Exam 5: Accounting for Receivables and Inventory Cost Flow

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows. Glasgow sold 220 units after purchase 3 for $17.00 each. Glasgow's ending inventory under LIFO would be:

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2?

The collection of an account receivable is an asset source transaction.

Generally accepted accounting principles would allow a company to use FIFO for part of its inventory and the weighted-average cost flow assumption for the rest of its inventory.

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows. Glasgow sold 220 units after purchase 3 for $17.00 each. Glasgow's ending inventory under weighted average would be approximately:

Singleton Company's perpetual inventory records included the following information: If Singleton uses the LIFO cost flow method, its ending inventory would be $1,260.

Which of the following is not an advantage of accepting credit cards from retail customers?

Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $160,000 of revenue on account during Year 1. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, Year 1 balance sheet would be:

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. Kincaid's entry required to recognize the uncollectible accounts expense for Year 2 will:

A company's gross margin reported on the income statement is not affected by the inventory cost flow method it uses.

Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method?

The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to:

Making a loan to another party is considered an investing activity on the statement of cash flows.

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. Kincaid's entry to recognize the write-off of the uncollectible accounts will:

When prices are rising, which method of inventory, if any, will result in the lowest relative net cash outflow (including the effects of taxes, if any)?

Indicate whether each of the following statements is true or false. _____ a) Most companies expect to receive the full face value of their receivables. _____ b) The estimated amount of uncollectible accounts is called the net realizable value. _____ c) The direct write-off method of accounting for uncollectible accounts does not require the computation of the net realizable value of accounts receivable. _____ d) The practice of reporting the net realizable value of receivables is the result of using the allowance method of accounting for uncollectible accounts. _____ e) The materiality principle requires the computation of net realizable value for a company's liabilities.

Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 400 units of inventory that cost $8.00 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $9.00 each. If Stubbs uses a weighted average cost flow method and sells 700 units of inventory for $16.00 each, the amount of gross margin reported on the income statement will be:

The percent of revenue method for estimating uncollectible accounts expense is considered superior to the percent of receivables method because it is more conservative.

The inventory records for Radford Co. reflected the following Determine the weighted average cost per unit for May.