19. Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high cost items?
Answer
| a. | FIFO | |
| b. | average | |
| c. | LIFO | |
| d. | specific identification |
20. Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a
Answer
| a. | debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales | |
| b. | debit to Cash and a credit to Sales | |
| c. | debit to Cash, credit to Credit Card Expense, and a credit to Sales | |
| d. | debit to Sales, debit to Credit Card Expense, and a credit to Cash |
21. The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles
Answer
| a. | requires a correcting entry for the period in which the account was written off. | |
| b. | does not affect net income in the period it is collected. | |
| c. | will increase net income in the period it is collected. | |
| d. | will decrease net income in the period it is collected. |
22. If the direct write off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer’s account as uncollectible?
Answer
| a. | Interest Expense | |
| b. | Uncollectible Accounts Expense | |
| c. | Accounts Receivable | |
| d. | Allowance for Doubtful Accounts |
23.
Dorman Co. sold merchandise to Smith Co. on account, $18,000, terms 2/15, net 45. The cost of the merchandise sold is $15,500. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of
net sales from the above transactions? Answer
| a. | $15,925 | |
| b. | $16,250 | |
| c. | $13,818 | |
| d. | $14,100 |
24. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment. What is the amount of the cash discount allowable?
Answer
| a. | $130 | |
| b. | $170 | |
| c. | $250 | |
| d. | $150 |
25. A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. What entry is required in the company’s accounts?
Answer
| a. | debit Cash; credit Accounts Receivable | |
| b. | debit Accounts Receivable; credit Cash | |
| c. | debit Cash; credit Accounts Payable | |
| d. | debit Accounts Payable; credit Cash |
26.
On October 1, Black Company receives a 6% interest bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of Answer
| a. | $1,200 | |
| b. | $300 | |
| c. | $600 | |
| d. | $0 |
27.
Two methods of accounting for uncollectible accounts are the Answer
| a. | allowance method and the net realizable method. | |
| b. | allowance method and the accrual method. | |
| c. | direct write off method and the allowance method. | |
| d. | direct write off method and the accrual method. |
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