Deck 10

Question 1

What factors adjust the bank balance?

Answer 1

Deposits in transit (add) and Outstanding checks (subtract) and errors

Question 2

What factors adjust the book balance?

Answer 2

Service charges (add); bank collections (add); errors; and Non-sufficient funds (subtract); and Interest income (add)

Question 3

Net method vs. gross method for sales/cash discounts:

Answer 3

Net method: Records sales and A/R net of the discount; Gross method: Record sales and A/R without regard to the discount

Question 4

Difference between sales/cash discounts and trade discounts? (Net or gross method used)

Answer 4

Sales/cash discounts: either method; Trade discounts: net method only

Question 5

Expected exchanges vs. sales returns or allowances:

Answer 5

Exchanges: dont affect any accounts; Sales returns/allowances: Decreases A/R and sales

Question 6

Factoring without recourse:

Answer 6

True sale; Sale is final and the assignee (the factor) assumes the risk of any losses

Question 7

Factoring with recourse:

Answer 7

Sale or loan; Factor has an option to re-sell any uncollectible receivables back to the seller

Question 8

In consignment sales, revenue is recognized when:

Answer 8

The goods are sold to a third party

Question 9

The cost of consigned inventory includes:

Answer 9

The cost of inventory plus any costs needed to get the inventory in place for sale (does not include advertising)

Question 10

Current market value of inventory

Answer 10

Recognize a loss on the income statement and recognize a liability for the accrued loss

Question 11

Understatement of ending inventory results in:

Answer 11

Overstatement of COGS, Understatement of RE and net income

Question 12

Calculation for Inventory at Base $ =

Answer 12

Inventory at current $/Price index

Question 13

What method does IFRS use to value inventory?

Answer 13

Lower of cost or net realizable value

Question 14

Journal entry to adjust the security to FV under the cost method (loss):

Answer 14

Dr. Unrealized holding loss; Cr. Investment in investee (switch the entries for a gain)

Question 15

What designation can only be applied to held-to-maturity securities?

Answer 15

Debt (not equity)

Question 16

Consigned goods:

Answer 16

The consignor includes the consigned goods in its inventory (Inventory costs include shipping)

Question 17

Consignor:

Answer 17

The seller

Question 18

Inventory that is not costed using LIFO or retail method should be measured at (for GAAP):

Answer 18

Lower of cost and net realizable value

Question 19

Inventory costed using LIFO or the retail method should be measured at the (for GAAP):

Answer 19

Lower of cost or market