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Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

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Question 61

Multiple Choice

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Which of the following correctly describes credit terms of 2/10,n/30?

A) A two percent discount for early payment is available if the invoice is paid before the tenth day of the month following the month the sale.
B) A two percent discount for early payment is available within ten days of the date of sale.
C) A ten percent discount for early payment is available if the invoice is paid within two days of the date of the invoice.
D) A two percent discount for early payment is available if the invoice is paid after the tenth day, but before the thirtieth day of the invoice date.

E) B) and C)
F) A) and D)

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Question 62

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The allowance for doubtful accounts is reported as a contra-asset on the balance sheet.

A) True
B) False

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Question 63

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Merchandise was sold on credit for $30,000,terms 3/15,n/30.Which of the following journal entry descriptions correctly describes the cash collection?

Which of the following statements pertaining to bank reconciliations is false?

One of Hawk Company's customers returned products that cost Hawk $300,which was sold on account for $450.Which of the following does not correctly describe the affect of the return on the financial statements?

The Tanner Company's April 1,2010 pre-reconciliation cash balance on their books was $35,000.While preparing the April 1 bank reconciliation,Tanner determined that outstanding checks total $11,000,deposits in transit total $7,000,and bank service charges are $50.How much was Tanner's April 1,2010 cash balance per the bank statement?

Which of the following transactions does not affect gross profit?

Which of the following does not correctly describe the effect of recording a credit sale of inventory for a profit?

When preparing a bank reconciliation,which of the following would be deducted from the company's cash balance?

On January 1,American Company's allowance for doubtful accounts had a credit balance of $3,000.The balance in the Accounts Receivable account on that date was $75,000.On January 2,prior to any credit sales,a $500 account from National Company was deemed to be uncollectible and written off. Required: A.Compute the net realizable value of American's receivables on January 1. B.Present the journal entry American would record on January 2 related to the write-off of National's account. C.Compute the net realizable value of American's receivables on January 2, immediately following the write-off of National's account

Oakwood Company had accounts receivable of $750,000 and an allowance for doubtful accounts of the $21,500 just prior to writing off as worthless an account receivable for Hyland Company of $5,000.The net realizable value of accounts receivable as shown by the accounting records before and after the write-off was as follows: $\begin{array} { l l c } & \underline { \text { Before } } & \underline { \text { After } } \\\text { A. } & \$ 750,000 & \$ 750,000 \\\text { B. } & \$ 721,500 & \$ 733,500 \\\text { C. } & \$ 728,500 & \$ 723,500 \\\text { D. } & \$ 728,500 & \$ 728,500\end{array}$

The gross profit percentage decreases when operating expenses increase.

The gross profit percentage is calculated by dividing net sales by gross profit.

Credit card discounts are reported as operating expenses on an income statement.

Newark Company has provided the following information: Cash sales,$450,000 Credit sales,$1,350,000 Selling and administrative expenses,$330,000 Sales returns and allowances,$90,000 Depreciation expense,$101,000 Gross profit,$1,360,000 Increase in accounts receivable,$55,000 Bad debt expense,$33,000 Sales discounts,$43,000 How much is Newark's cost of goods sold?

Cyclone Inc.reported the following figures from their financial statements for the years 2009 through 2011: $\begin{array} { l r r r } & \underline { 2011 } & \underline { 2010 } & \underline { 2009 } \\\text { Net revenues } & \$ 717,422 & \$ 1,110,178 & \$ 591,786 \\\text { Gross profit } & 560,421 & 960,434 & 498,605 \\\text { Net income (net loss) } & ( 92,788 ) & 70,776 & 47,811 \\\text { Cash flow from operations } & 106,850 & 509,707 & 204,496 \\\text { Accounts receivable } & 68,648 & 90,561 & 56,454\end{array}$ Describe how the change in accounts receivable will affect the calculation of cash flow from operations for 2011 and 2010.

Redwing Company sold inventory costing $500 to a customer on account for $700.Which of the following correctly describes the collection of $686 cash when the customer takes advantage of a discount?

Which of the following is not a component of the gross profit calculation?

The cash records and the bank statement of Frankel Company showed the following at the end of February 2010: Outstanding checks as of the beginning of February 2010,$8,000; checks written by Frankel Company according to their books during February 2010,$50,000; and checks cleared by the bank during February 2010,$54,000.How much were the outstanding checks at the end of February 2010?

You are the new manager of West Coast Company.The company distributes goods throughout the Rocky Mountain area.Customers are billed after the shipments are sent.Most customers pay within two weeks.You notice that one employee is responsible for opening all incoming payments,recording them in the accounting records,and depositing all receipts in the bank daily.When asked why this one person performed all of these duties,you were told that it was more efficient for one person to handle cash and to keep track of things.If any cash was missing,responsibility could be easily determined.Do you agree with this arrangement? What changes would you make,and why?