ACCT 591 Practice Exam 2
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ACCT 591
Practice Exam 2
1. Cash realizable value is determined by subtracting Allowance for Doubtful Accounts from Net Sales.
True or False
2. Which of the following should not be included in the physical inventory of a company?
a. Goods held on consignment from another company.
b. Goods in transit from another company shipped FOB shipping point.
c. Goods shipped on consignment to another company.
d. All of these answer choices should be included.
3. The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?
a. LIFO
b. Average Cost
c. FIFO
d. Physical inventory method
4. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the balance after adjustment?
a. $55,000
b. $11,000
c. $66,000
d. $44,000
5. A gain or loss on disposal of a plant asset is determined by comparing the
a. replacement cost of the asset with the asset's original cost.
b. book value of the asset with the asset's original cost.
c. original cost of the asset with the proceeds received from its sale.
d. book value of the asset with the proceeds received from its sale.
6. American Importers reports net income of $60,000 and cost of goods sold of $540,000. If the company’s gross profit rate was 40%, net sales were
a. $900,000.
b. $1,350,000.
c. $1,410,000.
d. $990,000.
7. Faster Company uses the periodic inventory method and had the following inventory information available:
Units Unit Cost Total Cost
1/1 Beginning Inventory 15 $8.00 $ 120
1/20 Purchase 60 $8.80 528
7/25 Purchase 30 $8.40 252
10/20 Purchase 45 $9.60 432
150 $1,332
A physical count of inventory on December 31 revealed that there were 55 units on hand.
Instructions
Answer the following independent questions and show computations supporting your answers.
1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $ .
2. Assume that the company uses the Average Cost method. The value of the ending inventory on December 31 is $ .
3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $ .
4. Assume that the company uses the FIFO method. The value of the cost of goods sold at December 31 is $ .
8. Fleming Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31, 2014, and December 31, 2015, appear below:
12/31/14 12/31/15
Net Credit Sales $400,000 $500,000
Accounts Receivable 60,000 80,000
Allowance for Doubtful Accounts 5,200 ?
The following events occurred in 2015.
Aug. 10 Determined that the account of Sue King for $800 is uncollectible.
Oct. 10 Received a check for $500 as payment on account from Sue King, whose
account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.
Nov. 15 Received a check for $300 from Sue King as payment on her account.
Instructions
(a) Prepare the adjusting journal entry to record bad debt expense for the year ended December 31, 2015.
(b) What is the balance of Allowance for Doubtful Accounts at December 31, 2015?
9. In recent years, Darnell Company purchased three machines. Because of heavy turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and each selected a different method. Information concerning the machines is summarized below.
Machine
1
2
3
Acquired
1/1/14
1/1/15
11/1/17
Cost
$105,000
180,000
125,000
Salvage
Value
$ 5,000
10,000
15,000
Useful Life in Years
10
8
6
Depreciation
Method
Straight-line
Declining-balance
Units-of-activity
For the declining-balance method, the company uses the double-declining rate. For the units-of- activity method, total machine hours are expected to be 25,000. Actual hours of use in the first 3 years were 2017, 2,000; 2018, 4,500; and 2019, 5,500.
Instructions
(a)Compute the amount of accumulated depreciation on each machine at December 31, 2017.
(b) If Machine 2 had been purchased on May 1 instead of January 1, what would be the depreciation expense for this machine in (1) 2016 and (2) 2017?
2023-10-17