Q: Which formula correctly calculates Net Realizable Value (NRV) of Accounts Receivable?

$$\text{NRV} = \text{Accounts Receivable} - \text{Allowance for Uncollectible Accounts}$$

Q: Which formula is used to calculate the gross profit percent?

$$\text{Gross Profit Percent} = \frac{\text{Gross Profit}}{\text{Sales}}$$

Q: Which formula is used to calculate the book value of an asset?

$$\text{Book Value} = \text{Cost} - \text{Accumulated Depreciation}$$

Question 1

A company sells goods to a customer with shipping terms FOB Shipping Point. When should the company recognize revenue from this sale?

Accepted Answer

When the goods are shipped from the seller's location

Question 2

Which formula correctly calculates Net Realizable Value (NRV) of Accounts Receivable?

Accepted Answer

$$	ext{NRV} = 	ext{Accounts Receivable} - 	ext{Allowance for Uncollectible Accounts}$$

Question 3

A company estimates that 2% of its credit sales will be uncollectible. If credit sales for the year are $500,000, what is the estimated bad debt expense using the percent-of-sales method?

Accepted Answer

$$\10$$,000$

Question 4

Which journal entry is required to write off an uncollectible account under the allowance method?

Accepted Answer

Debit Allowance for Uncollectible Accounts, Credit Accounts Receivable

Question 5

A company uses the straight-line depreciation method. If an asset costs $$50,000, has a residual value of 5$$,000, and a useful life of 10 years, what is the annual depreciation expense?

Accepted Answer

$$\4$$,500$

Question 6

Which of the following best describes the effect of a sales return on the financial statements?

Accepted Answer

It decreases net sales and decreases accounts receivable

Question 7

If a company purchases inventory and pays $$2,000 for the goods, 100 $$for freight-in, and receives a $50 purchase discount, what is the total cost of inventory recorded?

Accepted Answer

$$\2$$,050$

Question 8

Which inventory costing method results in the lowest net income during a period of rising prices?

Accepted Answer

LIFO (Last-In, First-Out)

Question 9

A company estimates that 5% of its accounts receivable will be uncollectible. If the ending balance of accounts receivable is $80,000, what is the required balance in the Allowance for Uncollectible Accounts?

Accepted Answer

$$\4$$,000$

Question 10

Which formula is used to calculate the gross profit percent?

Accepted Answer

$$	ext{Gross Profit Percent} = \frac{	ext{Gross Profit}}{	ext{Sales}}$$

Question 11

A company purchased equipment for $$120,000. The equipment is expected to last 8 years and have a residual value of 8$$,000. What is the depreciable cost?

Accepted Answer

$$\112$$,000$

Question 12

Which of the following is NOT a characteristic of a tangible asset?

Accepted Answer

It is amortized over its useful life

Question 13

A company issues a note receivable for $10,000 at 6% annual interest, due in 9 months. What is the amount of interest revenue recognized at maturity?

Accepted Answer

$$\450$

Question 14

Which journal entry records the purchase of a bond investment at face value?

Accepted Answer

Debit Investment in Bonds, Credit Cash

Question 15

If a company sells equipment for $$15,000 that originally cost 20$$,000 and has accumulated depreciation of $8,000, what is the gain or loss on sale?

Accepted Answer

$$\3$$,000$ gain

Question 16

Which of the following is capitalized as part of the cost of a plant asset?

Accepted Answer

Installation costs

Question 17

Which formula is used to calculate the book value of an asset?

Accepted Answer

$$	ext{Book Value} = 	ext{Cost} - 	ext{Accumulated Depreciation}$$

Question 18

Which of the following statements about intangible assets is correct?

Accepted Answer

Intangible assets lack physical substance and are usually long-lived

Question 19

A company uses the double-declining balance method for depreciation. If an asset has a cost of $$40,000, a useful life of 5 years, and a residual value of 5$$,000, what is the depreciation expense for the first year?

Accepted Answer

$$\16$$,000$

Financial Accounting Exam 2 Study Guide: Receivables, Inventory, Depreciation, and Investments

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