Inventory, adjusting entries, Internal control, bank reconciliation

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Quiz #2 Grade 0 Professor Talbot Save this file as: Name______________________________________ Last Name_First name_ACCT 220_Quiz 2 Start time_________________ Finish time__________________ Once you open up the exam found in the assignment section under quiz 2, You will have 2.5 hours to complete the quiz, closed book with no resources other than one page of your personal notes. Please turn in the one page of personal notes with this excel file after these instuctions in the assignment section. Also on the top of the page annotate your start time and ending time and it should be no longer than 2 1/2 hours. Please study for this quiz as a closed book test and study like you would any quiz that you take in the classroom. Distinguish between FOB shipping point and FOB destination, study LIFO, FIFO and average cost inventory valuation methods. Study the classified income statement and internal control. Study bank reconcilliations and petty cash. Study the Excel homework and exercises, review the in class discussions and the reading material. Study Accounts Receivable and the allowance method Good luck on the quiz and make sure that you upload the excel document by Thursday at 11:45 in the assignment section of the Leo classroom. Save this file as: _ACCT 220_Quiz 2 Using the code letters below, indicate how each of the items listed would be handled in preparing a bank reconciliation. Enter the appropriate code letter in the space to the left of each item. Code A B C D E Add to cash balance per books Deduct from cash balance per books Add to cash balance per bank Deduct from cash balance per bank Does not affect the bank reconciliation Items: 1 Outstanding checks. 2 Bank service charge. Check for $420 correctly written and paid by the bank but incorrectly 3 entered in the cash payments journal for $240. 4 Deposit in transit. 5 Bank returns deposited check marked NSF. 6 Bank collects notes receivable and interest for depositor. 7 Bank debit memorandum for check printing fees. Petty cash custodian has $91 in paid petty cash vouchers that have 8 not been reimbursed. Bank charged a check against the company which should have been 9 charged to another company. A check for $246 was correctly paid by the bank but was incorrectly 10 entered in the cash payments journal for $264. Exercise #2 The adjusted trial balance accounts: Advertising Expense Cost of Goods Sold Depreciation Expense Freight-out Income Tax Expense Interest Expense Interest Revenue Merchandise Inventory Prepaid Rent Sales Sales Discounts Sales Returns and Allowances Store Salaries Expense Unearned Revenue Utilities Expense Prepare a multiple-step income statement, in proper form , for the year ended December 31, 2014 for Cosey Inc. Also known as a classified income statement $ 15,000 347,000 3,500 2,000 21,700 19,000 25,000 35,750 4,500 575,000 9,500 50,000 74,000 8,000 18,000 Exercise #3 The Stoney Company sells many products. Wolie is one of its popular items. Below is an analysis of the inventory purchases and sales of Wolie for the month of March. Stoney Company uses the periodic inventory system. Units 1-Mar 3-Mar 4-Mar 16-Mar 25-Mar 30-Mar Beginning inventory Purchase Sales Purchase Purchase Sales Units Unit Cost 1,500 $0.80 6,000 $0.84 5,000 3,000 $0.88 4,500 $0.96 4,000 Unit Selling Price $2.00 $2.00 (a) Using the FIFO assumption, calculate the cost of goods sold and ending inventory for March. (Show and label computations. Perform all calculations to two decimal places.) b) Using the Average Cost assumption, calculate the cost of goods sold and ending inventory for March. (Show and label computations. Perform all calculations to two decimal places.) c) Using the LIFO Cost assumption, calculate the cost of goods sold and ending inventory for March. (Show and label computations. Perform all calculations to two decimal places.) $2.00 Answers to the 30 multiple choice questions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 < please record answer here < please record answer here < please record answer here < please record answer here 1) a. b. c. d. From an internal control standpoint, the asset most susceptible to improper dive prepaid insurance. cash. Equipment Investments 2) a. b. c. d. Jolene is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates documentation procedures are violated. independent internal verification is violated. segregation of duties is violated. establishment of responsibility is violated. 3) a. b. c. d. Internal control is defined, in part, as a plan that safeguards all balance sheet accounts. assets. liabilities. capital stock. 4) a. b. c. d. The control principle related to not having the same person authorize and pay for goods is known as establishment of responsibility. independent internal verification. segregation of duties. rotation of duties. 5) a. b. c. d. Two individuals at a retail store work the same cash register. You evaluate this situation as a violation of establishment of responsibility. a violation of segregation of duties. supporting the establishment of responsibility. supporting internal independent verification. 6) a. b. c. d. Having different individuals receive cash, record cash receipts, and hold the cash is an example of establishment of responsibility. segregation of duties. documentation procedures. independent internal verification. 7) An adjusting entry is not required for a. b. c. d. outstanding checks. collection of a note by the bank. NSF checks. bank service charges. If a check correctly written and paid by the bank for $591 is incorrectly recorded on the company's books for $519, 8) the appropriate treatment on the bank reconciliation would be to a. deduct $72 from the book's balance. b. add $72 to the book's balance. c. deduct $72 from the bank's balance. d. deduct $591 from the book's balance. 9) During 2013, Parker Enterprises generated revenues of $60,000. The company's expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000. Parker's gross profit is: a. $16,000.00 b. $18,000.00 c. $30,000.00 d. $60,000.00 10) a. b. c. d. A primary difference between a periodic and perpetual inventory system is that a periodic system: determines the inventory on hand only at the end of the accounting period. provides better control over inventories. records the cost of goods sold after each sale transaction. keeps a record showing the merchandise inventory on hand at all times. 11) a. b. c. d. A decline in a company's gross profit could be caused by all of the following except: selling products using a lower markup. clearance of discontinued inventory. paying lower prices to its suppliers. increasing competition resulting in a lower selling price. 12) South Company uses the perpetual inventory system. South's goods in transit at December 31 include: Sales made by South (1) FOB destination (2) FOB shipping point Which items should be included in South's inventory at December 31? a. (2) and (3) b. (1) and (4) c. (1) and (3) d. (2) and (4) 13) a. b. c. d. 14) a. b. c. d. In periods of rising prices, the inventory method which results in the greatest net income is the: LIFO method. FIFO method. Weighted Average method. Lower of Cost or Market method. The following information was available for Rawley Company at December 31, 2 inventory (Jan .01) $80,000; inventory (Dec. 31) $120,000; cost of goods sold $60 accounts receivable $73,000; and sales $900,000. Rawley's inventory turnover in 2008 was: 9.00 times. 7.50 times. 6.00 times. 5.00 times. A petty cash fund of $200 is replenished when the fund 15) contains $5 in cash and receipts for $193. The entry to replenish the fund would: a. credit Cash Over and Short for $2. b. credit Miscellaneous Revenue for $2. c. debit Cash Over and Short for $2. d. debit Miscellaneous Expense for $2. 16) a. b. c. d. An item is considered material if it doesn't costs a lot of money. it is of a tangible good intended for re-sale. it is likely to influence the decision of an investor or creditor. the cost of reporting the item is greater than its benefits. 17) Receivables might be sold to a. lengthen the cash-to-cash operating cycle. b take advantage of deep discounts on the cash realizable value of receivables. c. generate cash quickly. d. finance companies at an amount greater than cash realizable value. If the amount of uncollectible account expense is 18) understated at year end: a. net income will be understated. b. stockholders' equity will be understated. c. allowance for doubtful accounts will be overstated. d. net accounts receivable will be overstated. 19) a. b. c. d. A debit balance in the Allowance for Doubtful Accounts is the normal balance for that account. indicates that actual bad debt write-offs have exceeded previous provisions for b indicates that actual bad debt write-offs have been less than what was estimated cannot occur if the percentage of sales method of estimating bad debts is used. 20) a. b. c. d. Bad Debts Expense is considered an avoidable cost in doing business on a credit basis. an internal control weakness. a necessary risk of doing business on a credit basis. avoidable unless there is a recession. 21) a. b. c. d. The best managed companies will have no uncollectible accounts. a very strict credit policy. a very lenient credit policy. some accounts that will prove to be uncollectible. 22) a. b. c. d. Two methods of accounting for uncollectible accounts are the allowance method and the accrual method. allowance method and the net realizable method. direct write-off method and the accrual method. direct write-off method and the allowance method. 23) a. b. c. d. When the allowance method of accounting for uncollectible accounts is used, Bad Debts Expense is recorded in the year after the credit sale is made. in the same year as the credit sale. as each credit sale is made. when an account is written off as uncollectible. 24) a. b. c. d. Allowance for Doubtful Accounts on the balance sheet is offset against total current assets. increases the cash realizable value of accounts receivable. appears under the heading "Other Assets." is offset against accounts receivable. In reviewing the accounts receivable, the cash realizable 25) value is $14,000 before the write-off of a $1,500 account. What is the cash realizable value after the write-off? a. $1,500 b. $12,500 c. $14,000 d. $15,500 26) a. b. c. d. The maturity value of a $60,000, 10%, 60-day note receivable dated July 3 is $60,000 $61,000 $66,000 $70,000 27) a. b. c. d. The interest on a $10,000, 10%, 1-year note receivable is $1,000 $10,000 $10,100 $11,000 28) a. b. c. d. The maturity value of a $60,000, 8%, 3-month note receivable is $60,400 $60,480 $61,200 $64,800 29) a. b. c. d. Notes receivable are recorded in the accounts at cash (net) realizable value. face value. gross realizable value. maturity value. 30) a. b. c. d. Which of the following are also called trade receivables? Accounts receivable Other receivables Advances to employees Income taxes refundable 2 points each, 30 questions, for 60 point total most susceptible to improper diversion and use is t safeguards would be to end of the accounting period. tory on hand at all times. Purchases made by South (3) FOB destination (4) FOB shipping point s inventory at December 31? wley Company at December 31, 2008: $120,000; cost of goods sold $600,000; or or creditor. h realizable value of receivables. n cash realizable value. xceeded previous provisions for bad debts. een less than what was estimated. of estimating bad debts is used. counts are the ote receivable dated July 3 is note receivable is Exercise #4 On December 31, 2013, the balance in Accounts Receivable was $680,000 and net credit sales amounted to $3,800,000 during 2013. An aging analysis of the accounts receivable indicated that $40,000 in accounts are expected to be uncollectible. Past experience has shown that about 1% of net credit sales eventually are uncollectible. Instructions Prepare the adjusting entries to record estimated bad debts expense using the receivables basis under each of the following independent assumptions: (a) Allowance for Doubtful Accounts has a credit balance of $3,200 before adjustment. (b) Allowance for Doubtful Accounts has a debit balance of $730 before adjustment.
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