1.

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? a. Uncollectible Accounts Expense b. Allowance for Doubtful Accounts c. Accounts Receivable d. Interest Expense

ANS: B

DIF:

OBJ:

04

2. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of the following entries records the proper provision for doubtful accounts? a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts, $800 b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts, $14,200 c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense, $800 d. debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense, $15,800

ANS: B

DIF:

OBJ:

04

3. Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment), and uncollectible accounts expense is estimated at 3% of net sales. If net sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is a. $18,500 b. $17,500 c. $18,000 d. none of the above

ANS: C

DIF:

OBJ:

04

4. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $450,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable? a. $25,000 b. $425,000 c. $450,000 d. $455,000

ANS: B

DIF:

OBJ:

04

5. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? a. Uncollectible Accounts Expense b. Accounts Receivable c. Allowance for Doubtful Accounts

d. Interest Expense

ANS: B

DIF:

OBJ:

04

6. Allowance for Doubtful Accounts is listed on the balance sheet under the caption a. owner's equity b. investments c. fixed assets d. current assets

ANS: D

DIF:

OBJ:

04

7. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the a. Uncollectible accounts expense for the year b. total of the accounts receivables written-off during the year c. total estimated uncollectible accounts as of the end of the year d. sum of all accounts that are past due.

ANS: C

DIF:

OBJ:

04

8. Allowance for Doubtful Accounts has a credit balance of $1,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates doubtful accounts of $12,900. Which of the following entries records the proper provision for doubtful accounts? a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000 b. debit Allowance for Doubtful Accounts, $14,000; credit Uncollectible Accounts Expense, $14,000 c. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense, $11,800 d. debit Uncollectible Accounts Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800

ANS: D

DIF:

OBJ:

04

9. Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year (before adjustment), and an analysis of customers' accounts indicates doubtful accounts of $17,900. Which of the following entries records the proper provision for doubtful accounts? a. debit Allowance for Doubtful Accounts, $16,400; credit Uncollectible Accounts Expense, $16,400 b. debit Allowance for Doubtful Accounts, $19,400; credit Uncollectible Accounts Expense, $19,400 c. debit Uncollectible Accounts Expense, $19,400; credit Allowance for Doubtful Accounts, $19,400 d. debit Uncollectible Accounts Expense, $16,400; credit Allowance for Doubtful Accounts, $16,400

ANS: D

DIF:

OBJ:

04

10. What is the type of account and normal balance of Allowance for Doubtful Accounts? a. Contra asset, credit b.

Asset, debit c. Asset, credit d. Contra asset, debit

ANS: A

DIF:

OBJ:

04

11. A company uses the estimate of sales method to account for uncollectible accounts. When the firm writes off a specific customer's account receivable a. total current assets are reduced b. total expenses for the period are increased c. total current assets are reduced and total expenses are increased d. there is no effect on total current assets or total expenses

ANS: D

DIF:

OBJ:

04

12. An estimate based on an analysis of receivables shows that $780 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Uncollectible Accounts Expense is a. $110 b. $780 c. $670 d. $890

ANS: D

DIF:

OBJ:

04

13. ABC company uses the estimate of sales method of accounting for uncollectible accounts. ABC estimates that 3% of all credit sales will be uncollectible. On January 1, 2005, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2005, ABC wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000. After the adjusting entry, the December 31, 2005, balance in the Uncollectible Accounts Expense would be a. $1,200 b. $3,000 c. $3,600 d. $7,200

ANS: B

DIF:

OBJ:

04

14. The balance in Allowance for Doubtful Accounts must be carefully considered prior to the end of the year adjustment when applying which method? a. direct write-off method

b. estimate based on sales c. estimate based on an analysis of receivables d. both (b) and (c)

ANS: C

DIF:

STO:

04

15. Donovan Company uses the estimate based on analysis of receivables to account for uncollectible accounts. The company has determined that the Irish Company account is uncollectible. To write-off this account, Donovan should debit a. Uncollectible Accounts Expense and credit Accounts Receivable b. Uncollectible Accounts Expense and credit Allowance for Doubtful Accounts c. Allowance for Doubtful Accounts and credit Accounts Receivable d. Accounts receivable and credit Allowance for Doubtful Accounts

ANS: C

DIF:

OBJ:

04

16. Using the estimate based on sales method of accounting for uncollectible accounts, the entry to reinstate a specific receivable previously written off would include a a. credit to Allowance for Doubtful Accounts b. credit to Accounts Receivable c. debit to Allowance for Doubtful Accounts d. debit to Accounts Receivable

ANS: D

DIF:

OBJ:

04

17. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $540. During the year, $350 of previously written-off accounts were reinstated and accounts totaling $410 are written-off as uncollectible. The end of the year balance in the Allowance for Doubtful Accounts should be a. $350 b. $410 c. $480 d. $600 ANS: C DIF: 3 OBJ: 04 18. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? a. Uncollectible Accounts Payable b. Accounts Receivable c. Allowance for Doubtful Accounts d. Uncollectible Accounts Expense

ANS: D

DIF:

OBJ:

05

19. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? a. Uncollectible Accounts Expense b. Accounts Receivable c. Allowance for Doubtful Accounts d. Interest Expense

ANS: B

DIF:

OBJ:

05

21. In a periodic inventory system the purchase of $8,000 of merchandise would include a: a. debit to inventory b. debit to purchases c. debit to cost of goods sold d. credit to sales

ANS: B DIF: 03 REF: App C 22. In a perpetual inventory system, a purchase of $12,000 of merchandise would include a: a. debit to inventory b. debit to purchases c. debit to cost of goods sold d. credit to sales

ANS: A DIF: 03 REF: App C 23. In a perpetual inventory system, a sale of merchandise on credit would include: a. a debit to cash b. a debit to cost of goods sold c. a debit to inventory d. a debit to sales

ANS:

DIF:

03

REF:

App C

24. In a periodic inventory system, the entry to record a cash discount taken for early payment of merchandise would include: a. a credit to inventory b. a debit to sales discounts c. a credit to purchase discounts d. a credit to cost of goods sold

ANS:

DIF:

03

REF:

App C

25. In a periodic inventory system, to compute cost of goods sold, ending merchandise inventory is subtracted from: a. cost of merchandise purchased b. purchases c. net purchases d. net sales

ANS:

DIF:

03

REF:

App C

26. Sales 120,000

Given the following information:

Sales returns ? Sales discounts 4,000 Net Sales 110,000

Inventory, Jan. 1 ? Purchases 60,000 Purchase returns ? Purchase discounts 3,000 Net Purchases 52,000 Transportation In ? Cost of merchandise purchased 55,000 Merchandise available for sale 70,000 Inventory, Dec 31 ? Cost of goods sold ? Gross Profit 62,000

The sales returns are: a. 14,000 b. 6,000 c. 10,000 d. 16,000

ANS: 27. Sales 120,000

DIF:

03

REF:

App C

Given the following information:

Sales returns ? Sales discounts 4,000 Net Sales 110,000

Inventory, Jan. 1 ? Purchases 60,000 Purchase returns ? Purchase discounts 3,000 Net Purchases 52,000 Transportation In ? Cost of merchandise purchased 55,000 Merchandise available for sale 70,000 Inventory, Dec 31 ? Cost of goods sold ? Gross Profit 62,000

The Jan. 1st. inventory is: a. 10,000 b. 22,000 c. 15,000 d. 18,000

ANS:

DIF:

03

REF:

App C

28. Given the following information: Merchandise Inventory, Jan 1 15,800 Merchandise Inventory, Dec. 31 17,600 Purchases 82,500 Purchase discounts 1,200 Purchase returns 1,800 Sales 115,800 Sales discounts 2,300 Sales returns 1,500 Transportation In 3,200 Compute net purchases. a. 82,700 b. 85,500 c. 79,500 d. 98,500

ANS: C DIF: 29. Given the following information: Merchandise Inventory, Jan 1 15,800 Merchandise Inventory, Dec. 31 17,600 Purchases 82,500 Purchase discounts 1,200 Purchase returns 1,800 Sales 115,800 Sales discounts 2,300 Sales returns 1,500

03

REF:

App C

Transportation In 3,200 Compute the goods available for sale. a. 98,500 b. 82,700 c. 80,900 d. 67,900

ANS: A DIF: 30. Given the following information: Merchandise Inventory, Jan 1 15,800 Merchandise Inventory, Dec. 31 17,600 Purchases 82,500 Purchase discounts 1,200 Purchase returns 1,800 Sales 115,800 Sales discounts 2,300 Sales returns 1,500 Transportation In 3,200 Compute the Gross Profit. a. 33,300 b. 31,100 c. 32,300 d. 33,900

03

REF:

App C

ANS:

DIF:

03

REF:

App C

31. Financing activities involve a. lending money to other entities and collecting on those loans. b. cash receipts from sales of goods and services. c. long-term liability and owners' equity items. d. a. and c. Answer: c Objective: 2 32. Investing activities include a. collecting cash on loans made. b. obtaining cash from creditors. c. obtaining capital from owners. d. repaying money previously borrowed. Answer: a Objective: 2

33. Which of the following would never be needed to determine net cash provided by operating activities? a. Depreciation expense b. Change in accounts receivable c. Changes in plant and equipment d. Change in prepaid expenses Answer: c Objective: 3 34. A, B, C Lighting had cash sales of $300,000 and credit sales of $1,050,000. The accounts receivable balance increased $15,000 during the year. How much cash did Foley receive in total from sales during the year? a. $1,335,000. b. $1,365,000. c. $1,035,000. d. $1,065,000. Answer: a Objective: 3 35. Garys Bed Shed reports a $15,000 increase in inventory and a $5,000 increase in accounts payable during the year. Cost of Sales for the year was $150,000. The cash payments made to suppliers were a. $150,000. b. $160,000. c. $130,000. d. $145,000. Answer: b