2. Summer, Inc. has been in business for 20 years. During that time the company has consistently used the LIFO inventory costing method. Because of inflation, prices for merchandise have increased consistently over the 20 years. The company has maintained the same inventory quantities over the 20-year period. Which one of the following statements is true?

a. Summer, Inc.'s total net income for the past 20 years is greater than it would have reported using another inventory method.

b. Summer, Inc. will have paid more income taxes over the past 20 years than it would have if it had used the FIFO method.

c. Summer will have to continue using the LIFO method indefinitely because of generally accepted accounting principles and federal income tax rules.

d. The ending inventory figure reported on the balance sheet may be significantly lower than its current value.

3. Which method of inventory costing is not acceptable for financial accounting purposes?

a. Specific Identification

b. FIFO

c. LIFO

d. Replacement Cost 2

4. For which type of inventory would a company most likely use the specific identification method?

a. Barbie dolls

b. Cartons of milk

c. Custom designed diamond rings

d. Gasoline in storage tanks at a gasoline station

5. The data presented below is for Craft, Inc. for 2015. Credit sales during the year $2,100,000 Accounts receivable - December 31, 2015 295,000 Allowance for doubtful accounts - December 31, 2015 28,000 Bad debt expense for the year 17,000 What amount will Craft show on its year-end balance sheet for the net realizable value of its accounts receivable

a. $295,000 b. $267,000 c. $250,000 d. $ 28,000

6. The entry required to recognize the bad debts expense will act to:

a. Increase total assets and retained earnings

b. Decrease total assets and retained earnings

c. Decrease total assets and increase net income

d. Increase total assets and decrease net income

7. What is the distinguishing characteristic between accounts receivable and notes receivable?

a. Accounts receivable are usually current assets while notes receivable are usually longterm assets.

b. Accounts receivable require payment of interest if not paid within the usual credit terms.

c. Notes receivable result from credit sale transactions for merchandising companies, while accounts receivable result from credit sale transactions for service companies.

d. Notes receivable result from a written promise to pay within a specified amount of time.

8. Lasiter Corp. reported net credit sales of $2,000,000 and cost of goods sold of $1,400,000 for 2014. On January 1, 2014, accounts receivable was $250,000. Amounts owed by customers increased by $20,000 during 2014. Rounding to two decimal places, what is Lasiters accounts receivable turnover rate for 2014?

a. 8.33

b. 8.00

c. 7.69

d. 7.41 3

9. How will the payee of the promissory note record the note on its books?

a. The promissory note will be recorded as an asset

b. The promissory note will be recorded as a liability

c. The promissory note will be recorded as revenue

d. The promissory note will be recorded as an expense

10. On July 1, 2014, Falcon Company received a $20,000 promissory note from Jordyn Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2015. If Falcons fiscal year ends September 30, 2014, an adjusting entry is needed to:

a. Increase interest revenue by $1,000

b. Increase notes receivable by $250

c. Increase interest receivable by $250

d. Increase notes receivable by $1,000