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.

Oops Inc. shipped the wrong shade of hair color to a customer. The customer agreed to keep the product upon being offered a 20% price reduction. The price reduction is an example of a:

• Sales revenue

• Sales discount

• Sales allowance

• Sales return

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

Calculate the ending inventory using LIFO method given the following data:

Beginning inventory - 100 units at $7 per unit,

Purchases - 200 units at $8 per unit,

Sales - 150 units.

• Ending inventory is $1,100

• Ending inventory is $1,000

• Ending inventory is $1,300

• Ending inventory is $1,500