289 299 290 Questions 21 - 25 relate to CSO 2.2, 2.3 291 Objective 2.2: Describe the basics of inventory valuation methods and how they affect a business 292 Objective 2.3: Prepare journal entries based on the inventory valuation methods 293 294 21. Ending inventory is made up of the oldest purchases when a company uses 295 296 A. last-in, first-out 297 B. retail method 298 C. average cost D. first-in, first-out 300 301 When merchandise sold is assumed to be in the order in which the purchases were made, the company is 302 22. using 303 304 A. last-in, first-out 305 B. average cost 306 C. first-in, first-out 307 D. first-in, last-out 308 309 310 For problems 23. and 24., refer to the following information related to Addison, Inc. 311 Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for 312 the month of September: 313 314 Sep. 1 Inventory 20 units at $20 315 Sold 10 units 316 10 Purchased 30 units at $25 317 17 Sold 20 units 318 30 Purchased 10 units at $30 319 4 23. If Addison uses FIFO, the value of the ending merchandise inventory on the September 30 balance sheet is A. B. 320 321 322 323 324 325 326 330 650 700 750 800 C. D 24. If Addison uses LIFO, the value of the ending merchandise inventory on the September 30 balance sheet is A. 331 332 333 334 335 336 337 650 700 B. C. 750 D. 800 341 342 25. When using a perpetual inventory system, the journal entry to record the cost of merchandise sold is: 343 344 A. Dr. Cost of Merchandise Sold 345 Cr. Merchandise Inventory 346 B. No journal entry is required. 347 c. Dr. Merchandise Inventory 348 Cr. Cost of Merchandise Sold 349 D. Dr. Cost of Merchandise Sold 350 Cr. Sales 351 352 353 Questions 26-30 relate to CSO 2.4, 2.5 354 Objective 2.4: Describe the importance of internal controls in any business and how they affect the business 355 Objective 2.5: Prepare and read a bank reconciliation and prepare associated adjusting journal entries 356 357 26. Which one of the following below is not an element of internal control? 358 359 A. monitoring 360 B. cost-benefit considerations 361 C. information and communication 362 D. risk assessment 363 364 365 27. The objectives of internal control are to 366 A. provide reasonable assurance that assets are safeguarded and used for business purposes, financial reports 367 are accurate, and laws and regulations are complied with 368 B. provide control over "internal use only" reports and employee internal conduct 369 C. prevent fraud, and promote the social interest of the company 370 D. control the internal organization of the accounting department personnel and equipment 371 372 373 28. The following data were gathered to use in reconciling the bank account of Savannah Company: 374 375 Balance per bank 16,750 376 Balance per company records 16,125 377 Bank service charges 80 378 Deposit in transit 2,195 379 NSF check 950 380 Outstanding checks 3,850 381 382 What is the adjusted balance on the bank reconciliation? 383 384 A. 10,705 385 B. 15,720 386 C. 15,095 387 D 14,470 395 Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the 396 29. company's accounts? 397 398 A. Dr. Cash 399 Cr. Other Income 400 B. Dr. Accounts Payable 401 Cr. Cash 402 C. Dr. Cash 403 Cr. Accounts Payable 404 D. Dr. Miscellaneous Administrative Expense 405 Dr. Cash 406 407 Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the 408 30. customer. What entry is required in the company's accounts ? 409 410 A. Dr. Cash 411 Cr. Miscellaneous Income 412 B. Dr. Accounts Receivable 413 Cr. Cash 414 C. Dr. Cash 415 Cr. Notes Receivable 416 Cr. Interest Revenue 417 D. Dr. Notes Receivable 418 Cr. Cash 419 420 421 Questions 31 - 35 relate to CSO 2.6 422 Objective 2.6: Prepare accounts receivable and notes receivable calculations and journal entries 423 After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable? 31. A. 424 425 426 427 428 429 B. 289,000 391,000 340,000 51,000 C. D. 430 Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? 32. 19,500 19,500 65,000 65,000 437 438 439 440 441 442 443 444 445 446 447 448 A. Dr. Bad Debt Expense Cr. Allowance for Doubtful Accounts B. Dr. Bad Debt Expense Cr. Allowance for Doubtful Accounts C. Dr. Bad Debt Expense Cr. Allowance for Doubtful Accounts D. Dr. Bad Debt Expense Cr. Allowance for Doubtful Accounts 22,000 22,000 17,000 17,000 33. The amount of the promissory note plus the interest earned on the due date is called the A. maturity value B. issuance value C. face value D. interest value 34. The journal entry to record a note received from a customer to replace an accounts receivable is 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 A. Dr. Accounts Receivable Cr. Notes Receivable B. Dr. Notes Receivable Cr. Notes Payable C. Dr. Cash Cr. Notes Receivable D. Dr. Notes Receivable Cr. Accounts Receivable Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared? 35. 800 800 40,000 483 484 485 486 487 488 489 490 491 492 493 40,000 A. Dr. Interest Receivable Cr. Interest Revenue B. Dr. Note Receivable Cr. Cash C. Dr. Interest Receivable Cr. Interest Revenue D. Dr. Cash Cr. Interest Revenue 200 200 200 200