Quizzer: Cash to Inventory Valuation

1. A check drawn by a depositor for $180 in payment of a liability was recorded in the
journal as $810. This item would be included on the bank reconciliation as a(n)
a. addition to the balance per the depositor's records
b. addition to the balance per the bank statement
c. deduction from the balance per the bank statement
d. deduction from the balance per the depositor's records
ANS: A
DIF: Moderate
OBJ: 07-05
2. Accompanying the bank statement was a debit memorandum for bank service charges.
What entry is required in the depositor's accounts?
a. debit Expense; credit Cash
b. debit Cash; credit Other Income
c. debit Cash; credit Accounts Payable
d. debit Accounts Payable; credit Cash
ANS: A
DIF: Moderate
OBJ: 07-05
3. A check drawn by a depositor in payment of a voucher for $725 was recorded in the
journal as $257. What entry is required in the depositor's accounts?
a. debit Accounts Payable; credit Cash
b. debit Cash; credit Accounts Receivable
c. debit Cash; credit Accounts Payable
d. debit Accounts Receivable; credit Cash
ANS: A
DIF: Moderate
OBJ: 07-05
4.
a.
b.
c.
d.
ANS:

What entry is required in the depositor's accounts to record outstanding checks?

debit Accounts Receivable; credit Cash
debit Cash; credit Accounts Receivable
debit Cash; credit Accounts Payable
none
D
DIF: Easy OBJ: 07-05

5. Santos Company gathered the following reconciling information in preparing its August
bank reconciliation:
Cash balance per books, 8/31
Deposits in transit
Notes receivable and interest collected by bank
Bank charge for check printing
Outstanding checks
NSF check
The adjusted cash balance per books on August 31 is

$3,500
150
850
20
2,000
170

a.
b.
c.
d.
ANS:

$4,160.
$4,010.
$2,310.
$2,460.
A
DIF:

Moderate

OBJ: 07-05

6. In the normal operation of business you receive a check from a customer and deposit it
into your checking account. With your bank statement you are advised that this check for
$450 is NSF. The bank also informs you that due to the amount of activity on your
business account the monthly service charge is $40.
During a bank reconciliation:
a. subtract both values from balance according to bank.
b. add both values from balance according to books.
c. add both values from balance according to bank.
d. subtract both values from balance according to books.
ANS: D
DIF: Moderate
OBJ: 07-07
7. Jonas Company gathered the following reconciling information in preparing its April
bank reconciliation:
Cash balance per books, 4/30
Deposits in transit
Notes receivable and interest collected by bank
Bank charge for check printing
Outstanding checks
NSF check
The adjusted cash balance per books on April 30 is

$2,200
300
740
25
1,500
140

a.
b.
c.
d.
ANS:

$3,075.
$2,940.
$2,775.

8.
a.
b.
c.
d.
ANS:

Entries are made to the Petty Cash account when

making payments out of the fund.
recording shortages in the fund.
replenishing the petty cash fund.
establishing the fund.
D
DIF: Easy OBJ: 07-05

$3,055.
DIF: Moderate

OBJ: 07-05

9. A check for $456 was erroneously charged by the bank as $654. In order for the bank
reconciliation to balance, you must add $198 to the bank statement balance.
ANS: T
DIF: Moderate
OBJ: 07-05
10. Receipts from cash sales of $9,500 were recorded incorrectly in the cash receipts journal
as $5,900. What entry is required in the depositor's accounts?
a. debit Sales; credit Cash
b. debit Cash; credit Accounts Receivable
c. debit Cash; credit Sales
d. debit Accounts Receivable; credit Cash
ANS: C
DIF: Moderate
OBJ: 07-05
11. At the end of a period, before the accounts are adjusted, Allowance for Doubtful
Accounts has a debit balance of $2,000. If the estimate of uncollectible accounts
determined by aging the receivables is $30,000, the current provision to be made for
uncollectible accounts expense is $30,000.
ANS: F
DIF: Moderate
OBJ: 08-04
12. Allowance for Doubtful Accounts has a credit balance of $1,100 at the end of the year
(before adjustment), and an analysis of customers' accounts indicates doubtful accounts
of $12,900. Which of the following entries records the proper provision for doubtful
accounts?
a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts,
$14,000
b. debit Allowance for Doubtful Accounts, $14,000; credit Uncollectible Accounts Expense,
$14,000
c. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense,
$11,800
d. debit Uncollectible Accounts Expense, $11,800; credit Allowance for Doubtful Accounts,
$11,800

ANS: D

DIF:

Moderate

OBJ: 08-04

13. An estimate based on an analysis of receivables shows that $780 of accounts receivables
are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110.
After preparing the adjusting entry at the end of the year, the balance in the Uncollectible
Accounts Expense is
a. $110
b. $780
c. $670
d. $890
ANS: D
DIF: Moderate
OBJ: 08-04
14. ABC company uses the estimate of sales method of accounting for uncollectible
accounts. ABC estimates that 3% of all credit sales will be uncollectible. On January 1,
2005, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2005,
ABC wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000.
After the adjusting entry, the December 31, 2005, balance in the Uncollectible Accounts
Expense would be
a. $1,200
b. $3,000
c. $3,600
d. $7,200
ANS: B
DIF: Moderate
OBJ: 08-04
15. Tanning Company uses the percentage of receivables method for recording bad debts
expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. An
aging of accounts receivable shows that 5% will be uncollectible. What adjusting entry
will Manning Company make if the Allowance for Doubtful Accounts has a credit
balance of $2,000 before adjustment?
a. Bad Debts Expense
8,000
Allowance for Doubtful Accounts
8,000
b. Bad Debts Expense
10,000
Allowance for Doubtful Accounts
10,000
c. Bad Debts Expense
8,000
Accounts Receivable
8,000
d. Bad Debts Expense
10,000
Accounts Receivable
10,000
ANS: A
DIF: Moderate
OBJ: 08-04
16. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If
the note is discounted on May 21 at 15%, the proceeds are
a. $170
b. $9,830
c. $10,000
d. $10,030
ANS: D
DIF: Moderate
OBJ: 08-App

17. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If
the note is discounted on June 10 at 15%, the proceeds are
a. $10,115
b. $10,200
c. $10,000
d. $10,030
ANS: A
DIF: Moderate
OBJ: 08-App
18. At the end of a period, before the accounts are adjusted, Allowance for Doubtful
Accounts has a credit balance of $250, and net sales on account for the period total
$500,000. If uncollectible accounts expense is estimated at 1% of net sales on account,
the current provision to be made for uncollectible accounts expense is $4,750.
ANS: F
DIF: Moderate
OBJ: 08-04
19. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year
(before adjustment), and an analysis of accounts in the customers ledger indicates
doubtful accounts of $15,000. Which of the following entries records the proper
provision for doubtful accounts?
a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
$800
b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
$14,200
c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense,
$800
d. debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense,
$15,800
ANS: B
DIF: Moderate
OBJ: 08-04
20. If the allowance method of accounting for uncollectible receivables is used, what general
ledger account is credited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
ANS: B
DIF: Easy OBJ: 08-04
21. When merchandise sold is assumed to be in the order in which the expenditures were
made, the inventory method is called
a. first-in, last-out
b. last-in, first-out
c. first-in, first-out
d. average cost
ANS: C
DIF: Moderate
OBJ: 06-02
22. The inventory data for an item for November are:

Nov. 1
4
10
17
30

Inventory
Sold
Purchased
Sold
Purchased

20 units at $20
10 units
30 units at $21
20 units
10 units at $22

Using the perpetual system, costing by the first-in, first-out method, what is the cost of the
merchandise inventory of 30 units on November 30?
a. $640
b. $610
c. $620
d. $630
ANS: A
DIF: Difficult
OBJ: 06-03
23. In recording the cost of merchandise sold for cash, based on data available from perpetual
inventory records, the journal entry is
a. debit Cost of Merchandise Sold; credit Sales
b. debit Cost of Merchandise Sold; credit Merchandise Inventory
c. debit Merchandise Inventory; credit Cost of Merchandise Sold
d. debit Accounts Receivable; credit Sales
ANS: B
DIF: Difficult
OBJ: 06-03
24. The Baby Company sells blankets for $30 each. The following was taken from the
inventory records during July.
Date
Product T
Units
Cost
July 3
Purchase
5
$15
July 10
Sale
3
July 17
Purchase
10
$17
July 20
Sale
6
July 23
Sale
3
July 30
Purchase
10
$20

Assuming that the company uses the perpetual inventory system, determine the cost of
merchandise sold for the sale of July 20 using the average inventory cost method.
a. $125
b. $80
c. $100
d. $102
ANS: C
DIF: Difficult
OBJ: 06-03
25. Beginning inventory, purchases and sales data for tennis rackets are as follows:
Feb 3
11
14
21
25

Inventory
Purchase
Sale
Purchase
Sale

12 units
13 units
18 units
9 units
10 units

@
@

$15
$17

$20

Assuming the business maintains a perpetual inventory system, calculate the cost of
merchandise sold and ending inventory under First-in, first-out:
a. cost of merchandise sold 491; ending inventory 90
b. cost of merchandise sold 120; ending inventory 461
c. cost of merchandise sold 461; ending inventory 120
d. cost of merchandise sold 90; ending inventory 491
ANS: C
26. The following lots of a particular commodity were available for sale during the year
Beginning inventory
First purchase
Second purchase
Third purchase

10 units at $50
25 units at $53
30 units at $54
15 units at $60

The firm uses the periodic system and there are 20 units of the commodity on hand at the
end of the year. What is the amount of inventory at the end of the year according to the firstin, first-out method?
a. $1,030
b. $1,140
c. $1,170
d. $1,060
ANS: C
DIF: Moderate
OBJ: 06-04
27. The following lots of a particular commodity were available for sale during the year:
Beginning inventory
First purchase
Second purchase
Third purchase

10 units at $61
25 units at $63
30 units at $64
15 units at $73

The firm uses the periodic system and there are 20 units of the commodity on hand at the
end of the year. What is the amount of the inventory at the end of the year according to the
average cost method?
a. $1,300
b. $1,305
c. $1,415
d. $1,236
ANS: A
DIF: Moderate
OBJ: 06-04
28. Beckys Boutiques has identified the following items for possible inclusion in its
December 31, 2008 inventory. Which of the following would not be included in the year
end inventory?
a. Merchandise purchased FOB shipping point was picked up by the freight company but
had still not arrived at Beckys Boutique as of December 31, 2008.
b. Beckys has in its warehouse merchandise on consignment from ABC Co.
c. Becky has sent merchandise to various retailers on a consignment basis
d. Becky has merchandise on hand which has been returned by customers because of wrong
size.
ANS: B
DIF: Moderate
OBJ: 06-06
29. The inventory data for an item for November are:
Nov. 1
4
10
17
30

Inventory
Sold
Purchased
Sold
Purchased

20 units at $20
10 units
30 units at $21
20 units
10 units at $22

Using the perpetual system, costing by the last-in, first-out method, what is the cost of the
merchandise sold for November?
a. $640
b. $630
c. $620
d. $610
ANS: C
DIF: Moderate
OBJ: 06-03
30. Unsold consigned merchandise should be included in the consignee's inventory.
ANS: F
DIF: Moderate
OBJ: 06-06
A consignor who has goods out on consignment with an agent should include the goods in
ending inventory even though they are not in the possession of the consignor.
ANS: T
DIF: Moderate
OBJ: 06-06
31. Westcoe Company's goods in transit at December 31 include:
sales made
(1) FOB destination
(2) FOB shipping point

purchases made
(3) FOB destination
(4) FOB shipping point

Which items should be included in Westcoe's inventory at December 31?

a. (2) and (3)

b. (1) and (4)
c. (1) and (3)
d. (2) and (4)
ANS: B
32. On July 31, 2012, American Idol Company discounted at the bank, a customers P1.2
million, 6-month, 10% notes receivable dated May 31, 2012. The bank discounted the
note at 12%. How much net proceeds did American Idol Company received from the
discounted note?
a. P1,128,000

b. P1,152,000

c. P1,209,600

d. P1,234,800

ANS: C
33. If the allowance method of recording uncollectible accounts expense is used, the entries
at the time of collection of an previously written-off account would
a. have no effect on profit or loss of the entity
c. have no effect on the contra account of the receivable
b. Increase profit of the entity
d. decrease the contra account of the receivable
ANS: A

34. Assume the following data of JPIA Corporatixon of its cash and short-term, highly liquid
investments for December 31, 2007:
Cash on hand
Checking account-Bank 1
Checking account-Bank 2
Securities:
120-day Certificate of Deposit
BSP-Treasury Bills (No.1)
BSP-Treasury Bills (No.2)
180 days Commercial Paper
Money Market Funds

P8,000
20,000
(3,000)
Date Acquired
12/10/07
11/30/07
10/31/07
12/01/07
11/21/07

Maturity Date
01/31/08
04/30/08
01/20/08
06/20/08
02/10/08

The balance of cash and cash equivalents of JPIA Corporation would be

a. 385,000
c. 525,000
b. 388,000
d. 528,000
ANS: B
a.
b.
c.
d.

35. Goods on consignment should be included in the inventory of

the consignor but not the consignee.
the consignee but not the consignor.
both the consignor and the consignee.
neither the consignor nor the consignee.

ANS: A

Amount
P60,000
500,000
100,000
140,000
200,000