Summer2018 ACCT301-21 Exam2 Name Points.--_A05 Multiple Choice (3 points cach) I. In a period of rising prices, the inventory method which tends to give the highest reported net income is A) last-in, first-out. B) base stock C) first-in, first-out. D) weighted-avernge. 2. The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its A) invoice price plus any purchase discount lost. invoice price less the purchase discount allowable whether taken or not. invoice price less the purchase discount taken. B) C) D) invoice price. 3. Why are inventories included in the computation of net income? A) To determine sales revenue. To determine cost of goods sold. B) C) Inventories are not included in the computation of net income. D) To determine merchandise returns 4. Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of S12.000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year? A) $1,920,000. B) $ 532,000. C) $ 520,000. D) $ 508,000. 5. The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the net realizable value less normal profit margin. net realizable value. A) B) C) selling price less costs of completion and disposal. D) replacement cost. 6. Maxwell Corporation factored, with recourse, $100,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Maxwell estimates the recourse obligation at $2,400. What amount should Maxwell report as a loss on sale of receivables? A) S-0 B) $5,400. C) $10,400. D) $3,000. Version 2 Page