Reference no: EM131805415

On December 31 of the current year, Hewett Company reported an ending inventory balance of $215,000. The following additional information is also available:

· Hewett sold goods costing $38,000 to Trump Enterprises on December 28 and shipped the goods on that date with shipping terms of FOB shipping point. The goods were not included in the ending inventory amount of $215,000 because they were not in Hewett's warehouse.

· Hewett purchased goods costing $44,000 on December 29. The goods were shipped FOB destination and were received by Hewett on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in the ending inventory balance of $215,000.

· Hewett's ending inventory balance of $215,000 included $15,000 of goods being held on consignment from Rumsfeld Company. (Hewett Company is the consignee.)

· Hewett's ending inventory balance of $215,000 did not include goods costing $95,000 that were shipped to Hewett on December 27 with shipping terms of FOB destination and were still in transit at year-end.

Based on the above information, the correct balance for ending inventory on December 31 is:

Select one:

a. $194,000

b. $209,000

c. $200,000

d. $171,000

e. $156,000

Thelma Company reported cost of goods sold for Year 1 and Year 2 as follows:

Thelma Company made two errors: 1) ending inventory at the end of Year 1 was understated by $15,000 and 2) ending inventory at the end of Year 2 was overstated by $6,000. Given this information, the correct cost of goods sold figure for Year 2 would be:

Select one:

a. $291,000

b. $276,000

c. $264,000

d. $285,000

e. $249,000

Credit card expense may be classified as:

Select one:

a. A "discount" deducted from sales to get net sales.

b. A selling expense.

c. An administrative expense.

d. All of these.

e. Only A and B.

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on December 31, to record the accrued interest on the note?

Select one:

a. b. c. d. e.

Information on a depreciable asset is as follows:

If the asset is sold on January 1, 2011 for $13,000, the journal entry to record the sale will include:

Select one:

a. A credit to gain on sale for $8,000.

b. A debit to loss on sale for $2,625.

c. A credit to accumulated depreciation for $59,375.

d. A debit to loss on sale for $3,042.

e. A credit to gain on sale for $4,979.

The account receivable turnover measures:

Select one:

a. How long it takes to sell accounts receivable to a factor.

b. How often, on average, receivables are received and collected during the period.

c. The relation of cash sales to credit sales.

d. How long it takes to sell merchandise inventory.

e. All of these.

The person that borrows money and signs a promissory note is called the payee.

Select one:

True

False

Huffington Company traded in an old delivery truck for a new one. The old truck had a cost of $75,000 and accumulated depreciation of $60,000. The new truck had an invoice price of $125,000. Huffington was given a $12,000 trade-in allowance on the old truck, which meant they paid $113,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck?

Select one:

a. $15,000

b. $75,000

c. $113,000

d. $125,000

e. $128,000

The conservatism constraint:

Select one:

a. Requires that when multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.

b. Requires that a company use the same accounting methods period after period.

c. Requires that revenues and expenses be reported in the period in which they are earned or incurred.

d. Requires that all items of a material nature be included in financial statements.

e. Requires that all inventory items be reported at full cost.

Toys "R" Us had cost of goods sold of $8,321 million and its ending inventory was $2,027 million. Therefore its days' sales in inventory equals 89 days.

Select one:

True

False

Few companies take a physical count of inventory each year, and rely on inventory records alone to determine the inventory value.

Select one:

True

False

A method that charges the same amount of expense to each period of the asset's useful life is called:

Select one:

a. Accelerated depreciation.

b. Declining-balance depreciation.

c. Straight-line depreciation.

d. Units-of-production depreciation.

e. Modified accelerated cost recovery system (MACRS) depreciation.

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?

Select one:

a. $140.

b. $160.

c. $210.

d. $380.

e. $590.

If a customer owes interest on accounts receivable, Interest Revenue is debited and Accounts Receivable is credited.

Select one:

True

False

A 90-day note issued on April 10 matures on:

Select one:

a. July 9.

b. July 10.

c. July 11.

d. July 12.

e. July 13.

The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory.

Select one:

True

False

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Select one:

True

False

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Select one:

True

False

A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000 with accumulated depreciation of $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

Select one:

a. A loss of $25,000.

b. A gain of $25,000.

c. A loss of $65,000.

d. A gain of $65,000.

e. A gain of $90,000.

The going concern assumption supports the reporting of plant assets at book value rather than market value.

Select one:

True

False

After adjustment, the balance in the Allowance for Doubtful Accounts has the effect of reducing accounts receivable to its estimated realizable value.

Select one:

True

False

The cost of an intangible is systematically allocated to expense over its estimated useful life through the process of depletion.

Select one:

True

False

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Select one:

True

False

Under the allowance method of accounting for uncollectible accounts receivable, no attempt is made to predict bad debts expense.

Select one:

True

False

Information on a depreciable asset owned by Wilson Engineering is as follows:

If the asset is sold on July 1, 2012 for $20,000, the journal entry to record the sale will include:

Select one:

a. A credit to cash for $20,000.

b. A debit to accumulated depreciation for $22,500.

c. A debit to loss on sale for $10,000.

d. A credit to loss on sale for $10,000.

e. A debit to gain on sale for $2,500.

Plant assets refer to intangible assets that are used in the operations of a business.

Select one:

True

False