Accounting 350, Fall 2009

Quiz, Chpts 7,8 & 9 Night Class

1. Kaniper Company has the following items at year-end:
Cash in bank
$20,000
Petty cash
300
Short-term paper with maturity of 2 months
5,500
Postdated checks
1,400
Kaniper should report cash and cash equivalents of
A) $20,000.
B)

$20,300.

C)

$25,800.

D) $27,200.
2. Steinert Company has the following items at year-end:
Cash in bank
$30,000
Petty cash
500
Short-term paper with maturity of 2 months
8,200
Postdated checks
2,100
Steinert should report cash and cash equivalents of
A) $30,000.
B)

$30,500.

C)

$38,700.

D) $40,800.
3. Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of
December 31 and sales on credit during the year of $24 million. There is also a credit
balance of $12,000 in the allowance for doubtful accounts. If the company estimates
that 8% of its outstanding receivables will be uncollectible, what will be the amount of
bad debt expense recognized for the year?
A) $ 532,000.
B)

$ 520,000.

C)

$1,920,000.

D) $ 508,000.
4. During the year, Kiner Company made an entry to write off a $4,000 uncollectible
account. Before this entry was made, the balance in accounts receivable was $50,000
and the balance in the allowance account was $4,500. The net realizable value of
accounts receivable after the write-off entry was
A) $50,000.
B)

$49,500.

C)

$41,500.
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D) $45,500.
5.

McGlone Corporation had a 1/1/10 balance in the Allowance for Doubtful Accounts of
$15,000. During 2010, it wrote off $10,800 of accounts and collected $3,150 on
accounts previously written off. The balance in Accounts Receivable was $300,000 at
1/1 and $360,000 at 12/31. At 12/31/10, McGlone estimates that 5% of accounts
receivable will prove to be uncollectible. What should McGlone report as its Allowance
for Doubtful Accounts at 12/31/10?
A) $7,200.
B)

$7,350.

C)

$10,350.

D) $18,000.
6. Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a
list price of $800,000 to Arch Inc. Arch Inc. will pay $850,000 in one year. Royal Palm
Corp. normally sells this type of equipment for 90% of list price. How much should be
recorded as revenue?
A) $720,000.
B)

$765,000.

C)

$800,000.

D) $850,000.
7. Maxwell Corporation factored, with recourse, $100,000 of accounts receivable with
Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales
discounts, sales returns, and sales allowances. Maxwell estimates the recourse
obligation at $2,400. What amount should Maxwell report as a loss on sale of
receivables?
A) $ -0-.
B)

$3,000.

C)

$5,400.

D) $10,400.
8. In preparing its May 31, 2010 bank reconciliation, Catt Co. has the following
information available:
Balance per bank statement, 5/31/10
Deposit in transit, 5/31/10
Outstanding checks, 5/31/10
Note collected by bank in May

$30,000
5,400
4,900
1,250

The correct balance of cash at May 31, 2010 is

A) $35,400.
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B)

$29,250.

C)

$30,500.

D) $31,750.
9. Bell Inc. took a physical inventory at the end of the year and determined that $650,000
of goods were on hand. In addition, Bell, Inc. determined that $50,000 of goods that
were in transit that were shipped f.o.b. shipping were actually received two days after
the inventory count and that the company had $75,000 of goods out on consignment.
What amount should Bell report as inventory at the end of the year?
A) $650,000.
B)

$700,000.

C)

$725,000.

D) $775,000.
10. Risers Inc. reported total assets of $1,600,000 and net income of $85,000 for the current
year. Risers determined that inventory was understated by $23,000 at the beginning of
the year and $10,000 at the end of the year. What is the corrected amount for total assets
and net income for the year?
A) $1,610,000 and $95,000.
B)

$1,590,000 and $98,000.

C)

$1,610,000 and $72,000.

D) $1,600,000 and $85,000.

Transactions for the month of June were:
Purchases
June 1
(balance) 800 @ $3.20
3
2,200 @ 3.10
7
1,200 @ 3.30
15
1,800 @ 3.40
22
500 @ 3.50

Sales
June 2
600 @ $5.50
6
1,600 @ 5.50
9
1,000 @ 5.50
10
400 @ 6.00
18
1,400 @ 6.00
25
200 @ 6.00

11. Assuming that perpetual inventory records are kept in units only, the ending inventory
on a LIFO basis is
A) $4,110.
B)

$4,160.

C)

$4,290.

D) $4,470.

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12. Milford Company had 500 units of Tank in its inventory at a cost of $4 each. It
purchased, for $2,800, 300 more units of Tank. Milford then sold 400 units at a selling
price of $10 each, resulting in a gross profit of $1,600. The cost flow assumption used
by Johnson
A) is FIFO.
B)

is LIFO.

C)

is weighted average.

D) cannot be determined from the information given.

13. Opera Corp. uses the dollar-value LIFO method of computing its inventory cost. Data
for the past four years is as follows:
Year ended
December 31.
2009
2010
2011

Inventory at
End-of-year Prices
$ 65,000
126,000
135,000

Price
Index
1.00
1.05
1.10

What is the 2009 inventory balance using dollar-value LIFO?

A) $65,000.
B)

$61,904.

C)

$122,727.

D) $135,000.

14. Opera Corp. uses dollar-value LIFO method of computing its inventory cost. Data for
the past four years is as follows:
Year ended
December 31.
2009

Inventory at
End-of-year Prices
$ 65,000

Price
Index
1.00

2010

126,000

1.05

2011

135,000

1.10

What is the 2011 inventory balance using dollar-value LIFO?

A) $135,000.
B)

$128,500.

C)

$122,750.

D) $125,750.
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15. The following information was derived from the 2010 accounting records of Perez Co.:
Perez's Goods
Perez 's Central Warehouse Held by Consigness
$130,000
$ 14,000
575,000
70,000
10,000

Beginning inventory
Purchases
Freight-in
Transportation to consignees
Freight-out
Ending inventory
A) $570,000.
B)

$600,000.

C)

$634,000.

30,000
145,000

5,000
8,000
20,000

D) $639,000.
16. Keck Co. had 450 units of product A on hand at January 1, 2010, costing $42 each.
Purchases of product A during January were as follows:
Date
Jan. 10
18
28

Units
600
750
300

Unit Cost
$44
46
48

A physical count on January 31, 2010 shows 600 units of product A on hand. The cost of
the inventory at January 31, 2010 under the LIFO method is
A) $28,200.
B)

$26,700.

C)

$25,500.

D) $24,600.
17. Muckenthaler Company sells product 2005WSC for $20 per unit. The cost of one unit
of 2005WSC is $18, and the replacement cost is $17. The estimated cost to dispose of a
unit is $4, and the normal profit is 40%. At what amount per unit should product
2005WSC be reported, applying lower-of-cost-or-market?
A) $8.
B)

$16.

C)

$17.

D) $18.

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18. Given the historical cost of product Dominoe is $65, the selling price of product
Dominoe is $90, costs to sell product Dominoe are $16, the replacement cost for product
Dominoe is $60, and the normal profit margin is 20% of sales price, what is the cost
amount that should be used in the lower-of-cost-or-market comparison?
A) $74.
B)

$60.

C)

$56.

D) $65.
19. On August 31, a hurricane destroyed a retail location of Vinny's Clothier including the
entire inventory on hand at the location. The inventory on hand as of June 30 totaled
$320,000. Since June 30 until the time of the hurricane, the company made purchases of
$85,000 and had sales of $250,000. Assuming the rate of gross profit to selling price is
40%, what is the approximate value of the inventory that was destroyed?
A) $320,000.
B)

$181,500.

C)

$205,000.

D) $255,000.
20. Reyes Company had a gross profit of $360,000, total purchases of $420,000, and an
ending inventory of $240,000 in its first year of operations as a retailer. Reyes's sales in
its first year must have been
A) $540,000.
B)

$660,000.

C)

$180,000.

D) $600,000.
21. Dicer uses the conventional retail method to determine its ending inventory at cost.
Assume the beginning inventory at cost (retail) were $130,000 ($198,000), purchases
during the current year at cost (retail) were $685,000 ($1,100,000), freight-in on these
purchases totaled $43,000, sales during the current year totaled $1,050,000, and net
markups (markdowns) were $24,000 ($36,000). What is the ending inventory value at
cost?
A) $153,164.
B)

$156,165.

C)

$157,412.

D) $236,000.

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22. Fry Corporation's computation of cost of goods sold is:

Beginning inventory
Add: Cost of goods purchased
Cost of goods available for sale
Ending inventory
Cost of goods sold

$ 60,000
405,000
465,000
90,000
$375,000

The average days to sell inventory for Fry are

A) 58.4 days.
B)

67.6 days.

C)

73.0 days.

D) 87.6 days.

23. Goren Corporation had the following amounts, all at retail:

Beginning inventory
Purchase returns
Abnormal shortage
Sales
Employee discounts

$ 3,600
6,000
4,000
72,000
1,600

Purchases
Net markups
Net markdowns
Sales returns
Normal shortage

$100,000
18,000
2,800
1,800
2,600

What is Goren's ending inventory at retail?

A) $34,400.
B)

$36,000.

C)

$37,600.

D) $38,400

24. Ryan Distribution Co. has determined its December 31, 2010 inventory on a FIFO basis
at $250,000. Information pertaining to that inventory follows:
Estimated selling price
Estimated cost of disposal
Normal profit margin
Current replacement cost

$255,000
10,000
30,000
225,000

Ryan records losses that result from applying the lower-of-cost-or-market rule. At
December 31, 2010, the loss that Ryan should recognize is
A) $0.
B)

$5,000.
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C)

$20,000.

D) $25,000.

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Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.

C
C
D
D
D
A
C
C
D
C
A
C
A
D
D
C
B
D
D
A
A
C
A
D

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