ACCT 220 WEEK 2 QUIZ (UMUC)

ACCT 220 WEEK 2 QUIZ (UMUC)

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ACCT 220 WEEK 2 QUIZ (UMUC)

Question 1 (4 points)

One advantage to using a perpetual inventory system is that the company never has to physically count the inventory.

Question 1 options:

	True
	False

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Question 2 (4 points)

The weighted-average inventory method will likely result in neither the highest nor the lowest ending inventory.

Question 2 options:

	True
	False

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Question 3 (4 points)

When calculating accounts receivable turnover, a company would prefer a higher number rather than a lower number (within reason).

Question 3 options:

	True
	False

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Question 4 (4 points)

When performing a bank reconciliation, checks outstanding are added back to the bank balance.

Question 4 options:

	True
	False

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Question 5 (4 points)

Usually the quick ratio will be a lower number than the current ratio.

Question 5 options:

	True
	False

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Multiple Choice

Select the best answer for each of the following questions.

Question 6 (4 points)

The bad-debt method that uses the accounts receivable aging report is _______________.

Question 6 options:

	the direct write-off method
	the percentage-of-receivables method
	the percentage-of-sales method
	the bad-debt expense method

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Question 7 (4 points)

When it is determined that too much money has been set aside for uncollectible accounts, we will _______________.

Question 7 options:

	credit cash
	debit reserve for uncollectible accounts
	debit accounts receivable
	credit reserve for uncollectible accounts

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Question 8 (4 points)

A customer whose account was previously written off unexpectedly pays us. If we are using the allowance method we would _______________.

Question 8 options:

	debit accounts receivable and credit allowance for uncollectible accounts AND debit cash and credit accounts receivable
	debit bad-debt expense and credit cash
	debit reserve for uncollectible accounts and credit cash
	debit cash and credit bad-debt expense

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Question 9 (4 points)

When a retailer accepts a bank card (VISA or MasterCard), they will make what entry for the day’s receipts?

Question 9 options:

	debit cash and debit “credit card expense”; credit sales
	debit accounts receivable; credit sales, and credit “credit card expense”
	debit cash and credit sales
	debit accounts receivable and credit sales

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Question 10 (4 points)

The company prepares, but does not yet pay, its first payroll of the new year. Salaries total $10,000 and 7.65% is withheld from paychecks for FICA tax. Ignore all other payroll deductions. The journal entries will be _______________.

Question 10 options:

	debit wage expense $10,000 and credit wages payable $10,000; debit payroll tax expense for $765 and credit FICA tax payable $765
	debit wage expense $10,000 and credit wages payable 10,000; debit payroll tax expense for $1,530 and credit FICA tax payable $1,530
	debit wage expense $10,000 and debit payroll tax expense $765; credit wages payable $9,235 and credit FICA tax payable $1,530
	debit wage expense $10,000; credit wages payable $8,470 and FICA tax payable $1,530

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Question 11 (4 points)

A company buys a $10,000 bond at 102 as an investment. The correct entry is _______________.

Question 11 options:

	debit investment in bonds and credit cash for $10,200
	credit investment in bonds and debit cash for $10,200
	debit investment in bonds and credit cash for $9,800
	credit investment in bonds and debit cash for $9,800

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Question 12 (4 points)

A company issues bonds having a stated value of $100,000 for $102,500. At maturity, the company will _______________.

Question 12 options:

	debit bonds payable for $102,500
	credit bonds payable for $102,500
	debit bonds payable for $100,000
	credit bonds payable for $100,000

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Question 13 (4 points)

A company uses the percentage-of-receivables method for establishing the bad-debt reserve. They want the reserve balance to equal 0.5% of debts 30 days old or less, 2% of debts aged 31 to 60 days, and 4% of debts aged over 60 days. An aging report shows $780,000 relating to the past month, $232,600 relating to the prior month, and $89,200 relating to more than two months ago. The balance in the reserve account before adjustment is $10,175. What is the adjusting journal entry?

Question 13 options:

	debit bad-debt expense, credit accounts receivable $1,945
	debit allowance for bad debts, credit bad-debt expense $1,945
	debit bad-debt expense, credit allowance for bad debts $12,120
	debit bad-debt expense, credit allowance for bad debts $1,945

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Question 14 (4 points)

A company is closing out the accounting period. The inventory balance at the beginning of the period was $222,750, and at the end of the period it was $215,600. Purchases of goods for resale during the period equaled $682,500. What was the cost of goods sold total?

Question 14 options:

	$682,500
	$689,650
	$675,350
	$905,250

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Question 15 (4 points)

A merchandising company has beginning inventory of 50 units with a total cost of $500.  They have the following transactions during the month of January: 1/5 bought 10 units at $11.00 each; 1/8 bought 15 units at $11.25 each; 1/15 sold 8 units for $16 each; 1/22 bought 10 units at $11.50 each and sold 12 units for $16.50 each. The ending inventory is $693.75. What inventory costing method is the company using?

Question 15 options:

	FIFO
	LIFO – perpetual
	LIFO – periodic
	weighted average

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Short Answer

Prepare the following journal entries. Dates and descriptions are not required.

Question 16 (4 points)

What is the difference between the periodic-inventory and perpetual-inventory methods?

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Question 17 (4 points)

Name two costs, in addition to the purchase price, that are added to merchandise inventory cost.

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Question 18 (4 points)

What will be the result to inventory values, cost of goods sold, and net income if the LIFO method is used during times of inflation?

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Question 19 (4 points)

When comparing financial ratios, it is important to make comparisons only within an industry or between like companies. Why might a retail store have a much higher accounts receivable turnover than a manufacturing company?

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Question 20 (4 points)

How is gross margin or gross profit calculated on a merchandizing company income statement?

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Question 21 (4 points)

If a retail store has a sale with everything listed at 30% off, and a rack of clothing is also marked as “an additional 20% off,” what is the total discount offered?

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Question 22 (4 points)

What does 1/10, n/30 mean?

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Question 23 (4 points)

What cash control is compromised when the purchasing manager is one of the authorized check signers?

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Question 24 (4 points)

Name at least three out of the four documents that the accounting department should have access to in order to pay an invoice.

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Question 25 (4 points)

What item from the company’s records must be added to the bank balance when reconciling the bank statement?

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