1. Which amount does not change during the period and is added to purchases when computing the cost of goods available for sale?
A. Beginning inventory
B. Ending inventory
C. Periodic inventory
2. The Allowance for Doubtful Accounts is adjusted
A. at the end of each accounting period.
B. each time a customer’s debt is satisfied.
C. within one year of granting credit to a customer.
D. each time a customer is granted credit.
3. The goods a company has available to sell to customers are called
C. cost of goods sold.
D. merchandise inventory.
4. Net realizable value can be defined as the
A. Gross Accounts Receivable.
B. Current Bad Debts Expense.
C. amount of Accounts Receivable you don’t expect to collect.
D. Gross Accounts Receivable minus the Allowance for Doubtful Accounts.
5. At the start of the year, Northern Lights had $8,000 worth of merchandise. What do we know about Northern Lights?
A. It’s a service business.
B. It’s a retail business.
C. The company ended with a net income last year.
D. The company ended with a net loss last year.
6. Under the allowance method, Bad Debt Expense is recorded
A. as an estimate.
B. when an individual account is written off.
C. several times during the year as needed.
D. None of the above
7. Fit City estimates it will collect $2,300 of the $2,425 owed by customers. The difference of $125 represents the
A. Gross Accounts Receivable.
B. Allowance for Doubtful Accounts.
C. Net Realizable Value.
D. Value of the Current Unpaid Receivables.
8. Gross Accounts Receivable is $10,000. Allowance for Doubtful Accounts has a credit balance of $200. Net sales for the year are $150,000. In the past, 2% of sales had proved uncollectible. What would be the adjusted balance of the Allowance account under the income statement approach?
9. Harry’s Hardware estimates that approximately $1.75 out of every $100 of credit sales proves to be uncollectible. Barber calculates Bad-Debts Expense using the
A. income statement approach.
B. direct write-off method.
C. balance sheet approach.
D. aging the Accounts Receivable approach.
10. The physical count of inventory was incorrect; it overstated the ending inventory. This would cause the
A. cost of goods sold to be overstated.
B. cost of goods sold to be understated.
C. gross profit to be understated.
D. net income to be understated.
11. On December 31, 2012, Brooke’s Horse Stable’s unadjusted Allowance for Doubtful Accounts showed a debit balance of $432. An aging of the Accounts Receivable indicates probable uncollectible accounts of $1,000. The year-end adjusting entry for Bad-Debts Expense includes a
A. debit to the Allowance account for $568.
B. credit to the Allowance account for $42.
C. debit to the Allowance account for $822.
D. credit to the Allowance account for $1,432.
12. Using the aging method, estimated uncollectible accounts are $3,000. If the balance in the Allowance for Doubtful Accounts is a $600 credit before adjustment, what is the Bad-Debts Expense adjustment for the period?
13. The beginning Merchandise Inventory account appears in the _______ on the worksheet.
A. adjustment column
B. trial balance and the balance sheet columns
C. trial balance and adjustment columns
D. All of the above
14. Cost of goods sold equals
A. beginning inventory + net purchases + freight-in + ending inventory.
B. beginning inventory – net purchases – freight-in + ending inventory.
C. beginning inventory + net purchases + freight-in – ending inventory.
D. beginning inventory – net purchases + freight-in + ending inventory.
15. Indy Sport and Hobby’s Allowance for Doubtful Accounts had an unadjusted credit balance of $400. The manager estimates that $900 of the Accounts Receivable is uncollectible. Using the balance sheet approach, the year-end adjusting entry for Bad-Debts Expense includes a
A. credit to the Bad-Debt Expense account for $500.
B. debit to the Bad-Debts Expense account for $900.
C. credit to the Bad-Debts Expense account for $1,300.
D. debit to the Bad-Debts Expense account for $500.
16. Which method uses an aging of Accounts Receivable to calculate the Bad-Debts Expense?
A. Income statement approach
B. Balance sheet approach
C. Aging the Accounts Receivable
D. Direct write-off
17. An account never used in a service business is
A. Consulting Fees-Revenue.
B. Interest Payable.
C. Merchandise Inventory.
D. Accumulated Depreciation–Equipment.
18. Gross Accounts Receivable is $12,000. Allowance for Doubtful Accounts has a credit balance of $600. Net sales for the year are $100,000. In the past, 2% of sales had proved uncollectible, and an aging of the receivables indicates $1,900 as uncollectible. What would be the adjusted balance of the Allowance account under the balance sheet approach?
19. Gross Accounts Receivable is $10,000. Allowance for Doubtful Accounts has a credit balance of $200. Net sales for the year are $150,000. In the past, 2% of sales had proved uncollectible, and an aging of the receivables indicates $1,200 is doubtful. Under the income statement approach, the Bad-Debts Expense for the year is
20. Beginning inventory was $4,000, purchases totaled $22,000, and sales were $20,000. What is the ending inventory?
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