ACG2021 Exam 2 Chapters 4 top 7 new 2021 exam updated questions and answers

ACG2021 Exam 2 Chapters 4 top 7 QUE ST ION 1 1. The amount recorded for merchandise inventory includes all of the following except: Purchase discounts. Returns and allowances. Freight costs paid by the buyer. Freight costs paid by the seller. Trade discounts. 4 points QUE ST ION 2 1. A trade discount is: A term used by a purchaser to describe a cash discount given to customers for prompt payment. A reduction in selling price below the list price. A term used by a seller to describe a cash discount granted to customers for prompt payment. A reduction in price for prompt payment. Also called a rebate. 4 points QUE ST ION 3 1. An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called: Sales discounts. Trade discounts. Purchases discounts. Discounts lost. Discounts earned. 4 points QUE ST ION 4 1. Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold. True False 4 points QUE ST ION 5 1. Netherland Corporation has the following unadjusted balances: Accounts Receivable, $80,000 (debit), and Allowance for Sales Discounts $300 (credit). Of the receivables, $50,000 of them are within the 2% discount period, and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period’s sales. The adjusting entry to estimate sales discounts is (are): Accounts Receivable 80,000 Sales 80,000 Sales Discounts 50,000 Sales 50,000 Cost of Goods Sold 1,000 Inventory Returns Estimated 1,000 Sales Discounts 700 Allowance for Sales Discounts 700 Sales Discounts 1,000 Accounts receivable 1,000 Sales Discounts 1,000 Allowance for Sales Discounts 1,000 4 points QUE ST ION 6 1. A company's current assets are $17,980, its quick assets are $11,420 and its current liabilities are $12,190. Its quick ratio equals: 0.9 4. 1.0 7. 1.4 8. 1.5 7. 2.4 0. 4 points QUE ST ION 7 1. A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals: $(217,00 0). $375,00 0. $157,50 0. $217,50 0. $532,50 0. 4 points QUE ST ION 8 1. Overstating beginning inventory will understate cost of goods sold and net income. True False 4 points QUE ST ION 9 1. A company sells garden hoses and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during September were as follows: September 1: Beginning balance of 18 units at $13 each September 12: Purchased 30 units at $14 each September 19: Sold 24 units at $30 selling price each September 20: Purchased 24 units at $17 each September 27: Sold 27 units at $30 selling price each If the ending inventory is reported at $276, what inventory method was used? LIFO method. FIFO method. Weighted average method. Specific identification method. Retail inventory method. 4 points QUE ST ION 10 1. All of the following statements regarding U.S. GAAP and IFRS are true except: Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory. For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company owns and holds for sale. Both U.S. GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded. Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition cost. With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost. 4 points QUE ST ION 11 1. Whether purchase costs are rising or falling, FIFO always will yield the highest gross profit and net income. True False 4 points QUE ST ION 12 1. The conservatism constraint prescribes 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. A company use the same accounting methods period after period. Revenues and expenses are reported in the period in which they are earned or incurred. All items of a material nature are included in financial statements. All inventory items are reported at full cost. 4 points QUE ST ION 13 1. Eastview Company uses a perpetual LIFO inventory system, and has the following purchases and sales: January 1 150 units were purchased at $9 per unit. January 17 120 units were sold. January 20 160 units were purchased at $11 per unit. January 29 150 units were sold. 2. What is the value of ending inventory? $2,73 0. $2,75 0. $2,67 $440. $380. 4 points QUE ST ION 14 1. A receiving report is a document used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods. True False 4 points QUE ST ION 15 1. Assigning purchasing, receiving, and paying for merchandise to one department or individual is a way to streamline a voucher system. True False 4 points QUE ST ION 16 1. Spencer Co. has a $200 petty cash fund. At the end of the first month the accumulated receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The journal entry to record the reimbursement of the account includes a: Debit to Petty Cash for $200. Debit to Cash Over and Short for $18. Credit to Cash for $182. Credit to Inventory for $127. Credit to Cash Over and Short for $18. 4 points QUE ST ION 17 1. Electronic funds transfers (EFTs) are decreasingly used by companies due to the inconvenience and high cost. True 4 points QUE ST ION 18 1. Internal control systems are: Developed by the Securities and Exchange Commission for public companies. Developed by the Small Business Administration for non-public companies. Developed by the Internal Revenue Service for all U.S. companies. Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock is traded on an exchange (a public company). Required only if a company plans to engage in interstate commerce. 4 points QUE ST ION 19 1. The number of days' sales uncollected: Is used to evaluate the liquidity of receivables. Is calculated by dividing accounts receivable by sales. Measures a company's ability to pay its bills on time. Measures a company's debt to income. Is calculated by dividing sales by accounts receivable. 4 points QUE ST ION 20 1. Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa Studios signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.) $130 $7,8 00 $7,9 30 $8,0 50 $8,1 30 4 points QUE ST ION 21 1. Which of the following is not true regarding a credit card expense? Credit card expense may be classified as a "discount" deducted from sales to get net sales. Credit card expense may be classified as a selling expense. Credit card expense may be classified as an administrative expense. Credit card expense is not recorded by the seller. Credit card expense is a fee the seller pays for services provided by the card company. 4 points QUE ST ION 22 1. The maturity date of a note receivable: Is the day of the credit sale. Is the day the note was signed. Is the day the note is due to be repaid. Is the date of the first payment. Is the last day of the month. 4 points QUE ST ION 23 1. The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible. True False 4 points QUE ST ION 24 1. Notes receivable are classified as current liabilities regardless of the time to maturity. True False 4 points QUE ST ION 25 This study source was downloaded by from 1. A note that the maker is unable or refuses to pay at maturity is called a dishonored note. True False Question 5 0 out of 4 points Netherland Corporation has the following unadjusted balances: Accounts Receivable, $80,000 (debit), and Allowance for Sales Discounts $300 (credit). Of the receivables, $50,000 of them are within the 2% discount period, and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period’s sales. The adjusting entry to estimate sales discounts is (are): Selected Answer: Sales Discounts 1,000 Allowance for Sales Discounts 1,000