlulaccounts During2010 thecompanyhadcharges to baddebtexpense of 90 000andwroteoff asuncollectible accounts receivable of 40 000 What shouldthecompanyreporton its balancesheetat December31 2010 asaccount 4 receivable befbretheallowancefor doubtfulaccounts A 5670 000 Lelssso ooo c 490 000 D 440 000 D I i t u lqop t t t t I itta 1r t0 I iu r0t 10 On January1 2010 West Co exchanged equipmentfor a 9400 000zero inreresrbearingnotedueJanuary1 2013 The preva lr grrte of rnrerest for i niiEo ftns t pe at January1 2010was 107o Thepresentvalueof l at 102 for three periodsis 0 75 Whatamountof interestrevenueshouldbe includedin West 20l l incomestatement t i A 0 i ti B 30 000 0 c 33 000 ta t D 40 000 I 1 BellInc took a physicalinveritory count at the end of the yearanddetermined v that 475 000of goodswere on hand In addition the following itemswere not includedin the physicalcount Bell Inc determinedthat 60pOOof goods purchasedwerein tansit that were shippedFOB destination goodswere actually receivedby the companytbreedaysafter the inventorycount The companysold 25 000worth of inventory FOB destination What amountshouldBell reportas inventorv at the end of the vear A 475 000 1r 0a t Ll fij t 90at00tt B 535 000 ic s00 000 D 560 000 12 Whenvaluing raw materialsinventory at lower of cost or market what is the meaningof theterm market A Net realizable value Net realizablevaluelessa normalprofit margin Curent rcplacementcost Discounted prcsentvalue 13 The floor to be us din applyingtheLCM methodto inventoryis deteminedas the A Net realizablevalue B J Net realizablevaluelessnormalprofit margin d Replacement cost D Sellingpricelesscostsof completionanddisposal 14 Groh Co rccordedthe following datapertainingto raw materialX during January 2010 Date Received l 1 10 lnventory UlU10 Issueflcle U22l10 Purchase 4 000 x Cost 8 Issued X 1 600 On Hand 3 2N 1 600 s 5 600 9 40 3116 4 r ti li f Themoving average unitcostof X invJntory at Januarl3 t 2010is A 8 70 A q cj e 00 D 9 40 1 5t 6cv e t n t 6CL t ncl Jr2 800 15 KeckCo had450unitsof ProductA on handat Januaryl 2010 costing 42 each Purchases of productA duringJanuarywercasfollows UPi ji i a Xl utl 7 50 3N l 10 l 18 U28 Unit Cosr tqt M ji ia 46 48 lr r z0u A physcalcounton January 31 2010shows600unitsofproductA on hand The cost of the inventoryat January3 I 20I 0 underthe LIFO methodis A 28 200 L 26 700 c 25jN lt 24 600 l j t l t i t J 1 0 x t l 16 If a unit ofinventoryhasdeclinedin valuebeloworiginalcost but the replacement costexceeds netrealizablevalue the amountto be usedfor the lRrket valueis A Net realizablevalue lJ ungtnal cost C Market value D Net realizablevaluelessa normalprofit margin 17 Oslo Corporationhastwo ptoductsin its endinginventory eachaccountedfor at the lower of cost or market A profit marginof 3070on selling price is considered nomal for eachproduct Specificdatawith respectto eachproductfollows Product2 Historicalcost 70 00 Replacement cost 54 00 Estimated Costto dispose 10 00 26 00 iJ l g selincprice j oo 19 S v m priclnglsending invenrory utng theLCM whatunitvalt silould oslouse for projbcjs I and2 respectively f4 M0 00and 65 00 B 946and965 C 46and 60 D 45and 54 18 KeenCompany saccountiog recordsindicaredthefollowinghformation Inventory l l 10 600 000 Purchasesduring 2010 3 000 000 c rJ U q tu Salesduring2010 3 800 000 6r q qwLt d 7fAoo2 A physicalinventory takenon December31 2010 rcsultedin an ending inventoryof 700 000 Keen s grossprofit on saleshaslemainedconstantat 25 in rccentyears Keensuspectssomeinventory may havebeentakenby a new employee At December31 2OlO what is the estimatedcostof missing jq entory 4 5o ooo B 150 000 c 200 000 D 250 000 19 XYZ Co recordeda saleon May I for 6 000and saleson May 9 and l0 for 9 000and 12 000 respectively XYZ S credit termsare710 n 30 The palment on the 6 000salewasreceivedMay 10 The 12 000salewaspaid for on May 15 andhe 9 000salewaspaid for on May 29 Under the grossmethod net salesshouldappearat which of the following amountson the May income statem nt A 26 160 B 26 640 c 26 880 D 27 000 t u q00u ll 60 26 6qO 20 FGH Co commencedoperationson the first day of the curent year At yearend its recordsindicatedthat 900 000of