ACC 211

Review#2

NAME:

Solution

1. What is the normal balance of the Sales account and on which financial statement is it reported?
a. debit; balance sheet
c. debit; income statement
b. credit; balance sheet
d. credit; income statement
2. If the purchaser is responsible for paying the transportation costs, the terms are said to be
a. FOB destination
c. FOB shipping point
b. FOB delivery
d. FOB upon arrival
3. If merchandise is sold on account to a customer for $15,000, terms FOB shipping point, 1/10,
n/30, and the seller pays $50 in transportation costs, the amount of the discount for early
payment would be?
a. $0
c. $150.00
b. $50.00
d. $200.00
4. Which of the following accounts would be closed to Income Summary by debiting the account
at the end of the fiscal year?
a. Cost of Goods Sold
c. Delivery Expense
b. Sales Returns and Allowances
d. Interest Revenue
5. How is Gross Profit calculated?
a. Cost of Goods Sold-Operating Expenses
b. Net Sales Operating Expenses

c. Net Sales Cost of Goods Sold

d. Net Sales + Cost of Goods Sold

6. Which of the following accounts would not be included on a multi-step income statement?
a. Cost of Merchandise Sold
c. Sales Discounts
b. Merchandise Inventory
d. Sales
7. What type of account and on which financial statement is inventory reported?
a. Asset on the Balance Sheet
b. Liability on the Balance Sheet
c. Asset on the Income Statement
d. Expense on the Income Statement
8. If a company uses the perpetual inventory method, the journal entry to record the cost of
merchandise sold includes?
a. a debit to Cost of Goods Sold; a credit to Cash
b. a debit to Cost of Goods Sold; a credit to Merchandise Inventory
c. a debit to Merchandise Inventory; a credit to Cash
d. a debit to Merchandise Inventory; a credit to Cost of Goods Sold
9. Office salaries, depreciation of office equipment, and office supplies would all be reported under
which header on a multi-step income statement?
a. Administrative Expenses
c. Other Expenses
b. Miscellaneous Expenses
d. Selling Expenses

10. The inventory costing method that is based on the assumption that costs should be charged to
Cost of Merchandise Sold in the order in which they were purchased is:
a. average cost
c. LIFO
b. FIFO
d. specific identification
11. A credit balance in the Cash Over & Short account at the end of the accounting period is
reported as?
a. expense on the income statement
c. an asset on the balance sheet
b. revenue on the income statement
d . a liability on the balance sheet
12. Which one of the following is not an objective of a system of internal controls?
a. Safeguard company assets
b. Regulate the amount of authority a supervisor exercises over a subordinate.
c. Enhance the accuracy and reliability of accounting records
d. Compliance with laws and regulations.
13. Which of the following in a cash drawer at November 30 is not cash?
a. Money orders
b. Coins and currency
c. A customer check dated December 1
d. A customer check dated November 27
14. In preparing a bank reconciliation, the amount of deposits in transit would be:
a. a deduction from the balance per depositors records
b. an addition to the balance per depositors records
c. a deduction from the balance per bank statement
d. an addition to the balance per bank statement
15. Accompanying the bank statement was a debit memorandum for bank service charges. On the
bank reconciliation, the items is
a. a deduction from the balance per depositors records
b. an addition to the balance per bank statement
c. a deduction from the balance per bank statement
d. an addition to the balance per depositors records

c.
d.

16. Journal entries based on the bank reconciliation are required for
a. additions to the cash balance according to the depositors records
b. deductions from the cash balance according to the depositors records
both A and B
neither A nor B
17. Which of the following is correct entry to replenish a petty cash fund?
a. Debit Petty Cash; credit Cash
b. Debit various expense accounts; credit Petty Cash
c. Debit various expense accounts; credit Cash
d. Debit Cash; credit Petty Cash

18. If a company using the LIFO inventory costing method sells 20 units, compute the value of the
ending inventory and the cost of the merchandise sold.
Goods Available for Sale:
6/1 Beginning Inventory: 10 units @ $15 = $150
6/15 Purchase
15 units @ $20 = $300
6/27 Purchase
12 units @ $25 = $300
37
$750
-20 sold
17 left
Ending Inventory:
6/1 - 10 units @ $15 = $150
6/15 - 7 units @ $20 = $140
Total
$290

Cost of Merchandise Sold

Goods Available for Sale $ 750
Less: ending inventory $(290)
COMS
$ 460
----------------------------------Proof of inventory sold:
6/27 12 units @ $25 = $300
6/15 - 8 units @ $20 = $160
Cost of Merch. Sold $460

19. If a company using the FIFO inventory costing method sells 20 units, compute the value of the
ending inventory and the cost of the merchandise sold.
Goods Available for Sale:
6/1 Beginning Inventory: 10 units @ $15 = $150
6/15 Purchase
15 units @ $20 = $300
6/27 Purchase
12 units @ $25 = $300
37
$750
-20 sold
17 left
Ending Inventory:
6/27 - 12 units @ $25 = $300
6/15 - 5 units @ $20 = $100
Total
$400

Cost of Merchandise Sold:

Goods Available for Sale $ 750
Less: ending inventory $(400)
COMS $ 350
----------------------------------Proof of inventory sold:
6/1 - 10 units @ $15 = $150
6/15 - 10 units @ $20 = $200
Cost of Merch. Sold $350

20. If a company using the average inventory costing method sells 20 units, compute the value of
the ending inventory and the cost of the merchandise sold (round to two decimal places).
Goods Available for Sale:
6/1 Beginning Inventory: 10 units @ $15 = $150
6/15 Purchase
15 units @ $20 = $300
6/27 Purchase
12 units @ $25 = $300
37
$750
-20 sold
17 left

Cost of Merchandise Sold:

Goods Available for Sale $ 750.00
Less: ending inventory $(344.59)
COMS $
405.41*

Average cost= $750 / 37 units = $20.27 per unit

----------------------------------Proof of inventory sold:

Ending Inventory:

20 X $20.27 = $405.40*

17 units X $20.27 per unit = $344.59

*off $.01 due to rounding

21. The following information pertains to Family Video Company.

Cash balance per bank, July 31, $9,442.

July bank service charge, $36.

Cash balance per books, July 31, $9,469.

Deposits in transit, July 31, $1,950.

Bank collected $1,170 note for Family Video Company in July, plus interest $47, less fee
$26.The collection has not been recorded by Family Video Company.

Outstanding checks, July 31, $768.

Family Video Company

Bank Reconciliation
July 31, 20XX

Cash balance per bank

statement
Add:
Deposit 7/31

$ 9,44
2

Cash balance per

depositor's records
Add:

1,95
0

Note
collected
Interest
earned

$ 9,46
9

1,17
0
47

1,95
0
Dedu
ct:

Outstanding
Checks

768

1,21
7
Dedu
ct:

Loan fee
Service
charge

26
36

Adjusted Balance

Journal entries:
July
31

July
31

Cash
Notes Receivable
Interest Revenue
To record note collected by bank.

Loan Fee Expense

Bank Fee Expense
Cash
To record fees charged by bank.

768
10,6
24

62
10,6
24

Adjusted Balance

Dr.

Cr.
1,217
1,170
47

26
36
62