Cherry Falls Inc. (CFI) sells Red Sox baseball hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. On October 8, CFI decides that Horatio Hanno's account is worthless, and writes it off. Hanno has owed CFI 5I, 500 for several years. What is the effect on net income for this transaction? Note: if the event would NOT cause recognition of revenue or expense then select A: No effect on net income. A. No effect on net income B. Decrease net income C. Increase net income Varoom sells batteries with a 2-year shelf life. The batteries all look alike and cannot be distinguished from one another. Varoom expects the cost of the batteries to increase gradually over time. Which method cannot be used by Varoom for financial reporting purposes, based on the description above? A. FIFO B.LIFO C .Specific Identification D. Weighted Average or Average Cost Varoom sells batteries with a 2-year shelf life. The batteries all look alike and cannot be distinguished from one another. Varoom expects the cost of the batteries to increase gradually over time. Which inventory method would result in maximizing Varoom's reported net income in the financial statements? A. FIFO B.LIFO C. Specific Identification D. Weighted Average or Average Cost Varoom sells batteries with a 2-year shelf life. The batteries all look alike and cannot be distinguished from one another. Varoom expects the cost of the batteries to increase gradually over time. Which method results in the lowest balance sheet valuation of inventory? A. FIFO B.LIFO C. Specific Identification D. Weighted Average or Average Cost Scanlon Company sells 1, 000 widgets to Avon Inc. for $14 each, FOB shipping point. The widgets arc shipped on December 26, Year4 and arrive at Avon on January 3, Year5. The widgets should be included in Avon's inventory valuation at 12/31/Year4. True or False? True False Scanlon Company sells 1, 000 widgets to Avon Inc. for $14 cach, FOB shipping point. The widgets arc shipped on December 26, Ycar4 and arrive at Avon on January 3, Year5. Scanlon Company is responsible for the freight charges. True or False? True False Scanlon Company sells 1, 000 widgets to Avon Inc. for $14 each, FOB shipping point. The widgets arc shipped on December 26, Ycar4 and arrive at Avon on January 3, Year5. When should Scanlon record the sales revenue? A. When Scanlon replaces the inventory B. ln Year5 C. ln Year4 D. When Avon pays the bill QUESTION 30 Darkness Inc. started Year6 with $100, 000 in Accounts receivable and a S12, 000 normal credit balance in the allowance for uncollectible accounts. They provided $350, 000 of services on account. Darkness collected $300, 000 on account from their credit customers. During Year6, Darkness wrote-off uncollectible accounts of $10, 000. At the end of Year6, Darkness estimates that 10% of accounts receivable will be uncollectible. What will be the adjusted balance in the allowance for uncollectible accounts at 12/31/Year6? A.13000 B. 10000 C. 14000 D. 15000 E. 12000
