ACCT 101- ch. 6, 8, 9, 10

D

Consigned goods are held for sale by one party although ownership of the goods

A) will pass to the vendor upon placement of goods in the store.

B) is held by the owner of the store.

C) remains with the dealer.

D) is retained by another party.

A

Patagonia's inventory that has begun the production process but is not yet completed is classified as

A) work in process.

B) raw materials.

C) merchandise inventory.

D) finished goods.

B

The factor which determines whether or not goods should be included in a physical count of inventory is

A) physical possession.

B) legal title.

C) management's judgment.

D) payment status.

A

If goods in transit are shipped FOB destination,

A) the seller has legal title to the goods until they are delivered.

B) the buyer has legal title to the goods until they are delivered.

C) the transportation company has legal title to the goods while the goods are in transit.

D) no one has legal title to the goods until they are delivered.

C

Independent internal verification of the physical inventory process occurs when

A) the employee is required to count all items twice for the sake of verification.

B) the items counted are compared to the inventory account balance.

C) a second employee counts the inventory and compares the result to the count made by the first employee.

D) all prenumbered inventory tags are accounted for.

C

An inventory count is generally more accurate

A) on December 31 before holiday sales.

B) when inventory levels are at their highest.

C) when goods are not being sold during the counting.

D) if more employees are present and the business is open.

A

After the physical inventory is completed, the

A) financial statements are prepared.

B) quantities are entered into various general ledger inventory accounts.

C) accuracy of the inventory summary sheets is checked by the person listing the quantities on the sheets.

D) unit costs are determined by dividing the quantities on the inventory summary sheets by the total inventory costs.

A

When is a physical inventory usually taken?

A) When goods are not being sold or received

B) When the company has its greatest amount of inventory

C) When inventory levels are expected to be greatest

D) When the company has its greatest amount of inventory and at the end of the company's fiscal year

A

Which of the following should not be included in the physical inventory of a company?

A) Goods held on consignment from another company

B) Goods in transit from another company shipped FOB shipping point

C) Goods shipped on consignment to another company

D) All of these answer choices should be included.

B

Suppose that Amazon's goods in transit at December 31 include sales made

 

(1)​FOB destination

(2)​FOB shipping point and purchases made

(3)​FOB destination

(4)​FOB shipping point.

 

Which items should be included in Amazon's inventory at December 31?

A) (2) and (3)

B) (1) and (4)

C) (1) and (3)

D) (2) and (4)

A

The term "FOB" denotes

A) free on board.

B) freight on board.

C) free only to buyer.

D) freight charge on buyer.

A

Goods held on consignment are

A) goods held by one party for sale on behalf of the owner.

B) included in the ending inventory of the party holding the goods.

C) kept for sale on the premises of the owner.

D) included as part of no one's ending inventory.

C

Apple uses just-in-time inventory methods. Which of the following is an advantage of this method?

A) It limits the risk of having oversized items in inventory.

B) Companies will always have extra inventory to meet customer demand.

C) It lowers inventory levels and costs.

D) Companies can respond just-in-time to individual vendor requests.

A

Walmart uses a perpetual inventory system. Which of the following is a reason why Walmart needs to take a physical inventory?

A) To check the accuracy of the perpetual inventory records

B) To determine cost of goods sold for the accounting period

C) To compute inventory ratios

D) All of the choices are correct.

D

Which of the following statements is false?

A) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand.

B) No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period.

C) An inventory count is generally more accurate when goods are not being sold or received during the counting.

D) Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.

D

Dick's Sporting Goods is taking a physical inventory on January 30, the last day of its fiscal year. Which of the following must be included in this inventory count?

A) Goods in transit to Dick's Sporting Goods which were shipped FOB destination

B) Goods that Dick's Sporting Goods is holding on consignment for ENO

C) Goods in transit that Dick's Sporting Goods sold to Watauga County Recreation Center, FOB shipping point

D) Goods that Dick's Sporting Goods is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due

D

At December 31, 2025, suppose that ENO Company's inventory records indicated a balance of $632,000. Upon further investigation it was determined that this amount included the following:

 

•​$112,000 in inventory purchases made by ENO shipped from the seller on December 27, 2025 terms FOB destination, but not due to be received until January 2, 2026

•​$74,000 in goods sold by ENO with terms FOB destination on December 27, 2025. The goods are not expected to reach their destination until January 6, 2026

•​$6,000 of goods received on consignment from Tepui Company

 

What is ENO's correct ending inventory balance at December 31, 2025?

A) $520,000

B) $626,000

C) $440,000

D) $514,000

D

At December 31, 2025, suppose that Ulta Company's inventory records indicated a balance of $878,000. Upon further investigation it was determined that this amount included the following:

 

•​$168,000 in inventory purchases made by Ulta shipped from the seller December 31, 2025 terms FOB destination, but not due to be received until January 2, 2026

•​$111,000 in goods sold by Ulta with terms FOB destination on December 27, 2025. The goods are not expected to reach their destination until January 6, 2026.

•​$9,000 of goods received on consignment from Cocokind Company

 

What is Ulta's correct ending inventory balance at December 31, 2025?

A) $710,000

B) $869,000

C) $590,000

D) $701,000

C

Manufacturers such as TREK Bicycle Company usually classify inventory into each of the following categories except

A) work in process.

B) finished goods.

C) merchandise inventory.

D) raw materials.

A

Other receivables include

A) nontrade receivables such as loans to company officers.

B) trade receivables.

C) trade receivables and nontrade receivables.

D) notes receivables.

A

Trades receivable are

A) notes receivable and accounts receivable that result from sales transactions.

B) the same thing as accounts receivable.

C) other receivables such as amounts due from trading stock investments.

D) notes receivables that result from trading stock investments.

B

Interest is usually associated with

A) accounts receivable.

B) notes receivable.

C) doubtful accounts.

D) bad debts.

B

The receivable that is usually evidenced by a formal instrument of credit is a(n)

A) trade receivable.

B) note receivable.

C) accounts receivable.

D) income tax receivable.

C

Which of the following receivables would not be classified as an "other receivable"?

A) Advance to an employee

B) Refundable income tax

C) Notes receivable

D) Interest receivable

C

Notes or accounts receivables that result from sales transactions are often called

A) sales receivables.

B) nontrade receivables.

C) trade receivables.

D) merchandise receivables.

A

The term "receivables" refers to

A) amounts due from individuals or companies.

B) merchandise to be collected from individuals or companies.

C) cash to be paid to creditors.

D) cash to be paid to debtors.

B

Receivables are

A) one of the most liquid assets and thus are always considered current assets.

B) claims that are expected to be collected in cash.

C) shown on the income statement at cash realizable value.

D) always the result of revenue recognition.

C

Nontrade receivables should be reported separately from trade receivables. Why is this statement either true or false?

A) It is true because trade receivables are current assets and nontrade receivables are long-term.

B) It is false because all current receivables must be grouped together in one account.

C) It is true because nontrade receivables do not result from business operations and should not be included with accounts receivable.

D) It is false because management can decide how to report receivables.

B

Ace Delights is a corporation that sells breakfast cereal. Based on the accounts listed below, what are Ace's total trade receivables?

 

Income tax refund due​$   500

Advance due to the company from the company president​300

3-month note due from Ace's main customer​2,000

Interest due this month on the above note​100

Due and unpaid from this month's sales​9,000

Due and unpaid from last month's sales​1,000

A) $10,000

B) $12,000

C) $11,000

D) $12,900

C

Which of the following would probably be the most significant type of a claim held by a company?

A) Notes receivable

B) Nontrade receivables

C) Accounts receivable

D) Interest receivable

B

A1 Service Company had the following items to report on its balance sheet:

 

Employee advances	$  1,580
Amounts owed by customers for the sale of services (due in 30 days)	3,050
Refundable income taxes	1,120
Interest receivable	950
Accepted a formal instrument of credit for services (due in 18 months)	2,220
A loan to company president	10,000
Dishonored note which will eventually be collected	1,380

 

Based on this information, what amount should appear in the "Other Receivables" category?

A) $20,300

B) $13,650

C) $15,030

D) $17,250

B

On January 15, Acme Wholesale Company sells merchandise on account to Jones Associates for $5,000 with terms 3/10, n/30. On January 20, Jones returns $1,000 of this merchandise to Acme. On January 24, payment is received from Jones for the balance due. What is the amount of cash received?

A) $4,000

B) $3,880

C) $3,850

D) $2,800

A

Which of the following represent the three classifications of receivables?

A) Accounts receivable, notes receivable, and other receivables

B) Accounts to be collected, accounts estimated that will not be collected, accounts that were not collected

C) Receivables that are recognized, receivables that are valued, receivables that are accelerated

D) Interest-related receivables, receivables from customers, receivables from employees/officers

D

A1 Sports sells athletic equipment. On November 14, they sold $4,000 of uniforms to Middleboro Middle School, terms 2/10, n/30. On November 21, they received an order from Bay High School for $2,400 of custom printed bats to be produced in December. On November 30, Middleboro Middle School returned $400 of defective merchandise. A1 has received no payments from either school as of month-end. What amount will be reported as accounts receivable, net on the balance sheet as of November 30?

A) $6,400

B) $6,000

C) $4,000

D) $3,600

C

Three accounting issues associated with accounts receivable are

A) depreciating, returns, and valuing.

B) depreciating, valuing, and collecting.

C) recognizing, valuing, and disposing.

D) accrual, bad debts, and disposing.

B

A1 Supply Company on July 15 sells merchandise on account to Acme Co. for $3,000, terms 2/10, n/30. On July 20, Acme Co. returns $1,200 of merchandise to A1 Supply Company. On July 24, payment is received from Acme Co. for the balance due. What is the amount of cash received?

A) $1,800

B) $1,764

C) $1,740

D) $3,000

D

When calculating bad debts expense using the percentage of receivables basis of estimating uncollectible accounts,

A) always subtract the balance from Allowance for Doubtful Accounts to bad debt expense.

B) always add the balance from Allowance for Doubtful Accounts to bad debt expense.

C) ignore the existing balance in the Allowance for Doubtful Accounts.

D) the unadjusted amount in Allowance for Doubtful Accounts will affect the journal entry.

C

Under the direct write-off method, when an account is determined to be uncollectible,

A) Allowance for Doubtful Accounts is debited.

B) Allowance for Doubtful Accounts is credited.

C) Bad Debt Expense is debited.

D) Bad Debt Expense is credited.

A

If bad debt losses are significant, the direct write-off method is

A) unacceptable for financial reporting purposes.

B) always acceptable for financial reporting purposes.

C) acceptable for financial reporting purposes if the write-offs are posted only once a year.

D) acceptable for financial reporting purposes only for service companies.

D

The allowance method of accounting for bad debts

A) does not attempt to match bad debt expense to sales revenue.

B) does not show accounts receivable at the amount the company expects to collect.

C) is not acceptable for financial reporting purposes.

D) is the only method acceptable under GAAP.

A

The Allowance for Doubtful Accounts is similar to Accumulated Depreciation in that

A) it is a contra account.

B) it shows the total of all accounts written off over the years.

C) the balance represents the cumulative effect over the lifetime of the company.

D) the account balances are only affected when adjusting entries are prepared.

B

When using the direct write-off method,

A) year-end adjustments for bad debt expense must be made.

B) bad debt expense is adjusted only when an account is considered uncollectible.

C) the adjustment to bad debt expense occurs at the end of every month.

D) regular adjustments must be made to the Allowance for Doubtful Accounts.

C

Under the allowance method, when an account is deemed uncollectible and must be written off,

A) Bad Debt Expense is debited.

B) Bad Debt Expense is credited.

C) Allowance for Doubtful Accounts is debited.

D) Allowance for Doubtful Accounts is credited.

A

Under the allowance method, the cash realizable value of receivables

A) is the same both before and after an account has been written off.

B) is reported on the statement of cash flows.

C) equals the total receivables plus the allowance for doubtful accounts.

D) is reduced when an account is considered uncollectible.

C

A factor buys receivables from businesses and

A) sells them to the bank.

B) charges a fee to the bank.

C) collects the payment directly from customers.

D) purchases collection services at a factor of ten.