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Exam 5: Accounting for Receivables and Inventory Cost Flow

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Question 81

Multiple Choice

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When prices are rising,which method of inventory will result in the lowest cash outflow for income taxes?

A) weighted average
B) FIFO
C) LIFO
D) None of these; inventory methods do not affect the amount of income taxes.

E) A) and B)
F) B) and C)

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Question 82

True/False

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Delta Company was accruing interest on a note receivable at the end of 2012.The note had principal of $10,000,an interest rate of 8%,and it had been outstanding for three months.Delta should accrue $200 of interest income for 2012.

A) True
B) False

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Question 83

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What type of transaction is the collection of cash from accounts receivable? (asset source,asset use,asset exchange,claims exchange)

Porter Company experienced the following events during 2012: 1.Recognized $8,400 of service revenue on account 2.Wrote off as uncollectible an account receivable in the amount of $27 3.Prepared adjusting entry to recognize uncollectible accounts expense.Porter expected that 1% of service revenue would not be collected Required: Show how each of these events would affect the financial statements model,below.Include dollar amounts of increases and decreases.When an account is not affected by a particular event,indicate with NA.

Define the terms FIFO and LIFO.

In the first year of operations,2012,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 2012? b)What amount of uncollectible accounts expense was recognized in 2012?

The amount of cash flow from operating activities that would appear on the 2012 statement of cash flows is:

After the accounts are adjusted at the end of the year,Accounts Receivable has a balance of $450,000,Uncollectible Accounts Expense for the year was $18,000,and Allowance for Doubtful Accounts has a balance of $19,200.What is the net realizable value of the accounts receivable?

If prices are rising,which inventory cost flow method will produce the lowest amount for Cost of Goods Sold?

Potter Co.used the allowance method to account for uncollectible accounts expense.On June 20,2012,Potter wrote off an uncollectible account in the amount of $8,000.Show the effect of this write-off.

Hardin Company collected a receivable due from a credit card company (from a sale to a customer who paid with a credit card).Show the effect of collection of the credit card receivable on Ulmer's financial statements.

Collection of a credit card receivable is an asset source transaction.

A company that has a note receivable outstanding at the end of the accounting period will have to make an adjusting entry related to that note.Describe the purpose of the adjusting entry.

The net effect of the entries to recognize the collection of a previously written-off account under the allowance method will

Victorino Company accepted a credit card payment in exchange for $10,000 of services provided to a customer.The credit card company charges a 5% service charge.The collection of cash from the credit card company when it settles the account receivable balance will

Fairleigh Company sells home weather stations.Its beginning inventory was 50 units at $200 per unit.During the year,Fairleigh made two purchases of the station: first,a 150-unit purchase at $220 per unit,and then 100 units at $250 per unit.The ending inventory for the year was 125 units. Required: Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory,assuming that Fairleigh uses a)FIFO b)LIFO c)Weighted average

The following information is available for K.M.R.Company,which uses the allowance method of accounting for uncollectible accounts. K.M.R.estimates that 1% of sales on account will be uncollectible.After several attempts at collection during 2012,K.M.R.wrote off an account of $200 that could not be collected. Required: Indicate the effects on the financial statements of the following events: a)2012 sales b)2012 collections on account c)Write-off of the uncollectible account d)Uncollectible accounts expense for 2012 Round amounts to nearest dollar.Show amounts of increases and decreases.For cash flows,indicate whether they are operating,investing,or financing activities.

In a period of rising prices,which inventory cost flow method will produce the lowest amount of cost of goods sold?

At the end of 2012,Duffau Company had outstanding accounts receivable of $109,760.Before recording the adjusting entry for uncollectible accounts,the balance in the Allowance for Doubtful Accounts was $350.If Duffau estimates that it will not collect 4 percent of its accounts receivable,what amount of uncollectible accounts expense should Duffau record? Round to the nearest dollar.

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