wk 2 Accounting for Receivables and Inventory Cost Flow

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Feb 20, 2024

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Accounting for Receivables and Inventory Cost Flow Which of the following statements is correct? Correct Answer Both the allowance for doubtful accounts and the NRV of accounts receivable are estimated amounts. Cash flows are not affected by ______. Correct Answer recognizing uncollectible accounts expense True or false: One benefit of estimating uncollectible accounts is that it better matches expenses with revenues. Correct Answer True A company recorded an event that had no affect on total assets, net income, or cash flow. This could have been caused by ______. Correct Answer writing off an uncollectible account A company has been using the allowance method for uncollectible accounts expense for several years. On the year end financial statements, the amount of uncollectible accounts expense ______ the balance of the Allowance account. Correct Answer will likely be different than

The allowance for doubtful accounts is: Correct Answer an estimate that represents the amount of accounts receivable a company expects to be uncollectible. On December 31, Year 2 before adjustments, Silver Co.'s Accounts Receivable account balance was $20,000 and the Allowance for Doubtful Accounts account balance was $300. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Allowance for Doubtful Accounts shown on the Year 2 balance sheet is: Correct Answer $1,000. When a company recognizes uncollectible accounts expense, cash flows from operating activities ______. Correct Answer is not affected When uncollectible accounts are estimated: Correct Answer  there is a better matching of revenues with expenses.  the balance sheet reports the amount of cash the company expects to collect. Writing-off an uncollectible account receivable does not affect the: Correct Answer  statement of cash flows.  income statement. When a company uses the allowance method uncollectible accounts expense will likely be ______. Correct Answer

overstated or understated Which of the following statements about aging accounts receivable is true? Correct Answer Higher percentages are applied to older accounts. On December 31, Year 2 before adjustments, Silver Co.'s Accounts Receivable account balance was $20,000 and the Allowance for Doubtful Accounts account balance was $300. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Year 2 uncollectible accounts expense shown on the income statement will be: Correct Answer $700. Because the percent of receivables method focuses on determining the best estimate of the allowance account, it is often called the balance Blank 1 Blank 1 balance , Correct Unavailable sheet Blank 2 Blank 2 sheet , Correct Unavailable approach. (Enter only one word per blank.) Correct Answer  Blank 1: balance  Blank 2: sheet True or false: One benefit of estimating uncollectible accounts is that it better matches expenses with revenues. Correct Answer True Which of the following is not a common feature of a promissory note? Correct Answer A government loan guarantee

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A company recorded an event that had no affect on total assets, net income, or cash flow. This could have been caused by ______. Correct Answer writing off an uncollectible account The longer an account receivable remains outstanding, the less Blank 1 Blank 1 less , Correct Unavailable likely it is to be collected. (Enter either more or less.) Correct Answer  Blank 1: less Western Company loaned Eastern Company money. This event affects Western Company's ______. Correct Answer  statement of cash flows  balance sheet Interest is normally shown as a(n) expense Blank 1 Blank 1 expense , Incorrect Unavailable item on the income statement and a(n) operating Blank 2 Blank 2 operating , Correct Unavailable activity on the statement of cash flows. (Enter one word per blank.) Correct Answer  Blank 1: nonoperating or non-operating  Blank 2: operating Because the percent of revenue method focuses on determining the uncollectible accounts expense, it is often called the uncollectible Blank 1 Blank 1 uncollectible , Incorrect Unavailable accounts Blank 2 Blank 2 accounts , Incorrect Unavailable approach. (Enter only one word per blank.)

Correct Answer  Blank 1: income  Blank 2: statement Assets belonging to the maker of a promissory note that are assigned as security to ensure the principal and interest will be paid when due are called collateral Blank 1 Blank 1 collateral , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: collateral When inventory is sold, inventory cost methods (FIFO, LIFO, weighted average) are used to determine how much cost to assign to ______. Correct Answer cost of goods sold A company experienced an event that had no affect on the amount of total assets or net income, but did cause a cash outflow from investing activities. The event that caused this could have been ______. Correct Answer loaning money with a three year term to maturity Interest is normally shown as a(n) ______ item on the income statement and ______ item on the statement of cash flows. Correct Answer nonoperating, operating The specific identification cost flow method is most likely to be used when ______. Correct Answer sales volume is low and cost per unit of inventory is high

When goods are sold under the perpetual inventory system, the cost of the good sold is transferred from the ______ account to the ______ account. Correct Answer inventory; cost of goods sold Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses FIFO cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is ______. Correct Answer $100 A company recorded an event that had no affect on total assets, net income, or cash flow. This could have been caused by ______. Correct Answer writing off an uncollectible account Inventory item 101 purchased in October cost $100. Inventory item 102 purchased in November cost $110. The two inventory items are identical in all respects, except the price paid to acquire them. The business uses the Last-in, first-out (LIFO) cost flow method. If item 101 is sold to a customer, the amount assigned to cost of goods sold is ______. Correct Answer $110 Inventory item 101 cost $100. Inventory item 102 cost $110. If the business uses the specific identification cost flow method and Item 102 is sold to a customer, the amount assigned to cost of goods sold is ______. Correct Answer $110

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Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the FIFO cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______ Correct Answer will be $30 Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses the weighted-average cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is ______. Correct Answer $105 Which method do companies most often use to physically flow inventory items through a store? Correct Answer FIFO Ted's Sports Center purchased two identical basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. Assume Ted's uses the last-in, first-out (LIFO) cost flow method. If Ted's sells one of the balls in August, which of the following amounts would be charged to the Cost of Goods Sold account? Correct Answer $34 Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $22 gross margin?

Weighted average correct Reason: If weighted average is used, the $78 [(80 + 76) ÷ 2] average cost of the last fan purchased is charged to cost of goods sold. Gross margin would then be $22. ($100 revenue - $78 cost of goods sold = $22 gross margin.) Correct Answer Weighted average Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the specific identification cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______ Correct Answer may be $30 or $34 Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the weighted-average cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______ will be $32 correct Reason: ($30 + $34) ÷ 2 = $32 Correct Answer will be $32 True or false: A company may use LIFO or weighted average for financial reporting even if its goods flow physically on a FIFO basis. Correct Answer

True Cost of goods available for sale is the amount of the ______. Correct Answer beginning inventory + purchases made during the accounting period Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $24 gross margin? Correct Answer First-in, first out Cost of goods available for sale is allocated between ______. Correct Answer ending inventory and cost of goods sold Hector Company purchased two identical inventory items. The item purchased first cost less the item purchased last. One of the items was sold. If Hector uses the LIFO cost flow system, cost of goods sold will be ______. Correct Answer  higher than if FIFO is used  higher than if weighted average is used Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. Benson's cost of goods available for sale is ______. Multiple choice question. $212,000

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correct Reason: Beginning inventory (150 units × $200 each) + Purchase 1 (500 units × $210 each) + Purchase 2 (350 units × $220) Correct Answer $212,000