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Final Exam Review

45. Manufactured inventory that has begun the production process but is not yet completed is
a. work in process.
b. raw materials.
c. merchandise inventory.
d. finished goods.

Work in progress

46. The factor which determines whether or not goods should be included in a physical count of inventory is
a. physical possession.
b. legal title.
c. management's judgment.
d. whether or not the purchase price has been paid.

Legal Title

47. If goods in transit are shipped FOB destination
a. the seller has legal title to the goods until they are delivered.
b. the buyer has legal title to the goods until they are delivered.
c. the transportation company has legal title to the goods while the goods are in transit.
d. no one has legal title to the goods until they are delivered.

The seller has legal title until the goods are delivered.

48. Independent internal verification of the physical inventory process occurs when
a. the employee is required to count all items twice for sake of verification.
b. the items counted are compared to the inventory account balance.
c. a second employee counts the inventory and compares the result to the count made by the first employee.
d. all prenumbered inventory tags are accounted for

a second employee counts the inventory and compares the result to the count made by the first employee.

68. Charlene Cosmetics Company just began business and made the following four inventory purchases in June:
June 1 150 units $ 780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
Total: $4,200

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is
a. $1,463.
b. $1,620.
c. $1,575.
d. $1,500.

$1,500 [(4200/700)x6] (total cost/total units)xUnits@End of period

55. Goods held on consignment are
a. never owned by the consignee.
b. included in the consignee's ending inventory.
c. kept for sale on the premises of the consignor.
d. included as part of no one's ending inventory.

never owned by the consignee

69. Echo Sound Company just began business and made the following four inventory purchases in June:
June 1 150 units $ 780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
$4,200

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is
a. the FIFO method.
b. the LIFO method.
c. the weighted average unit cost method.
d. not determinable.

The FIFO Method

70. Atom Company just began business and made the following four inventory purchases in June:
June 1 150 units $ 825
June 10 200 units 1,120
June 15 200 units 1,140
June 28 150 units 885
total: $3,970

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is
a. $1,385.
b. $1,425.
c. $1,455.
d. $1,475.

$1,385

72. A company just began business and made the following four inventory purchases in June:
June 1 150 units $ 825
June 10 200 units 1,120
June 15 200 units 1,140
June 28 150 units 885
$3,970

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is
a. $1,418.
b. $1,475.
c. $1,425.
d. $1,400.

$1,418

Olympus Climbers Company has the following inventory data:
July 1 Beginning inventory 20 units at $19 $ 380
7 Purchases 70 units at $20 1,400
22 Purchases 10 units at $22 220
$2,000
A physical count of merchandise inventory on July 30 reveals that there are 40 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is
a. $780.
b. $820.
c. $1,180.
d. $1,220.

$1,180

If employees are bonded
a. it means that they are not allowed to handle cash.
b. they have worked for the company for at least 10 years.
c. they have been insured against misappropriation of assets.
d. it is impossible for them to steal from the company.

They have been insured against misappropriation of assets

An employee authorized to sign checks should not record
a. owner cash contributions.
b. mail receipts.
c. cash disbursement transactions.
d. sales transactions.

cash disbursement transactions

59. Notes or accounts receivables that result from sales transactions are often called
a. sales receivables.
b. non-trade receivables.
c. trade receivables.
d. merchandise receivables.

Trade receivables are accounts or notes receivables that result from sales transactions.

62. Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false?
a. It is true because trade receivables are current assets and non-trade receivables are long term.
b. It is false because all current receivables must be grouped together in one account.
c. It is true because non-trade receivables do not result from business operations and should not be included with accounts receivable.
d. It is false because management can decide how to report receivables.

non trade receivables are reported separately from trade receivables because they are not part of business operations

68. Which one of the following is not an accounting problem (issue) associated with accounts receivable?
a. Depreciating accounts receivable
b. Recognizing accounts receivable
c. Valuing accounts receivable
d. Accelerating cash receipts from accounts receivable

Depreciating accounts receiveable. A/R does not depreciate. There is a contra asset account (allowance for bad debt expense set up to allow for uncollectible receivables.

70. Three accounting issues associated with accounts receivable are
a. depreciating, returns, and valuing.
b. depreciating, valuing, and collecting.
c. recognizing, valuing, and accelerating collections.
d. accrual, bad debts, and accelerating collections.

Three issues associated with accounts receivables are recognizing, valuing, and accelerating collections. These are all concerned with realizing the receivable.

71. Carson Company on July 15 sells merchandise on account to Tayler Co. for $1,500, terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $600 to Carson Company. On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received?
a. $900
b. $882
c. $870
d. $1,500

$882 [(1500-600)x.98]

72. The Allowance for Doubtful Accounts is necessary because
a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
b. uncollectible accounts that are written off must be accumulated in a separate account.
c. a liability results when a credit sale is made.
d. management needs to accumulate all the credit losses over the years.

allowance for doubtful accounts

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