ACCTG 215 Fall 2013 Multiple Choice Questions 1 point each Be sure to record your answers in the spaces provided on the cover sheet 1 A firm credits accounts receivable Which of the following transactions could have caused this Write offs of bad debts 2 Carroll Company sells 900 worth of goods to a customer on account on March 3 2013 with payment terms 2 10 n 60 Which of the following is recorded upon receipt of payment on April 7 2013 Debit Cash 900 3 The Average Days to Sell Inventory formula is 365 Inventory Turnover Clemons and Co had cost of goods sold of 300 000 net income of 100 000 and average inventory of 50 000 What is its Average Days to Sell Inventory rounded to one decimal place 60 8 4 In a periodic inventory system the cost of purchases is initially debited to Purchases 1 ACCTG 215 Fall 2013 5 Under the direct write off method what adjustment is made at the time an actual bad debt occurs Debit bad debt expense credit accounts receivable 6 Sherman Incorporated uses a periodic inventory system Inventory records revealed the following transactions for the month of October Date October 1 October 15 October 25 Transaction Beginning inventory Purchase Sale Number of Units 500 300 650 Unit Cost 2 50 2 75 Ending inventory for the month of October assuming FIFO would be 412 50 7 Wilson Company uses the aging method for the allowance for bad debts On 6 30 13 Wilson determined that one of its customers who owed 2 000 would not pay their account On 9 30 13 the same customer found additional funds and paid Wilson Company 500 Which of the following journal entries did Wilson Company record on 9 30 13 Accounts Receivable Allowance for bad debts Cash Accounts Receivable 500 500 500 500 2 ACCTG 215 Fall 2013 8 During 2013 Lynch Brothers Inc discovered that their ending inventory balance for 2012 had been overstated by 5 000 The company uses the periodic system of accounting for inventory Which of the following statements is true Cost of goods sold in 2012 was understated by 5 000 Cost of goods sold in 2013 will be overstated by 5 000 9 Percy Inc had a cash balance in its account of 15 000 as of 12 31 13 In reconciling its cash balance with the bank statement starting with the company s balance which of the following transactions would not affect the reconciliation Outstanding checks 10 Which listed methods of accounting for inventory are permitted under IFRS 1 FIFO 2 LIFO 3 Average Cost 1 and 3 3 ACCTG 215 Fall 2013 Numeric Questions 1 point each Be sure to record your final answers in the spaces provided on the cover sheet Use the following information for questions 11 and 12 Below is information extracted from the annual report for Baldwin Company for the year ended December 31 2013 Partial Income Statement for the year ended December 31 2013 Net Sales all on account 585 000 Cost of Goods Sold 250 000 Operating Expenses 135 000 Pretax Income 200 000 Inventory as of January 1 2013 65 000 Inventory as of December 31 2013 58 000 Accounts Receivable as of January 1 2013 50 000 Accounts Receivable as of December 31 2013 40 000 11 What is the value of Net Purchases made during 2013 for Baldwin Company Answer 243 000 58 000 65 000 x 250 000 x 243 000 Ending inventory Beginning inventory Net Purchases COGS 12 Receivables Turnover is calculated as Net Sales Average Accounts Receivable What is Baldwin Company s Receivables Turnover for 2013 Answer 13 585 000 50 000 40 000 2 13 13 On October 22 2013 Chancellor Corporation sold 100 pairs of shoes to Bruce Irvin for 8 600 price of 86 per pair on account with payment terms 3 15 n 30 On October 25 2013 Bruce returned 10 pairs of shoes for a full refund Bruce pays his account in full on November 1 2013 Assume the company made no other sales in the month of October What are Chancellor Corporation s net sales for the month of October Answer 7 507 80 Gross sales sales returns sales discount Net sales 8 600 860 7 740 0 03 7 507 80 4 ACCTG 215 Fall 2013 Use the following information for questions 14 and 15 Tate Industries uses a periodic inventory system Inventory records for the month of October showed the following transactions during the month Date October 1 October 10 October 18 October 30 Transaction Beginning inventory Purchase Sale Purchase Number of Units 1 000 600 1 100 400 Unit Cost 1 50 2 00 2 25 14 Calculate the value of Ending Inventory under Average Cost method Answer 1 620 Number of units 1 000 600 400 2 000 x x x Unit cost 1 50 2 00 2 25 Total cost 1 500 1 200 900 3 600 Average cost per unit 3 600 2 000 units 1 80 per unit Ending inventory 900 1 80 1 620 15 Calculate the value of Ending Inventory under the LIFO method Answer 1 350 Ending inventory 900 1 50 1 350 5