ACCT 2301 EXAM 2 QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026

ACCT 2301 EXAM 2 QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026 Which account does a merchandiser use that a service company does not use? - Answers Sales Revenue, Merchandise Inventory, Cost of Goods Sold The two main inventory accounting systems are the - Answers perpetual and periodic. Suppose Dave's Discount's Merchandise Inventory account showed a balance of $8,000 before the year-end adjustments. The physical count of goods on hand totaled $7,400. Dave uses a perpetual inventory system. To adjust the accounts, which entry would the company make? - Answers Cost of Goods Sold 600 Merchandise Inventory 600 Which of the following accounts would be closed at the end of the year using the perpetual inventory system? - Answers Cost of Goods Sold What is the order of the subtotals that appear on a multi-step income statement? - Answers Gross Profit, Operating Income, Total Other Income and Expenses, Net Income Assume Music Maker made Net Sales Revenue of $ 83,000 and Cost of Goods Sold totaled $ 57,000. What was Music Maker's gross profit percentage for this period? - Answers 31% gross profit %= gross profit/net sales revenue =26000 26000/83000=.31 .31x100=31% How is gross profit calculated? - Answers Sales Revenue - Cost of Goods Sold How is operating income calculated? - Answers Gross Profit - Operating Expenses Which principle or concept states that businesses should use the same accounting methods and procedures from period to period? - Answers Consistency Which inventory costing method assigns to ending merchandise inventory the newest- the most recent-costs incurred during the period? - Answers First-in, first-out (FIFO) weighted-average method - Answers total cost / total units Which inventory costing method results in the lowest net income during a period of rising inventory costs? - Answers Last-in, first-out (LIFO) Which of the following is most closely linked to accounting conservatism? - Answers Lower-of-cost-or-market rule At December 31, 2018, Stevenson Company overstated ending inventory by $36,000. How does this error affect cost of goods sold and net income for 2018? - Answers Understates cost of goods sold and overstates net income Suppose Clip's had cost of goods sold during the year of $ 300,000. Beginning merchandise inventory was $ 45,000, and ending merchandise inventory was $80,000. Determine Clip's inventory turnover for the year. - Answers inventory turnover=cost of goods sold/average merchandise inventory 300000/((80000+45000)/2) =4.80 times per year Which inventory costing method requires companies to keep detailed inventory records and carefully identify the inventory item being sold? - Answers Specific Identification Method When using the weighted-average inventory method, what is the formula used to calculate the weighted-average cost per unit? - Answers Cost of goods available for sale / Number of units available Which of the following statements is true relating to the lower-of-cost-or-market rule for valuing merchandise inventory? - Answers Market value for merchandise inventory is determined by current replacement cost Which of the following is not part of the definition of internal control? - Answers Separation of duties The Sarbanes-Oxley Act - Answers requires that an outside auditor must evaluate a public company's internal controls. Encryption - Answers rearranges messages by a special process. Separation of duties is important for internal control of - Answers cash receipts AND cash payments Payment by check is an important internal control over cash payments because - Answers the check must be signed by an authorized official. AND before signing the check, the official reviews the invoice supporting the payment. The petty cash fund had an initial imprest balance of $ 100. It currently has $22 and petty cash tickets totaling $76 for office supplies. The entry to replenish the fund would contain - Answers a debit to Cash Short & Over for $ 2. When recording credit card or debit card sales using the net method, - Answers cash received equals sales minus the fee assessed by the card processing company. he document that explains all the differences between the company's cash records and the bank's figures is called a(n) - Answers bank reconciliation. cash ratio equation - Answers cash ratio= (cash+cash equivalents) / total current liabilities T or F: When replenishing the petty cash fund, the business debits either the expense incurred or the asset purchased with the funds. - Answers True Which of the following items would be added to the book side of a bank reconciliation - Answers Interest revenue earned on the bank balance With good internal controls, the person who handles cash can also - Answers nothing else T or F : A note receivable typically has longer terms than an accounts receivable and interest usually needs to be paid back along with the principal. - Answers true _______ is the cost that arises when a business is unable to collect from a credit customer. - Answers bad debts expense When writing off a customer's account using the allowance method - Answers The Allowance for Bad Debts account is decreased with a debit allowance method vs direct write odd method - Answers direct write off journals bad debt expense whereas allowance method journals allowance for bad debts When selling merchandise using a perpetual inventory system, two journal entries must be made - one to record the sales revenue and another to record the reduction in merchandise inventory. - Answers true Which of the following are common timing differences due to a time lag between when the bank records a cash payment/receipt and when a business records a cash payment/receipt? - Answers outstanding checks, eft cash payments, outstanding deposits Deposits-in-transit and outstanding checks are always adjusted on the bank's side of the bank reconciliation. - Answers true All items on the bank side of the reconciliation require journal entries. - Answers false Which of the following is a limitation of the direct write-off method of accounting for uncollectibles? - Answers The direct write-off method overstates assets on the balance sheet, does not set up an allowance for uncollectibles, does not match expenses against revenue very well. The entry to record a write-off of an uncollectible account when using the direct write-off method involves a - Answers debit to Bad Debts Expense. Corporation uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for Bad Debts had a credit balance of $ 900. During the year Brinkman wrote off uncollectible receivables of $ 1900. Brinkman recorded Bad Debts Expense of $ 2700. What is Brinkman's year-end balance in Allowance for Bad Debts? - Answers 1700 Bend Company uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for Bad Debts had a credit balance of $ 1 300. During the year Bend wrote off uncollectible receivables of $ 2500. Bend recorded Bad Debts Expense of $ 3 100. Bend's year-end balance in Allowance for Bad Debts is $ 1900. Bend's ending balance of Accounts Receivable is $ 19200. Compute the net realizable value of Accounts Receivable at year-end. - Answers 17300 At year-end, Slippery, Inc. has cash of $ 8 000, current accounts receivable of $ 40 000, merchandise inventory of $ 43 200, and prepaid expenses totaling $ 5 900. Liabilities of $ 32000 must be paid next year. What is Slippery's acid-test ratio? - Answers acid test ratio= (cash + short-term investments + net current receivables)/ total current liabilities 1.50=(40,000+8000)/32000 Which of the following statements are true regarding receivables? - Answers involve two parties- creditor and a debtor, can include a loan of money to another party, can be listed as a current asset or