ACC 201 Module 4 Exam 2 – Chapters 4, 5 & 7 (2014)

ACC 201 JUNE – AUG 2014 (1))
Assignment:Module 4 – Exam 2 –
Chapters 4, 5 & 7

1.A
company purchased $1,800 of merchandise on December 5. On December 7, it
returned $200 worth of merchandise. On December 8, it paid the balance in full,
taking a 2% discount. The amount of the cash paid on December 8 is:

$200

$1,564

$1,568

$1,600

$1,800

2.Multiple-step income statements:

Are required by the
FASB.

Contain more detail than
a simple listing of revenues and expenses.

Are required for the
perpetual inventory system.

List cost of goods
sold as an operating expense.

Can only be used in
perpetual inventory systems.

3.The consistency concept:

Requires a company to
consistently use the same accounting method of inventory valuation unless a
change will improve financial reporting.

Requires a company to
use one method of inventory valuation exclusively.

Requires that all
companies in the same industry use the same accounting methods of inventory
valuation.

Is also called the
full disclosure concept.

Is also called the
matching concept.

4.The inventory turnover ratio:

Is used to analyze
profitability.

Is used to measure
solvency.

Measures how quickly a
company turns over its merchandise inventory.

Validates the
acid-test ratio.

Calculation depends on
the company’s inventory valuation method.

5.A company had inventory on November 1 of 5 units
at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On
November 6, they purchased 6 units at $25 each. On November 8, 8 units were
sold for $55 each. Using the FIFO perpetual inventory method, what was the
value of the inventory on November 8 after the sale?

$304

$296

$288

$280

$276

6.A credit sale of $2,500 to a customer would
result in:

A debit to the Accounts
Receivable account in the general ledger and a debit to the customer’s
account in the accounts receivable ledger.

A credit to the
Accounts Receivable account in the general ledger and a credit to the
customer’s account in the accounts receivable ledger.

A debit to the
Accounts Receivable account in the general ledger and a credit to the
customer’s account in the accounts receivable ledger.

A credit to the Accounts
Receivable account in the general ledger and a debit to the customer’s
account in the accounts receivable ledger.

A credit to Sales and
a credit to the customer’s account in the accounts receivable ledger.

7.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 paid.

Is the date of the
first payment.

Is the last day of the
month.

8. A company has net sales of $870,000 and
average accounts receivable of $174,000. What is its accounts receivable
turnover for the period?

0.20

5.00

20.0

73.0

1,825

9.A method of estimating bad debts expense that
involves a detailed examination of outstanding accounts and their length of
time past due is the:

Direct write-off
method.

Aging of accounts
receivable method.

Percent of sales
method.

Aging of investments
method.

Percent of accounts
receivable method.

10.The following supplementary records summarize Tosca Company’s
merchandising activities for year 2013.

Cost of merchandise
sold to customers in sales transactions

$

207,000

Merchandise inventory,
December 31, 2012

30,056

Invoice cost of
merchandise purchases

212,216

Shrinkage determined
on December 31, 2013

820

Cost of
transportation-in

2,122

Cost of merchandise
returned by customers and restored to inventory

2,050

Purchase discounts
received

1,698

Purchase returns and
allowances

3,700

Record the summarized activities
in the T-accounts below.

11.Laker Company reported the following January purchases and
sales data for its only product.

Date

Activities

Units
Acquired at Cost

Units
Sold at Retail

Jan.

1

Beginning inventory

340

units

@
$10.80

=

$

3,672

Jan.

10

Sales

185

units

@$18.80

Jan.

20

Purchase

410

units

@
$9.80

=

4,018

Jan.

25

Sales

335

units

@$18.80

Jan.

30

Purchase

280

units

@
$8.80

=

2,464

Totals

1,030

units

$

10,154

520

units

Laker uses a perpetual inventory
system. For specific identification, ending inventory consists of 510 units,
where 280 are from the January 30 purchase, 80 are from the January 20
purchase, and 150 are from beginning inventory.

1.

Complete comparative income
statements for the month of January for Laker Company for the four inventory
methods. Assume expenses are $3,500, and that the applicable income tax rate
is 35%.(Do not round your Intermediate calculations.)

2.

Which method yields
the highest net income?

3.

Does net income using
weighted average fall between that using FIFO and LIFO?

4.

If costs were rising
instead of falling, which method would yield the highest net income?

12.At year-end (December 31), Chan Company estimates its bad
debts as 0.20% of its annual credit sales of $819,000. Chan records its Bad
Debts Expense for that estimate. On the following February 1, Chan decides
that the $410 account of P. Park is uncollectible and writes it off as a bad
debt. On June 5, Park unexpectedly pays the amount previously written off.

Prepare the journal entries of
Chan to record these transactions and events of December 31, February 1, and
June 5.

13.Following are selected transactions Dulcinea Company for
2012.

Dec.

13

Accepted a $25,000, 45-day, 6%
note dated December 13 in granting Miranda Lee a time extension on her
past-due account receivable.

31

Prepared an adjusting entry to
record the accrued interest on the Lee note.

First, complete the table below to
calculate the interest amounts at December 31st.(Do not round your intermediate calculations.
Use 360 days a year.)

Use the calculated
value to prepare your journal entries.