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Cornett Fall 2013

Receivables are usually a significant portion of

total current assets.

A note receivable due in 90 days is listed on the balance sheet under

current assets.

A note receivable due in five years is listed on the balance sheet under the caption

investments.

A written promise to pay a sum of money on demand or at a definite time is called a(n)

promissory note.

In reference to a promissory note, the person who makes the promise to pay is called the

maker.

In reference to a promissory note, the person who is to receive payment is called the

payee.

The amount of the promissory note plus the interest earned on the due date is called the

maturity value.

The due date of a 90-day note dated July 5 is

October 3.

The due date of a 60-day note dated July 12 is

September 10.

A note receivable due in 18 months is listed on the balance sheet under the caption

investments.

A 60-day, 10% note for $6,000 dated April 15 is received from a customer on account.
The face value of the note is

$6,000.

A 90-day, 10% note for $10,000 dated April 1 is received from a customer on account. The face value of the note is

$10,000.

A 90-day, 8% note for $10,000 dated May 1 is received from a customer on account.
The maturity value of the note is

$10,200.

A 60-day, 12% note for $15,000 dated May 1 is received from a customer on account. The maturity value of the note is

$15,300.

Other receivables do NOT include

accounts receivable.

The process of a company selling its accounts receivable to another company is referred to as

factoring.

The two methods of accounting for uncollectible receivables are the allowance method and the

direct write-off method.

One of the weaknesses of the direct write-off method is that it

violates the matching principle.

Allowance for Doubtful Accounts is listed on the balance sheet under the caption

current assets.

After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $500,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable?

$475,000

What type of account is Allowance for Doubtful Accounts?

Contra asset

Allowance for Doubtful Accounts has an unadjusted balance of $800 at the end of the year, and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of the following records the proper provision for doubtful accounts?

Increase Uncollectible Accounts Expense, $14,200; increase Allowance for Doubtful Accounts, $14,200

Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and an analysis of accounts in the customers ledger indicates doubtfulaccounts of $15,000. Which of the following records the proper provision for doubtful accounts?

Increase Uncollectible Accounts Expense, $14,500; increase Allowance for Doubtful Accounts, $14,500

After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of $30,000. What is the net realizable value of the accounts receivable?

$400,000

Allowance for Doubtful Accounts has an unadjusted balance of $1,100 at the end of the year, and an analysis of customers' accounts indicates doubtful accounts of $12,900. Which of the following records the proper provision for doubtful accounts?

Increase Uncollectible Accounts Expense, $11,800; increase Allowance for Doubtful Accounts, $11,800

Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $950,000, the amount of the adjustment to record the provision for doubtful accounts is

$9,500.

Allowance for Doubtful Accounts has an unadjusted balance of $400 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $300,000, the amount of the adjustment to record the provision for doubtful accounts is

$3,000.

The presentation of net accounts receivable on the balance sheet will be most accurate
under the

estimate based on analysis of receivables.

When an account is written off under the allowance method,

the write-off is taken against the allowance account.

The term "inventory" indicates

both of these.

The inventory method that considers the inventory to be composed of the units of merchandise acquired earliest is called

last-in, first-out.

Inventory costing methods place primary emphasis on assumptions about

flow of costs.

When merchandise sold is assumed to be in the order in which the expenditures were made, the inventory method is called

first-in, first-out.

Under which method of cost flows is the inventory assumed to be com- posed of the most
recent costs?

First-in, first-out

The two most widely used methods for determining the cost of inventory are

FIFO and LIFO.

The inventory method that assigns the most recent costs to cost of good sold is

LIFO.

Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made?

Last-in, first-out

Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

$640

Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

$605

Use the following data to calculate the cost of ending inventory under the FIFO method.

$825

Use the following data to calculate cost of merchandise sold under FIFO method.

$675

Use the following data to calculate the cost of ending inventory using the LIFO method.

$675

Use the following data to calculate the cost of ending inventory under average cost method.

$750

Calculate the cost of ending inventory using FIFO inventory cost method.

$760

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is

LIFO.

If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is

FIFO.

If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will yield the largest gross profit?

FIFO

If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest gross profit?

LIFO

If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is

$60.

If the cost of an item of inventory is $70, the current replacement cost is $65, and the sales price is $85, the amount included in inventory according to the lower of cost or market is

$65.

Merchandise inventory is reported on the balance sheet in the section entitled

current assets.

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