Chapter 5-6 JK

A multiple-step income statement provides the advantage of:

• Placing all revenues before all expenses.

• Excluding the effects of income taxes in the calculation of net income.

• Separating revenues and expenses based on their different types of activities.

• Placing all revenues after all expenses.

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $120,000 and ends the year with $29,000 of inventory. The company will report cost of goods sold equal to:

• 102,000

• 103,000

• 104,000

• 105,000

Answer explanation

Cost of goods sold = beginning inventory ($12,000) + purchases ($120,000) − ending inventory ($29,000) = $103,000.

On January 18, a company provides services to a customer on account for $500 and offers the customer terms 3/15, n/30. Which of the following would be debited when the services were provided on January 18?

• Cash 500

• Service Revenue 500

• Accounts Receivable 500

• Accounts Receivable 485

On January 18, a company provides services to a customer on account for $500 and offers the customer terms 3/15, n/30. Which of the following would be recorded when the customer remits payment on January 25?

• Debit Cash for $500.

• Debit Sales Discount for $15.

• Credit Accounts Receivable for $485.

• Credit Service Revenue for $500.

The allowance method for uncollectible accounts

• Is required by Generally Accepted Accounting Principles.

• Allows for the possibility that some accounts will not be collected

• Reports net accounts receivable for the amount of cash expected to be collected.

• All of the answer choices are correct.

At the end of it's first year of operations, ABC company has A/R of $30,000. The company expects to collect 90% of A/R. The company's year-end journal entry for estimating uncollectible accounts would be:

• Debit: Allowance for Uncollectible Accounts; Credit: A/R for $3000

• Debit: Bad Debt Expense; Credit: A/R for $3000

• Debit: Allowance for Uncollectible Accounts; Credit: Bad Debt Expense for $3000

• Debit: Bad Debt Expense ; Credit: Allowance for Uncollectible Accounts for $3000