Question

1 In regard to the accounts receivable turnover rate:

a. In some industries it is better higher and in some industries it is better to be lower.

b. The auto industry prefers a lower rate.

c. The higher the better.

d. The lower the better.

2 The Allowance for Doubtful Accounts will appear on the:

a. Owners' equity statement.

b. Balance sheet.

c. Cash flow statement.

d. Income statement.

3 The specific identification method is more appropriate than a cost flow assumption method:

a. If each item in the inventory is unique.

b. If purchase costs are rising.

c. If purchase costs are falling.

d. For a large inventory of identical low-priced items.

4

In a periodic inventory system, the cost of goods sold is determined as follows:

a. Year-end inventory, plus purchases during the year, less the inventory at the beginning of the year.

b. Cost of goods available for sale during the year, less the ending inventory.

c. Net sales, less the balance in the Gross Profit account.

d. A physical count is made of all items sold throughout the year, and a cost flow assumption is applied at year-end.

5

Uncollectible accounts expense:

a. Represents the loss in value of accounts receivable that are estimated to be uncollectible.

b. Is the amount of cash a business must pay each time a credit customer fails to pay his or her account.

c. Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable.

d. Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit.

6

Hicksville's Department Store uses a perpetual inventory system. At year-end, the balance in the Inventory control account is $1,200,000. Assuming that the inventory records have been maintained properly, a year-end physical inventory:

a. Is needed to establish the ending inventory, as the $1,200,000 balance in the Inventory control account represents the beginning inventory.

b. Probably will indicate more than $1,200,000 in merchandise on hand.

c. Is unnecessary.

d. Probably will indicate less than $1,200,000 in merchandise on hand.

Answer 1

1	c. The higher the better.
2	b. Balance sheet.
3	a. If each item in the inventory is unique.
4	b. Cost of goods available for sale during the year, less the ending inventory.
5	a. Represents the loss in value of accounts receivable that are estimated to be uncollectible.
6	d. Probably will indicate less than $1,200,000 in merchandise on hand.