Response to the following multiple choice questions:
1. Use the following information to answer the following questions.
The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
| Date |
Product Z |
Units |
Cost |
| May 3 |
Purchase |
5 |
$30 |
| May 10 |
Sale |
3 |
|
| May 17 |
Purchase |
10 |
$34 |
| May 20 |
Sale |
6 |
|
| May 23 |
Sale |
3 |
|
| May 30 |
Purchase |
10 |
$40 |
Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method.
a. $494
b. $520
c. $422
d. $502
2. A debit balance in the Allowance for Doubtful Accounts
a. is the normal balance for that account.
b. indicates that actual bad debt write-offs have been less than what was estimated.
c. cannot occur if the percentage of receivables method of estimating bad debts is used.
d. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
3. Use the following information to answer the following questions.
The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
| Date |
Product Z |
Units |
Cost |
| May 3 |
Purchase |
5 |
$30 |
| May 10 |
Sale |
3 |
|
| May 17 |
Purchase |
10 |
$34 |
| May 20 |
Sale |
6 |
|
| May 23 |
Sale |
3 |
|
| May 30 |
Purchase |
10 |
$40 |
Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the LIFO inventory cost method.
a. $240
b. $196
c. $124
d. $204
4. Which of the following accounts has a normal debit balance?
a. Sales Returns and Allowances
b. Interest Revenue
c. Sales
d. Accounts Payable
5. Merchandise with a sales price of $800 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a
a. Credit to Sales for $800
b. Debit to Accounts Receivable for $784
c. debit to Cash for $800
d. Debit to Sales Discounts for $16
6. A retailer purchases merchandise with a catalog list price of $15,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?
a. $15,000
b. $12,495
c. $12,750
d. $14,700
7. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be
a. $7,200
b. $1,200
c. $3,000
d. $3,600
8. During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.
True
False