Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

Cyclone Inc.reported the following figures from their financial statements for the years 2009 through 2011: Net revenues \ 717,422 \ 1,110,178 \ 591,786 Gross profit 560,421 960,434 498,605 Net income (net loss) (92,788) 70,776 47,811 Cash flow from operations 106,850 509,707 204,496 Accounts receivable 68,648 90,561 56,454 Calculate the days' sales in receivables for 2011 and 2010:

Where,if at all,do items A through G (listed below)belong in the following bank reconciliation? 1. Balance per bank statement, June 30 \XXX Plus (1) ---- Minus (2) ---- Correct cash balance, June 30 \XXX 2. Balance per company books, June 30 \XXX Plus (3) ---- Minus (4) ---- Correct cash balance, June 30 \XXX Items: A.Checks written during June that had not cleared the bank by June 30. B.Bank service charges for June which were not known until the June 30th bank statement arrived. C.Deposit made on June 30 that did not reach the bank until July 1. D.Upon reviewing the company's cash receipts book after June 30,it was discovered the accounting clerk had neglected to post one receipt to the cash account. E.The bank statement reported a "NSF check" during June. F.The bank incorrectly deducted the check of another company to the bank account during June. G.The company was paid interest on its account by the bank.

Which of the following accounts is not a contra-revenue?

Anthony Inc.reported the following amounts on their 2011 and 2010 income statements: Net Sales \ 20,438 \ 20,367 Cost of sales 7,943 8,198 Requirements: A.Compute the gross profit percentage for both years. B.Provide at least two potential causes for the change in Anthony's gross profit percentage.

Which of the following transactions will result in a decrease in the receivable turnover ratio?

The following data were taken from the records of Lilo Corporation for the year ended December 31,2010 Sales of merchandise for cash \ 150,000 Sales of merchandise on credit 800,000 Sales returns and allowances 10,000 Selling expenses 80,000 Cost of goods sold 610,000 Administrative expenses 90,000 The following items have not been included in above amounts: Estimated bad debt expense is 1% of credit sales. The income tax rate is 35%. 10,000 of shares of common stock are outstanding. Requirements: A.Based on the above data,prepare a multiple-step income statement (including gross profit,pretax income,and earnings per share). B. 1. What was the gross profit ratio? $\quad$ 2. Explain what gross profit and the gross profit ratio mean.

Hickory Corporation recorded sales revenue during the year of $350,000 of which $100,000 was on credit.The company has experienced an average loss rate of 2% of credit sales.Give the adjusting journal entry at the end of the year to record bad debt expense.

The journal entry to write-off an uncollectible account does not change the net realizable value (book value)of accounts receivable.

Which of the following journal entries correctly records the write-off of an uncollectible account receivable?

When credit terms for a sale are 2/15,n/40,the customer saves by paying early.What percent (rounded)would this savings amount to on an annual basis?

Which of the following statements is correct?

The Roscoe Company's March 1,2010 bank statement balance was $70,000.As of March 1,outstanding checks total $22,000 and deposits in transit total $15,000.How much was Roscoe's March 1,2010 cash balance on their books?

Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection?

Flyer Company has provided the following information: Cash sales,$150,000 Credit sales,$450,000 Selling and administrative expenses,$110,000 Sales returns and allowances,$30,000 Gross profit,$490,000 Accounts receivable,$110,000 Sales discounts,$14,000 Allowance for doubtful accounts credit balance,$1,200 How much is bad debt expense assuming that 5% of accounts receivable is estimated to be uncollectible?

When a particular account receivable is determined to be uncollectible,the journal entry to write-off the account reduces net income.

An objective of preparing the bank reconciliation is to reconcile the bank balance at the end of the period with the company's book balance at the end of the period.

Illinois Company prepared the following bank reconciliation at May 31: Balance per bank .............. \1 ,250 Additions: Deposits in transit. .............. 240 Balance per books .............. \1 ,365 Additions: Interest Received from bank. .............. 100 Check incorrectly charged to our bank balance.. .............. 75 Deductions: Outstanding checks. .............. (235) Correct cash balance. .............. \ 1.330 Deductions: NSF check (Nelson) .............. (100) Bank service charges (35) Correct cash balance. .............. \1 ,330 Prepare the necessary journal entries for Illinois Company required by the May 31 bank reconciliation.

Chicago Company has hired you to reconcile its bank statement and cash account.For June,the Cash account showed the following: Cash account Date Explanation Debits Credits Balance June 1 Balance 5,600 June 1-30 Deposits \ 32,000 37,600 June 1-30 Checks \ 29,700 7,900 June 30 Balance 7,900 The June bank statement,just received,showed the following: June 1, balance \ 5,600 June deposits 29,000 June-Interest paid by bank 120 June checks (27,500) Bank service charge (50) NSF Charged (Brad Jolie, check returned for nonsufficient funds) June 30 , balance There were neither outstanding checks nor deposits in transit at May 31. A.Prepare the bank reconciliation. B.Prepare the adjusting journal entries needed due to the bank reconciliation. C.What is the June 30 ending cash balance?

Which of the following is correct when bad debt expense is recorded at year-end?

Asia Company sold $10,000 of goods to Euro Company on credit on May 1.At the time of the sale,Asia recorded a debit to Accounts Receivable and a credit to Sales Revenue for $10,000.Terms were 2/10,n/30. Required: Present the entries Asia Company would record for each of the following independent situations: A.Euro paid the balance due, less the discount, on May 10. B.Euro returned half of the goods for credit on May 4.Euro paid the balance due, less the discount, on May 10. C.Euro paid their bill on May 30 (there were no returns).