Deck 6: Receivables and Inventories

Question 1

All receivables that are expected to be realized in cash within a year are presented in the current assets section of the balance sheet.

Answer 1

True

Question 2

Receivables not expected to be collected within one year are reported in the fixed assets section of the balance sheet.

Answer 2

False

Question 3

Generally accepted accounting principles do not normally allow the use of the allowance method of accounting for uncollectible accounts.

Answer 3

False

Question 4

The due date of a 60-day note dated July 10 is September 9.

Question 5

The maturity value of a 12%,60-day note for $5,000 is $5,100.

Question 6

The interest on a 6%,60-day note for $5,000 is $50.

Question 7

The direct write-off method records uncollectible accounts expense in the year the specific account receivable is determined to be uncollectible.

Question 8

At the end of a period before the accounts are adjusted,Allowance for Doubtful Accounts has a balance of $250,and net sales on account for the period total $500,000.If uncollectible accounts expense is estimated at 1% of net sales on account,the current provision to be made for uncollectible accounts expense is $4,997.50.

Question 9

When the estimate based on analysis of receivables is used,income is reduced when a specific receivable is written off.

Question 10

Under the direct write-off method,an attempt is made to match Bad Debt Expense to sales revenues in the same accounting period.

Question 11

When companies sell their receivables to other companies,the transaction is called factoring.

Question 12

The difference between the total receivables and the balance in Allowance for Doubtful Accounts at the end of a period is referred to as the net realizable value of the accounts receivable.

Question 13

The person who is to be paid when a note matures is called the payee.

Question 14

The estimate based on the sales method violates the matching principle.

Question 15

Allowance for Doubtful Accounts is a contra-equity account.

Question 16

Inventories of merchandising and manufacturing businesses are reported as current assets on the balance sheet.

Question 17

The party promising to pay a note at maturity is the payee.

Question 18

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Question 19

The maturity value of a 12%,60-day note for $1,000 is $1,020.

Question 20

The due date on a 90-day note dated June 10 is September 8.

Question 21

In reference to a promissory note,the person who makes the promise to pay is called the

A)maker.
B)payee.
C)seller.
D)receiver.

Question 22

During inflationary periods,the use of the LIFO method of costing inventory will result in a lesser amount of net income than would result from the use of the average method.

Question 23

Merchandise Inventory is presented on the balance sheet in the current assets section.

Question 24

A note receivable due in 90 days is listed on the balance sheet under

A)long-term liabilities.
B)fixed assets.
C)current liabilities.
D)current assets.

Question 25

In reference to a promissory note,the person who is to receive payment is called the

A)maker.
B)payee.
C)seller.
D)payor.

Question 26

During inflationary periods,the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet approximating the current replacement cost.

Question 27

"Market," as used in the phrase "lower of cost or market" for valuing inventory,refers to the price at which the inventory is being offered for sale by its owner.

Question 28

A written promise to pay a sum of money on demand or at a definite time is called a(n)

A)default.
B)deferral.
C)accrual.
D)promissory note.

Question 29

Of the three widely used inventory costing methods (FIFO,LIFO,and average),the FIFO method of costing inventory is based on the assumption that costs are charged against revenues in the order in which they were incurred.

Question 30

The net realizable value is used for purposes of valuing out-of-date merchandise in inventory.

Question 31

The use of the lower of cost or market method of inventory valuation increases the gross profit for the period in which the inventory replacement price declined.

Question 32

In valuing damaged merchandise for inventory purposes,net realizable value is the estimated selling price less any direct cost of disposition.

Question 33

The FIFO method of costing inventory is based on the assumption that costs should be charged against revenues in the reverse order in which they were incurred.

Question 34

Receivables are usually a significant portion of

A)total current liabilities.
B)total liabilities.
C)total current assets.
D)total assets.

Question 35

The balance of the allowance for doubtful accounts is deducted from accounts receivable on the balance sheet.

Question 36

A note receivable due in five years is listed on the balance sheet under the caption

A)investments.
B)current assets.
C)fixed assets.
D)stockholders' equity.

Question 37

During deflationary periods,the use of the LIFO method of costing inventory will result in a greater amount of net income than would result from the use of the FIFO method.

Question 38

The lower of cost or market is a method of inventory valuation.

Question 39

During inflationary periods,the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Question 40

Cost is a method of inventory valuation.

Question 41

Allowance for Doubtful Accounts is listed on the balance sheet under the caption

A)stockholders' equity.
B)investments.
C)fixed assets.
D)current assets.

Question 42

A note receivable due in 18 months is listed on the balance sheet under the caption

A)long-term liabilities.
B)fixed assets.
C)current assets.
D)investments.

Question 43

After the accounts are adjusted and closed at the end of the fiscal year,Accounts Receivable has a balance of $500,000 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)$525,000
C)$500,000
D)$475,000

Question 44

A 60-day,10% note for $6,000 dated April 15 is received from a customer on account.
The face value of the note is

A)$6,100.
B)$5,400.
C)$5,900.
D)$6,000.

Question 45

One of the weaknesses of the direct write-off method is that it

A)understates accounts receivable on the balance sheet.
B)violates the matching principle.
C)is too difficult to use for many companies.
D)is based on estimates.

Question 46

Allowance for Doubtful Accounts has an unadjusted balance of $800 at the end of the year,and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000.Which of the following records the proper provision for doubtful accounts?

A)Increase Uncollectible Accounts Expense,$800;increase Allowance for Doubtful Accounts,$800
B)Increase Uncollectiable Accounts Expense $15,000;increase Allowance for Doubtful Accounts,$15,000
C)Increase Uncollectible Accounts Expense,$14,200;increase Allowance for Doubtful Accounts,$14,200
D)Increase Uncollectible Accounts Expense,$15,800;increase Allowance for Doubtful Accounts,$15,800

Question 47

The due date of a 60-day note dated July 12 is

A)September 11.
B)September 8.
C)September 9.
D)September 10.

Question 48

The amount of the promissory note plus the interest earned on the due date is called the

A)realizable value.
B)maturity value.
C)face value.
D)net realizable value.

Question 49

A 90-day,8% note for $10,000 dated May 1 is received from a customer on account.
The maturity value of the note is

A)$10,000.
B)$10,800.
C)$10,200.
D)$9,800.

Question 50

Other receivables do NOT include

A)accounts receivable.
B)interest receivable.
C)taxes receivable.
D)receivables from employees or officers.

Question 51

What type of account is Allowance for Doubtful Accounts?

A)Contra asset
B)Asset
C)Revenue
D)Expense

Question 52

The two methods of accounting for uncollectible receivables are the allowance method and the

A)equity method.
B)direct write-off method.
C)interest method.
D)cost method.

Question 53

The process of a company selling its accounts receivable to another company is referred to as

A)discounting.
B)adjusting.
C)assignment.
D)factoring.

Question 54

After the accounts are adjusted and closed at the end of the fiscal year,Accounts Receivable has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of $30,000.What is the net realizable value of the accounts receivable?

A)$30,000
B)$460,000
C)$430,000
D)$400,000

Question 55

A 60-day,12% note for $15,000 dated May 1 is received from a customer on account.
The maturity value of the note is

A)$15,300.
B)$15,000.
C)$14,700.
D)$16,800.

Question 56

The due date of a 90-day note dated July 5 is

A)September 30.
B)October 2.
C)October 3.
D)October 1.

Question 57

A 90-day,10% note for $10,000 dated April 1 is received from a customer on account.The face value of the note is

A)$10,000.
B)$11,000.
C)$1,000.
D)$9,000.

Question 58

Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year,and uncollectible accounts expense is estimated at 1% of net sales.If net sales are $950,000,the amount of the adjustment to record the provision for doubtful accounts is

A)$9,500.
B)$500.
C)$8,500.
D)$9,000.

Question 59

Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year,and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000.Which of the following records the proper provision for doubtful accounts?

A)Increase Uncollectible Accounts Expense,$14,500;increase Allowance for Doubtful Accounts,$14,500
B)Increase Uncollectible Accounts Expense,$15,000;increase Allowance for Doubtful Accounts,$15,000
C)Increase Uncollectible Accounts Expense,$14,000;increase Allowance for Doubtful Accounts,$14,000
D)Increase Uncollectible Accounts Expense,$15,500;increase Allowance for Doubtful Accounts,$15,500

Question 60

Allowance for Doubtful Accounts has an unadjusted balance of $1,100 at the end of the year,and an analysis of customers' accounts indicates doubtful accounts of $12,900.Which of the following records the proper provision for doubtful accounts?

A)Increase Uncollectible Accounts Expense,$14,000;increase Allowance for Doubtful Accounts,$14,000
B)Decrease Allowance for Doubtful Accounts,$14,000;decrease Uncollectible Accounts Expense,$14,000
C)Decrease Allowance for Doubtful Accounts,$11,800;decrease Uncollectible Accounts Expense,$11,800
D)Increase Uncollectible Accounts Expense,$11,800;increase Allowance for Doubtful Accounts,$11,800

Question 61

Inventory costing methods place primary emphasis on assumptions about

A)flow of goods.
B)flow of costs.
C)flow of goods or costs depending on the method.
D)flow of values.

Question 62

The inventory method that assigns the most recent costs to cost of good sold is

A)FIFO.
B)LIFO.
C)average cost.
D)specific identification.

Question 63

The presentation of net accounts receivable on the balance sheet will be most accurate
Under the

A)direct write-off method.
B)estimate based on the percentage of sales method.
C)estimate based on analysis of receivables.
D)none of these.

Question 64

Use the following data to calculate the cost of ending inventory using the LIFO method.

A)$825
B)$750
C)$675
D)$600

Question 65

If merchandise inventory is being valued at cost and the price level is steadily rising,the method of costing that will yield the highest net income is

A)average cost.
B)LIFO.
C)FIFO.
D)All methods will generate the same net income.

Question 66

When merchandise sold is assumed to be in the order in which the expenditures were made,the inventory method is called

A)first-in,last-out.
B)last-in,first-out.
C)first-in,first-out.
D)average cost.

Question 67

The inventory method that considers the inventory to be composed of the units of merchandise acquired earliest is called

A)first-in,first-out.
B)retail method.
C)average cost.
D)last-in,first-out.

Question 68

The inventory data for an item for November are:

Using the first-in,first-out method,what is the cost of the merchandise inventory of 30 units on November 30?

A)$640
B)$605
C)$623
D)$660

Question 69

The term "inventory" indicates

A)merchandise held for sale in the normal course of business.
B)materials in the process of production or held for production.
C)both of these.
D)neither of these.

Question 70

Allowance for Doubtful Accounts has an unadjusted balance of $400 at the end of the year,and uncollectible accounts expense is estimated at 1% of net sales.If net sales are $300,000,the amount of the adjustment to record the provision for doubtful accounts is

A)$400.
B)$3,400.
C)$3,000.
D)$2,600.

Question 71

When an account is written off under the allowance method,

A)the write-off is taken against the allowance account.
B)bad debt expense is increased.
C)accounts receivable remains unchanged.
D)accounts receivable increases.

Question 72

Use the following data to calculate the cost of ending inventory under the FIFO method.

A)$825
B)$750
C)$675
D)$840

Question 73

Use the following data to calculate the cost of ending inventory under average cost method.

A)$825
B)$600
C)$675
D)$750

Question 74

Use the following data to calculate cost of merchandise sold under FIFO method.

A)$825
B)$750
C)$675
D)$600

Question 75

Calculate the cost of ending inventory using FIFO inventory cost method.

A)$800
B)$760
C)$580
D)$500

Question 76

The two most widely used methods for determining the cost of inventory are

A)FIFO and LIFO.
B)FIFO and average cost.
C)LIFO and average cost.
D)gross profit and average cost.

Question 77

Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made?

A)Average cost
B)Last-in,first-out
C)First-in,first-out
D)Last-in,last-out

Question 78

During a period of consistently rising prices,the method of inventory that will result in reporting the greatest cost of merchandise sold is

A)FIFO.
B)average cost.
C)LIFO.
D)All methods will generate the same cost of merchandise sold.

Question 79

Under which method of cost flows is the inventory assumed to be composed of the most
Recent costs?

A)Average cost
B)Last-in,first-out
C)First-in,last-out
D)First-in,first-out

Question 80

The inventory data for an item for November are:

Using the last-in,first-out method,what is the cost of the merchandise inventory of 30 units on November 30?

A)$640
B)$623
C)$600
D)$605