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Financial Accounting-Achievement Test 3: Chapters 5 and 6-When a customer returns merchandise purchased on credit, the

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Question;Achievement Test 3: Chapters 5;and 6 Name;Financial Accounting, 6e Instructor;Section;# ________ Date;Part;I;II;III;IV;V;Total;Points;36;26;18;10;10;100;Score;PART I ?;MULTIPLE CHOICE (36;points);Instructions;Designate the best answer for each of the following questions.;1. When a customer returns merchandise;purchased on credit, the;a. customer should credit Accounts Payable.;b. seller should credit Sales Returns and;Allowances.;c. customer should credit Accounts Receivable.;d. none of the above.;2. Credit terms of 2/10, n/30 mean that;a. a 10% cash discount may be taken if payment;is made immediately, a 2% discount if paid within 30 days.;b. a 2% cash discount may be taken if payment is;made within 10 days of the invoice date, otherwise the full amount is due at;the end of the month.;c. an additional amount equal to 2% of the;invoice price must be paid if payment is not received within 10 days, the;account is overdue after 30 days.;d. a 2% cash discount may be taken if payment is;made within 10 days of the invoice date, otherwise the full amount is due;within 30 days.;3. A periodic inventory system;a. allows for the determination of cost of goods;sold after each sale.;b. traditionally has been used with low;unit-value items.;c. requires that detailed inventory records be;kept.;d. requires the use of a cost of goods sold;account.;4. In accordance with the revenue recognition;principle, sales revenues are recorded when;a. earned, which typically occurs when the goods;are transferred from the seller to the buyer.;b. cash is received from the customer for items;already delivered.;c. an order is received from a customer with;delivery of the product expected to take place within the next 30 days.;d. the accountant determines which period's;income statement "needs" more revenue.;5. Expenses that relate to such activities as;personnel management, accounting, and store security generally should appear in;a multiple-step income statement in the;a. Cost of Goods Sold section.;b. Administrative Expenses section.;c. Nonoperating section.;d. Selling Expenses section.;6. Which of the following accounts should;appear in the Nonoperating section of a multiple-step income statement?;a. Freight-out;b. Sales Discounts;c. Sales Returns and Allowances;d. Interest Expense;7. Freight terms of FOB shipping point mean;that the;a. buyer must bear the freight costs.;b. seller must debit freight out.;c. goods are placed free on board at the buyer's;place of business.;d. seller must bear the freight costs.;8. With regard to accounting for a;merchandising company versus a service enterprise, which of the following is false?;a. Additional accounts and entries are typically;required for a merchandising company.;b. Both retail and wholesale enterprises;generally use accounting techniques of a merchandising company.;c. The process of measuring net income is;conceptually different.;d. There are just as many steps as in the;accounting cycle for a merchandising company.;9. With regard to the accounts used to record;freight costs;a. Freight-out is added to Cost of Goods Sold.;b. Freight-out's normal balance is a debit.;c. Freight-out is recorded when freight terms;are FOB shipping point.;d. Freight-out is a contra account to Sales.;10. The Sales Returns and Allowances account;a. normally has a credit balance.;b. should not be closed at the end of the;period.;c. is a contra account to Accounts Receivable.;d. is used by a merchandising company, but not a;service enterprise.;11. A debit to Sales Returns and Allowances is;evidence of a;a. sale on account.;b. return of goods originally purchased on;account.;c. return of goods originally sold on account.;d. purchase of goods on account.;12. Which of the following accounts is not included in the computation of net;sales?;a. Sales Discounts;b. Sales;c. Sales Returns and Allowances;d. Freight Out;13. Given the following information, compute the;amount of cash finally remitted by the customer.;Oct.;22?Sale on;credit, terms of 2/10, n/30?$3,000;Oct.;27?Allowance granted due to some items being damaged?$300;Oct.;31?Payment in full received from customer?$?;a. $2,646.;b. $3,000.;c. $2,640.;d. $2,814.;14. In order to minimize errors when taking a;physical inventory, each inventory counter should be required to establish the;authenticity of each inventory item. This is an application of the internal;control principle of;a. documentation procedures.;b. independent internal verification.;c. segregation of duties.;d. establishment of responsibility.;15. Which statement is false regarding the lower of cost or market (LCM) method of inventory?;a. Market is defined as current replacement cost, not selling price.;b. LCM is an example of the accounting concept of conservatism.;c. LCM is applied to individual items listed on the inventory summary;sheets.;d. All of the above are true regarding LCM.;16. Proponents;of LIFO, as opposed to FIFO, point out that LIFO results in;a. lower income taxes in a period of deflation.;b. a more current cost of goods sold.;c. lower net income in a period of deflation.;d. higher net income in periods of inflation.;17. Goods;in transit should be included in the inventory of the;a. buyer when the terms are FOB destination.;b. buyer when the terms are FOB shipping point.;c. transportation company when the terms are FOB destination.;d. seller when the terms are FOB shipping point.;18. The ending inventory of Larkin Company;which uses a periodic inventory system, was understated $7,000 on December 31, 2007, and;overstated $3,000 on December;31, 2008. Because of these errors, 2008 net income was;a. overstated $3,000.;b. overstated $10,000.;c. understated $4,000.;d. understated $10,000.;PART II ?;JOURNAL ENTRIES (26;points);The ledger accounts given below, with an;identification number for each, are used by Kiner Company.;Instructions;Prepare appropriate entries for the month of August by placing the appropriate;identification number(s) in the debit and credit columns provided and the;dollar amounts pertaining to each account in the adjoining columns.;1. Cash 7. Accounts Payable;2. Accounts;Receivable 8. Sales Returns and Allowances;3. Notes;Receivable 9. Sales Discounts;4. Merchandise;Inventory 10. Sales;5. Office;Supplies 11. Cost of Goods Sold;6. Land 12. Freight-out;???????????????????????????????????????????;Account(s) Account(s) Debit Credit;Entry;Information Debited Credited Amount(s) Amount(s);???????????????????????????????????????????;0. Aug. 1 Sold merchandise for cash $300. 1 10 $300 $300;The;cost of the merchandise sold;was;$200. 11 4 200 200;1. Aug. 2 Purchased merchandise from;ABC;Co. on account for $5,000;terms;2/10, n/30.;2. Aug. 4 Sold excess land for $7,000;accepting;a 2-year, 12% note.;The;land was purchased for;$7,000;last year.;3. Aug. 6 Sold merchandise to D. Riley;on;account for $830, terms 2/10;n/30.;D. Riley will pay $30 freight;costs;per the shipping terms. The;merchandise;sold cost $600.;4. Aug. 8 Accepted a sales return of defective;merchandise;from D. Riley?credit;granted;was $280. The returned;merchandise;cost $200.;5. Aug. 11 Purchased merchandise from;Tanner;Hardware on account for;$2,000;terms 1/10, n/30.;6. Aug. 12 Paid freight of $200 on the shipment;from;ABC Co. per the shipping terms.;7. Aug. 15 Received payment in full from D.;Riley.;8. Aug. 19 Paid ABC Co. in full.;9. Aug. 20 Paid Tanner Hardware in full.;10. Aug. 27 Purchased office supplies for $250;cash.;???????????????????????????????????????????;PART III ?;BASIC INVENTORY COMPUTATIONS (18 points);Vaughn Company, which uses a periodic inventory system, had a;beginning inventory on May 1, of 400 units of Product A at a cost of $7 per;unit. During May, the following purchases and sales were made.;Purchases Sales;May 6 375 units at $9 May 4 275 units;14 250 units;at $10 8 300 units;21 300 units;at $11 22 400 units;28;425 units at $13 24;225 units;1,350 1,200;Instructions;Compute the May 31 ending inventory and May cost of goods sold under (a);Average Cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting;calculations.;(a) Average;? Ending Inventory = $_________, Cost;of Goods Sold = $_________.;(b) FIFO ?;Ending Inventory = $_________, Cost;of Goods Sold = $_________.;(c) LIFO ?;Ending Inventory = $_________, Cost;of Goods Sold = $_________.;PART IV ?;CLOSING ENTRIES (10;points);Below is a;partial listing of accounts in the general ledger of Denton Co.;Instructions: Place an X in the appropriate column to;designate whether the account should be closed at year end and, if so, whether;the appropriate closing entry would require a debit or credit to the account.;???????????????????????????????????????????;Not Closed;Account Closed Debit Credit;???????????????????????????????????????????;1. Sales...................................................................................;2. Cost of Goods Sold............................................................;3. Accumulated Depreciation.................................................;4. Merchandise Inventory.......................................................;5. Sales Returns and Allowances...........................................;6. Dividends............................................................................;7. Freight-out...........................................................................;8. Retained Earnings..............................................................;9. Interest Expense.................................................................;10. Sales Discounts..................................................................;PART V ?;INVENTORY: SHORT PROBLEMS (10 points);Instructions: Complete the requirements specified for each;of the following independent situations.;A. State the missing items identified by ???.;1. Net;purchases +? = Cost of goods purchased;2. Net;purchases +? +;? = Purchases;3.? +;Purchases ? Purchases discounts ? Purchases returns and allowances;+;Freight-in =?;B. Watts Company uses the lower of cost or;market (LCM) basis for its inventory. The following information relates to its December 31, 2008;inventory. Determine the amount of the ending inventory applying LCM to;individual items.;December 31, 2008;Product Units Unit Cost Market;A 200 $19 22;B 250 29 26;C 300 16 18;D 150 30 28;E 180 15 17

 

Paper#37739 | Written in 18-Jul-2015

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