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Exam 5: Accounting for Receivables and Inventory Cost Flow

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Question 81

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If Schulze Company is using FIFO, how would the accountant compute cost of goods sold when recording a sale under the perpetual inventory system?

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Under FIFO, the cost of the oldest units...

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Question 82

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On June 1, 2014, Siebens Enterprises loaned $20,000 to Tyler Company for one year at 8 percent interest. Under the terms of the promissory note, Tyler will repay the principal and pay one year's interest on May 31, 2015. What amounts will Siebens report on its 2014 statement of cash flows?

A) $0
B) A cash outflow of $20,000 shown as an operating activity
C) A cash outflow of $20,000 and an inflow of $800 for interest
D) A cash outflow of $20,000 shown as an investing activity

E) All of the above
F) A) and D)

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Question 83

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Most companies report receivables on their balance sheets at the net realizable value.

When a company accepts a credit card payment for a sale, the amount of sales revenue to be recorded is reduced by the amount of the credit card company's fee.

On December 31, 2014, the Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method of accounting for uncollectible accounts. On February 15, 2015, Landon wrote off the account of one of its customers, in the amount of $2,500. On April 7, 2015, the customer paid the account in full. Which of the following answers correctly states the effect of the reinstatement of the receivable on April 7, 2015?

On August 1, 2014, Miles Company accepted from another company a one-year note receivable with a face amount of $4,000 and an interest rate of 8%. What would be the amount of cash flow from operating activities (related to the note receivable) on the 2014 statement of cash flows?

Indicate whether each of the following statements is true or false. 1. The FIFO cost flow method assumes that the cost of items purchased last should be assigned to ending inventory 2. The LIFO inventory flow method assumes that the cost of items purchased last should be assigned to the ending inventory 3. Under the weighted average cost flow method, the average unit cost of the inventory is determined by dividing the total inventory cost by the number of units 4. The LIFO cost flow method assumes that the cost of items purchased first is assigned to cost of goods sold first 5. The cost flow assumption used in accounting for inventory must be consistent with the physical flow of the inventory

To estimate the amount of its uncollectible accounts receivable, a company might

Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expenses?

In the first year of operations, 2014, Ringsted Repair Service recognized $265,000 of service revenue on account. The ending accounts receivable balance was $75,000. The company estimates that 3% of sales on account will not be collected. Assume there were no other transactions affecting accounts receivable. Required: a) What amount of cash was collected in 2014? b) What amount of uncollectible accounts expense was recognized in 2014?