Q: Which of the following is the correct formula for calculating days sales in inventory? Use $$\text{Days Sales in Inventory} = \frac{365}{\text{Inventory Turnover}}.$$

$$\frac{365}{\text{Inventory Turnover}}$$

Question 1

A company purchases equipment for $$96,000, with a residual value of 6$$,000 and a useful life of 8 years. What is the annual straight-line depreciation expense? Use the formula $$	ext{Depreciation Expense} = \frac{	ext{Cost} - 	ext{Residual Value}}{	ext{Useful Life}}.$$

Accepted Answer

$$\11$$,250$

Question 2

Which of the following is an example of an intangible asset?

Accepted Answer

Trademark

Question 3

During a period of rising inventory costs, which inventory costing method will generally result in the lowest cost of goods sold (COGS)?

Accepted Answer

FIFO

Question 4

A retailer purchases $$48,000 of inventory on account, terms 2/10, n/30, and returns 3$$,000 before paying. If the retailer pays on day 8, what is the cash payment? Use the formula $$	ext{Discount} = (	ext{Purchase} - 	ext{Return}) 	imes 	ext{Discount Rate}.$$

Accepted Answer

$$\44$$,100$

Question 5

A company uses the allowance method for bad debts. If Accounts Receivable is $$120,000 and Allowance for Bad Debts is 3$$,100 (credit) before adjustment, and the required ending allowance is $5,000, what is the adjusting entry amount for Bad Debts Expense?

Accepted Answer

$$\1$$,900$

Question 6

Which of the following best describes the effect of overstating ending inventory by $4,200 on the current year's financial statements?

Accepted Answer

Cost of goods sold is understated and net income is overstated

Question 7

Prairie Outfitters reports net sales of $$960,000, gross profit of 360$$,000, beginning inventory of $$70,000, and ending inventory of 90$$,000. What is the inventory turnover ratio? Use the formulas $$	ext{COGS} = 	ext{Net Sales} - 	ext{Gross Profit}$$, $$	ext{Average Inventory} = \frac{	ext{Beginning Inventory} + 	ext{Ending Inventory}}{2}$$, and $$	ext{Inventory Turnover} = \frac{	ext{COGS}}{	ext{Average Inventory}}.$$

Accepted Answer

$$6.00$$

Question 8

A $$24,000, 6%, six-month note is accepted on November 1, Year 1. What is the total interest earned at maturity? Use $$	ext{Interest} = 	ext{Principal} 	imes 	ext{Rate} 	imes \frac{	ext{Time}}{12}$.

Accepted Answer

$$\720$

Question 9

Which of the following expenditures should be capitalized rather than expensed?

Accepted Answer

An equipment upgrade that extends useful life by four years

Question 10

A company sells merchandise for $$9,000 on account (cost 5$$,400). The customer returns goods with a selling price of $$1,500 (cost 900). $$What is the correct journal entry for the return under a perpetual inventory system?

Accepted Answer

Debit Sales Returns and Allowances $$1,500; Credit Accounts Receivable 1$$,500; Debit Inventory $$900; Credit Cost of Goods Sold 900$$

Question 11

Which of the following is a characteristic of a plant asset?

Accepted Answer

Used in business operations over multiple periods

Question 12

A company writes off a $4,600 receivable under the allowance method, then later collects the full amount. What is the correct sequence of entries?

Accepted Answer

Debit Allowance for Bad Debts; Credit Accounts Receivable; then Debit Accounts Receivable; Credit Allowance for Bad Debts; then Debit Cash; Credit Accounts Receivable

Question 13

Which of the following best measures inventory management efficiency?

Accepted Answer

Inventory turnover and days sales in inventory

Question 14

A company pays $$150,000 cash and signs a 250$$,000 note to acquire land with an unwanted old building. It pays $$8,000 past-due property taxes, 6$$,000 title and legal fees, and $$20,000 demolition costs, receiving 3$$,000 salvage proceeds. What is the total cost assigned to land? Use $$	ext{Land Cost} = 	ext{Purchase Price} + 	ext{Note} + 	ext{Taxes} + 	ext{Title Fees} + 	ext{Demolition} - 	ext{Salvage}.$$

Accepted Answer

$$\434$$,000$

Question 15

If a routine repair is incorrectly capitalized, before any related depreciation is recorded:

Accepted Answer

Assets and net income are overstated

Question 16

Which of the following is a common cost of accepting customer credit cards?

Accepted Answer

A processor service fee

Question 17

A company uses the perpetual inventory system. Which action is required when a customer returns undamaged goods?

Accepted Answer

Recording both the sales reversal and restoration of inventory at cost

Question 18

Which of the following is the correct formula for calculating days sales in inventory? Use $$	ext{Days Sales in Inventory} = \frac{365}{	ext{Inventory Turnover}}.$$

Accepted Answer

$$\frac{365}{	ext{Inventory Turnover}}$$

Question 19

Which of the following best describes the reporting of Allowance for Bad Debts on the balance sheet?

Accepted Answer

As a deduction from Accounts Receivable

Question 20

A company accepts a $$24,000, 6%, six-month note on November 1, Year 1. What is the amount of interest revenue accrued at December 31, Year 1? Use $$	ext{Interest} = 	ext{Principal} 	imes 	ext{Rate} 	imes \frac{	ext{Time}}{12}$.

Accepted Answer

$$\480$

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