ACC 577 ACC577 Week 2 Quiz

ACC 577 Week 2 Quiz

On December 30, 2004, Astor Corp. sold merchandise for $75,000 to Day Co. 

The terms of the sale were net 30, FOB shipping point. The merchandise was shipped on December 31, 2004, and arrived at Day on January 5, 2005. Due to a clerical error, the sale was not recorded until January 2005 and the merchandise, sold at a 25% markup, was included in Astor's inventory at December 31, 2004.

As a result, Astor's cost of goods sold for the year ended December 31, 2004, was

Foster Co. adjusted its allowance for uncollectible accounts at year end. The general ledger balances for the accounts receivable and the related allowance account were $1,000,000 and $40,000, respectively. Foster uses the percentage-of-receivables method to estimate its allowance for uncollectible accounts. Accounts receivable were estimated to be 5% uncollectible. What amount should Foster record as an adjustment to its allowance for uncollectible accounts at year end? 

Jones Wholesalers stocks a changing variety of products.

Which inventory costing method will be most likely to give Jones the lowest ending inventory when its product lines are subject to specific price increases?

Fenn Stores, Inc. had sales of $1,000,000 during December 2004. Experience has shown that merchandise equaling 7% of sales will be returned within 30 days and an additional 3% will be returned within 90 days. Returned merchandise is readily resalable. In addition, merchandise equaling 15% of sales will be exchanged for merchandise of equal or greater value.

What amount should Fenn report for net sales in its income statement for the month of December 2004?

During January 2004, Metro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:

Anders Co. uses the moving-average method to determine the cost of its inventory. During January 2005, Anders recorded the following information pertaining to its inventory: 

When the double extension approach to the dollar-value LIFO inventory method is used, the inventory layer added in the current year is multiplied by an index number.

Which of the following correctly states how components are used in the calculation of this index number?

Fireworks, Inc. had an explosion in its plant that destroyed most of its inventory. Its records show that beginning inventory was $40,000. Fireworks made purchases of $480,000 and sales of $620,000 during the year. Its normal gross profit percentage is 25%. It can sell some of its damaged inventory for $5,000. The insurance company will reimburse Fireworks for 70% of its loss. What amount should Fireworks report as loss from the explosion? 

(NOTE: This is a CPAexcel simulated Exam Question, not AICPA licensed Material)

When the dollar-value LIFO (DV LIFO) retail method is used, what is the first step in the calculation? 

Smith Co. has a checking account at Small Bank and an interest-bearing savings account at Big Bank. On December 31, year 1, the bank reconciliations for Smith are as follows: 

(NOTE: This is a CPAexcel simulated Exam Question, not AICPA licensed Material)

At the end of the current year (calendar-fiscal year), a creditor firm's 6% note receivable balance is $10,000. Two years remain in the note term. Interest is due each December 31. The debtor's financial position has deteriorated causing the creditor to reevaluate the note. After careful consideration, the creditor believes that only 60% of the principal ($10,000) will be collected at the end of the term. The only interest expected to be received is 2% of the original principal for one year, also to be collected at the end of the term. At the end of the current year, what amount of expense or loss is recognized by the creditor for this loan impairment? The present value of $1 two years hence at 6% is .89, and at 2% is .961. 

Hutch, Inc. uses the conventional retail inventory method to account for inventory. The following information relates to 2004 operations:

Trans Co. uses a periodic inventory system. The following are inventory transactions for the month of January: 

At December 31, 2004, Kale Co. had the following balances in the accounts it maintains at First State Bank:

Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a

A material overstatement in ending inventory was discovered after the year-end financial statements of a company were issued to the public. What effect did this error have on the year-end financial statements?

The following costs pertain to Den Co.'s purchase of inventory: 

Loft Co. reviewed its inventory values for proper pricing at year-end. The following summarizes two inventory items examined for the lower of cost or market: 

On January 1, 2004, Card Corp. signed a three-year, noncancelable purchase contract, which allows Card to purchase up to 500,000 units of a computer part annually from Hart Supply Co. at $.10 per unit and guarantees a minimum annual purchase of 100,000 units.