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Exam 6: Receivables and Inventories

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Question 31

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

A) long-term liabilities.
B) fixed assets.
C) current liabilities.
D) current assets.

E) B) and C)
F) A) and C)

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Question 32

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The use of the lower-of-cost-or-market method of inventory valuation increases the gross profit for the period in which the inventory replacement price declined.

A) True
B) False

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Question 33

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All receivables that are expected to be realized in cash within a year are presented in the current assets section of the balance sheet.

The balance of the allowance for doubtful accounts is deducted from accounts receivable on the balance sheet.

When companies sell their receivables to other companies, the transaction is called factoring.

Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases: (a)Balance of $\$ 500$ in the allowance account just prior to adjustment. Andysis of accountsreceivable indicates doubtful accounts of $\$ 9,500$ . (b)Balance of $\$ 950$ in the allowance account just prior to adjustment. Uncollectibles are estimated at $3.5 \%$ of sales, which totaled $\$ 1,000,000$ for the year.

The inventory data for an item for November are: $\begin{array}{lll}25 \text { units at } \$ 20 \text { each } & \text { Inventory } & \text { Nov. } 1 \\30 \text { units at } \$ 21 \text { each } & \text { Purchase } & 10 \\10 \text { units at } \$ 22 \text { each } & \text { Purchase } & 30 \\35 \text { units } & \text { Sale } &\end{array}$ Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

Under the direct write-off method, an attempt is made to match Bad Debt Expense to sales revenues in the same accounting period.

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 (Assume 360 days in a year) :

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:

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?

After the accounts are adjusted 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 receivables?

Receivables not expected to be collected within one year are reported in the fixed assets section of the balance sheet.

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

In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct cost of disposal.

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:

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

Inventory costing methods place primary emphasis on assumptions about:

"Market," as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner.

Use the following data to calculate cost of merchandise sold under FIFO method. $\begin{array}{lll}15 \text { units at } \$ 20 \text { each } & \text { Beginning Inventory } & \text { September 1 } \\20 \text { units at } \$ 25 \text { each } & \text { Purchase } & \text { September 10 } \\25 \text { units at } \$ 28 \text { each } & \text { Purchase } & \text { September } 20 \\30 \text { units } & \text { Ending Inventory } & \text { September } 30\end{array}$