1. Rainer Inc. acquired equipment from the manufacturer on 10/1/15 and gave a noninterest-bearing note in exchange. Rainer is obligated to pay $918,000 on 4/1/16 to satisfy the obligation in full. If Rainer accrued interest of $9,000 on the note in its 2015 year-end financial statements, what is its imputed annual interest rate?

A. 5%

B. 4%

C. 2%

D. 6%

2. The Do-It-Yourself Hardware began 2015 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. The Do-It-Yourself estimates that 6% of all sales will be returned. During 2015, customers returned merchandise for credit of $28,000 to their accounts. What's the balance in the allowance for sales returns account at the end of 2015?

A. $11,000

B. $43,000

C. $39,000

D. $21,000

3. If a company uses LIFO, a LIFO liquidation causes a company's income taxes to increase

A. nothing. LIFO liquidations have no effect on a company's income taxes.

B. when inventory purchase costs are declining.

C. when inventory purchase costs are rising.

D. whether inventory purchase costs are declining or rising.

4. Data below for the year ended December 31, 2015, relates to Bamboo Inc. Bamboo started business January 1, 2015, and uses the LIFO retail method to estimate ending inventory.

Cost Retail

Beginning inventory $66,000 $104,000

Net purchases 280,000 420,000

Net markups 20,000

Net markdowns 40,000

Net sales 375,000

Estimated ending inventory at cost is

A. $90,720.

B. $83,500.

C. $67,650.

D. $91,600.

5. The Do-It-Yourself Hardware began 2015 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. The Do-It-Yourself estimates that 6% of all sales will be returned. During 2015, customers returned merchandise for credit of $28,000 to their accounts. The Do-It-Yourself's 2015 income statement would report net sales of:

A. $646,000 C. $607,000

B. $611,000 D. $622,000

6. The following information pertains to Imogen Co.'s accounts receivable at December 31, 2015:

Days Estimated

Outstanding Amount Uncollectible

0-30 $420,000 2%

31-60 140,000 5%

61-120 100,000 10%

Over 120 120,000 20%

During 2015, Imogen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Imogen's December 31, 2014, allowance for uncollectible accounts was $40,000. Under the aging method, what amount of allowance for uncollectible accounts should Imogen report at December 31, 2015?

A. $49,400

B. $55,400

C. $28,000

D. $31,400

7. Michael Jackson's Strings uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:

Cost Retail

Beginning inventory $46,000 $63,000

Net purchases 154,000 215,000

Net markups 22,000

Net markdowns 35,000

Net sales 220,000

To the nearest thousand, estimated ending inventory using the conventional retail method is

A. $30,000.

B. $32,000.

C. $34,000.

D. $37,000.

8. Mario Brothers Company adopted the dollar-value LIFO inventory method on January 1, 2015. In applying the LIFO method, Mario Brothers uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO:

Ending Inventory

At Current At Base

Year Cost Year Cost Cost Index

1/1/2015 $300,000 $300,000 1.00

12/31/2016 345,600 320,000 1.08

12/31/2017 420,000 350,000 1.20

Under the dollar-value LIFO method, the inventory at December 31, 2016, should be:

A. $351,600. D. $357,600.

B. $600,120. C. $350,000.

9. Thatch Fencing Company sold $46,000 of fencing to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Thatch uses the gross method of accounting for cash discounts.

What entry would Thatch make on April 12?

A.

Accounts receivable 45,540

Sales 45,540

B.

Accounts receivable 46,000

Sales 46,000

C.

Accounts receivable 46,000

Sales 45,540

Sales discounts 460

D.

Accounts receivable 45,540

Sales discounts 460

Sales 46,0004

10. Lingua Company reported the following pretax data for its first year of operations.

Net sales 7,340

Cost of goods available for sale 5,790

Operating expenses 1,728

Effective tax rate 40%

Ending inventories:

If LIFO is elected 618

If FIFO is elected 798

What's Lingua's net income if it elects LIFO?

A. $264

B. $440

C. $620

D. $372

11. When using the gross profit method to estimate ending inventory, it's not necessary to know

A. net purchases.

B. beginning inventory.

C. net sales.

D. cost of goods sold.

12. Tannis Design began 2015 with accounts receivable of $115,000. All sales are made on credit. Sales and cash collections from customers for the year were $780,000 and $700,000, respectively. Cost of goods sold for the year was $450,000. What was Tannis's receivables turnover ratio (rounded) for 2015?

A. 4.00

B. 2.90

C. 6.78

D. 5.03

13. San Juan Company had the following account balances at December 31, 2015, before recording bad debt expense for the year:

Accounts receivable $1,400,000

Allowance for uncollectible accounts (credit balance) 22,000

Credit sales for 2015 1,950,000

San Juan is considering the following approaches for estimating bad debts for 2015:

Based on 3% of credit sales

Based on 6% of year-end accounts receivable

What amount should San Juan charge to bad debt expense at the end of 2015 under each method?

A. Percentage of credit sales: $58,500; percentage of accounts receivable: $62,000

B. Percentage of credit sales: $117,000; percentage of accounts receivable: $95,000

C. Percentage of credit sales: $58,500; percentage of accounts receivable: $84,000

D. Percentage of credit sales: $36,500; percentage of accounts receivable: $62,000

14. Scotland Corporation obtained a $40,000 note receivable from a customer on June 30, 2015. The note, along with interest at 6%, is due on June 30, 2016. On September 30, 2015, Scotland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Scotland receive from Cloverdale Bank?

A. $40,600

B. $36,000

C. $39,220

D. $36,820

15. On January 1, 2015, Ferret, Inc., adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The 2015 ending inventory, valued at year-end costs, was $126,000. The relative cost index for this inventory in 2015 was 1.05. What inventory balance should Ferret report on its 12/31/15 balance sheet?

A. $121,000

B. $100,000

C. $126,000

D. $120,000

16. Donut Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Donut's cost of goods sold for this year was

A. overstated by $5,000.

B. understated by $48,000.

C. overstated by $31,000.

D. understated by $31,000.

17. Bobby Corporation has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows:

Selling price $520,000 Normal profit margin 60,000

Disposal costs 30,000 Replacement cost 440,000

What should be the carrying value of Bobby's inventory if the company prepares its financial statements according to International Financial Reporting Standards?

A. $440,000

B. $500,000

C. $490,000

D. $430,000

18. The conventional retail inventory method is based on

A. LIFO, lower of cost, or net realizable value.

B. LIFO cost.

C. average cost.

D. average, lower of cost or net realizable value

19. Pi Company reported the following pretax data for its first year of operations.

Net sales 2,800

Cost of goods available for sale 2,500

Operating expenses 880

Effective tax rate 40%

Ending inventories:

If LIFO is elected 820

If FIFO is elected 1,060

What's Pi's net income if it elects LIFO?

A. $144

B. $480

C. $240

D. $288

20. Pi Company reported the following pretax data for its first year of operations.

Net sales 2,800

Cost of goods available for sale 2,500

Operating expenses 880

Effective tax rate 40%

Ending inventories:

If LIFO is elected 820

If FIFO is elected 1,060

What's Pi's gross profit ratio if it elects LIFO?

A. 5%

B. 80%

C. 40%

D. 49%