Q: A company purchases $$10,000 of merchandise inventory on account with credit terms 2/10, n/30 and pays the freight cost of 500 ($$FOB Shipping Point). The company returns $1,000 of the inventory before payment. If the company pays within the discount period, what is the total cash paid?

$$9,310$$ \\ = [($$10,000 - 1$$,000) \times 0.98] + $$500$$

Q: Given the following inventory data, calculate the weighted average cost per unit: \\ \\ Beginning Inventory: 100 units at $$5 each \\ Purchase: 200 units at 7 $$each

$$6.33$$ \\ = \frac{(100 \times 5) + (200 \times 7)}{100 + 200}$

Q: A company has 300 units in ending inventory. Using the FIFO method, the first 200 units were purchased at $$8 each, and the next 100 units at 10 $$each. What is the value of ending inventory?

$$2,600$$ \\ = (200 \times 8) + (100 \times 10)$

Q: A company’s unadjusted cash balance is $$5,000. The bank statement shows a service charge of 50 $$and a customer’s NSF check of $200. What is the adjusted cash balance?

$$4,750$$ \\ = $$5,000 - 50$$ - $$200$$

Question 1

A company purchases $$10,000 of merchandise inventory on account with credit terms 2/10, n/30 and pays the freight cost of 500 ($$FOB Shipping Point). The company returns $1,000 of the inventory before payment. If the company pays within the discount period, what is the total cash paid?

Accepted Answer

$$9,310$$ \ = [($$10,000 - 1$$,000) 	imes 0.98] + $$500$$

Question 2

Which of the following is the correct journal entry for a buyer to record the return of merchandise previously purchased on account?

Accepted Answer

Debit Accounts Payable; Credit Merchandise Inventory

Question 3

A company sells merchandise for $$5,000 on account. The cost of the merchandise sold is 3$$,200. What is the correct compound journal entry to record this sale?

Accepted Answer

Debit Accounts Receivable $$5,000; Credit Sales Revenue 5$$,000; Debit Cost of Goods Sold $$3,200; Credit Merchandise Inventory 3$$,200

Question 4

A customer returns $$400 of merchandise previously sold on account. The cost of the returned merchandise is 250. $$What is the correct journal entry from the seller’s perspective?

Accepted Answer

Debit Sales Returns and Allowances $$400; Credit Accounts Receivable 400$$; Debit Merchandise Inventory $$250; Credit Cost of Goods Sold 250$$

Question 5

A company’s beginning inventory is $$8,000, purchases are 20$$,000, purchase returns are $$2,000, freight-in is 1$$,000, and ending inventory is $7,000. What is the Cost of Goods Sold?

Accepted Answer

$$8,000 + 20$$,000 - $$2,000 + 1$$,000 - $$7,000 = 20$$,000$

Question 6

Which account is used by the seller to record freight costs under FOB Destination?

Accepted Answer

Freight-Out

Question 7

A company’s ending inventory is understated by $2,000. What is the effect on Cost of Goods Sold (CoGS) and Gross Profit (GP)?

Accepted Answer

CoGS is overstated; GP is understated

Question 8

Given the following inventory data, calculate the weighted average cost per unit: \ \ Beginning Inventory: 100 units at $$5 each \ Purchase: 200 units at 7 $$each

Accepted Answer

$$6.33$$ \ = \frac{(100 	imes 5) + (200 	imes 7)}{100 + 200}$

Question 9

A company has 300 units in ending inventory. Using the FIFO method, the first 200 units were purchased at $$8 each, and the next 100 units at 10 $$each. What is the value of ending inventory?

Accepted Answer

$$2,600$$ \ = (200 	imes 8) + (100 	imes 10)$

Question 10

If the market value of inventory is $$12,000 and the cost is 15$$,000, what amount should be reported on the balance sheet under the lower-of-cost-or-market rule?

Accepted Answer

$$12,000$$

Question 11

Which of the following best describes the materiality concept in accounting?

Accepted Answer

Only information that would influence a decision maker needs to be disclosed

Question 12

Which of the following is a book-side adjustment in a bank reconciliation?

Accepted Answer

Bank service charges

Question 13

A company’s unadjusted cash balance is $$5,000. The bank statement shows a service charge of 50 $$and a customer’s NSF check of $200. What is the adjusted cash balance?

Accepted Answer

$$4,750$$ \ = $$5,000 - 50$$ - $$200$$

Question 14

Which of the following best defines petty cash?

Accepted Answer

A small fund of cash kept on hand to pay for minor expenditures

Question 15

When replenishing petty cash, the Cash Short & Over account is debited if:

Accepted Answer

There is a cash shortage

Question 16

Which of the following best describes the Allowance for Bad Debts account?

Accepted Answer

A contra-asset account that reduces Accounts Receivable

Question 17

A company estimates bad debts expense as 2% of $100,000 credit sales. What is the adjusting journal entry under the percent-of-sales method?

Accepted Answer

Debit Bad Debts Expense $$2,000; Credit Allowance for Bad Debts 2$$,000

Question 18

A $5,000 account is written off as uncollectible under the allowance method. What is the correct journal entry?

Accepted Answer

Debit Allowance for Bad Debts $$5,000; Credit Accounts Receivable 5$$,000

Question 19

A previously written-off account of $1,000 is recovered. What are the correct journal entries under the allowance method?

Accepted Answer

1) Debit Accounts Receivable $$1,000; Credit Allowance for Bad Debts 1$$,000 \ 2) Debit Cash $$1,000; Credit Accounts Receivable 1$$,000

Question 20

Given the following aging schedule, what is the estimated total uncollectible value? \ \ Current: $$10,000 	imes 1\%$$ \ 31-60 days: $$5,000 	imes 5\%$$ \ Over 60 days: $$2,000 	imes 20\%$$

Accepted Answer

$$100 + 250$$ + $$400 = 750$

Question 21

A company has Accounts Receivable of $$50,000 and Allowance for Bad Debts of 2$$,000 (credit balance). What is Accounts Receivable, Net?

Accepted Answer

$$48,000$$ \ = $$50,000 - 2$$,000$

Question 22

A 90-day, $10,000 note is issued on March 1. What is the maturity date? (Assume all months have 30 days.)

Accepted Answer

May 30

Question 23

A company holds a 60-day, $12,000 note receivable at 6% annual interest. What is the interest revenue earned at maturity? (Assume a 360-day year.)

Accepted Answer

$$120$$ \ = $$12,000 	imes 0.06 	imes \frac{60}{360}$$

Question 24

At maturity, a note receivable for $$5,000 plus 100 $$interest is collected. What is the correct journal entry if the interest was previously accrued?

Accepted Answer

Debit Cash $$5,100; Credit Notes Receivable 5$$,000; Credit Interest Receivable $100

Principles of Accounting: Exam 3 Study Guide (Merchandising, Inventory, Cash, Receivables)

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