Ch. 4-6 Textbook Questions Flashcards
Adjusted entries for unearned revenues:
Decrease liabilities and increase revenues
Adjusted entries for prepaid expenses:
Decrease assets and increase expenses
Colleen Mooney earned salary of $400 for last week of September. She will be paid on October 1st. The adjusting entry at September 30th is:
Salaries and wages expense 400
Salaries and wages payable 400
Which account will have a 0 balance after the company has journalized and posted closing entries?
Service revenue
Which type of accounts will appear in the post-closing trial balance?
Permanent accounts
Bufford Corporation had reported the following amounts at December 31, 2017: sales revenue $184,000 ending inventory $11,600 beginning inventory $17,200 purchases $60,400 purchase discounts $3,000 purchase returns and allowances $1,100 freight‐in $600 freight‐out $900 Calculate the cost of goods available for sale.
Beginning inventory ($17,200)
+ Purchases ($60,400)
− Purchases discounts ($3,000)
− Purchase returns and allowances ($1,100)
+ Freight‐in ($600)
= Cost of goods available for sale ($74,100)
The gross profit rate is equal to:
Net sales - cost of goods sold/divided by net sales.
A quality of earnings ratio:
that is less than 1 indicates that a company might be using aggressive accounting tactics
= Net cash/net income
When is a physical inventory usually taken?
Both (b) and (c)
B. When a limited number of goods are being sold or received
C. At the end of the company’s fiscal year
Which of the following should not be included in the physical inventory of a company?
Goods held on consignment from another company
As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2017. This count did not take into consideration the following facts. Rogers Consignment Store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.
The inventory held on consignment by Rogers should be included in Railway’s inventory balance at cost ($35,000). The purchased goods of $13,000 should not be included in inventory until January 3 because the goods are shipped FOB destination. Therefore, the correct amount of inventory is
$180,000 +$35,000 = $215,000
Cost of goods available for sale consists of two elements: beginning inventory and:
Cost of goods purchased
The lower‐of‐cost‐or‐market rule for inventory is an example of the application of:
The conservatism convention
Which of these would cause inventory turnover to increase the most?
Decreasing the amount of inventory on hand and increasing sales
Norton Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower‐of‐cost‐or‐market is:
Under the LCM basis, “market” is defined as the current replacement cost. Therefore, ending inventory would be valued at:
200 widgets ×$80 = $16,000
$16,000
