Complex Questions

Question 1

Merchandise subject to terms 3/10, n/30, FOB shipping point, is sold on account to a customer for $18,000. The seller paid transportation costs of $1,500 and issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?

Answer 1

$420
$18,000-4,000=$14,000 times 3%= discount

NO discounts are ever applied to shipping costs so for the calculation of the discount the shipping costs can be ignored. A credit memorandum (for returned merchandise) would reduce the amount due and the amount subject to the discount.

Question 2

A $2,000, 60-day, 12% note recorded on July 21 is not paid by the maker at maturity. The journal entry to recognize this event is

Answer 2

Dr A/R 2,000
Cr Notes Receivable 2,000

Since this is no longer a note we need to take it out of notes receivables and increase our account receivables.

Question 3

The inventory data for an item for Nov. are:

Nov. 1	Inventory	20 units at $20
        4	Sold	10 units
      10	Purchased	30 units at $24
      17	Sold	20 units
      30	Purchased	10 units at $22

Using the perpetual system and FIFO (first in-first out), what is the cost of the merchandise inventory of 30 units on Nov 30?

In other words, what is the amount of inventory left after 30 units are sold.

Answer 3

$700

Step 1: multiply units purchased by purchase amount

Step 2: Using FIFO calculate the COGS for the first 30 that were purchased

Step 3: subtract this amount from the total amount of inventory purchased

20 x 20 = 400
30 x 24 = 720
10 x 22 = 220
Total $1,340

FIFO for 30 units:
20 x 20 = 400
10 x 24 = 240
240 + 400 = 640

640 - 1,340 = 700 COMS @ Nov 30

Question 4

The inventory data for an item for June are:

Nov. 1	Inventory	20 units at $20
        4	Sold	10 units
      10	Purchased	13 units at $24
      17	Sold	20 units
      30	Purchased	10 units at $22

Using the perpetual system, costing by the last-in, first-out method (LIFO), what is the cost of the merchandise inventory of 13 units on June 30?

a) 288
b) 220
c) 270
d) 280

Answer 4

Figure out

Question 5

An owner puts $10,000 cash into the name of the business (puts money into the business bank account). The effect is to

Answer 5

increases assets, increases owner’s equity

Question 6

The total assets and the total liabilities of a business at the beginning and at the end of the year appear below. During the year, the owner had withdrawn $50,000 for personal use and had made an additional investment of $35,000 in the business.

Assets
Liabilities
Beginning of year	
$295,000
$190,000

End of year
355,000
220,000

The amount of net income for the year was

Answer 6

$45,000

Question 7

Liabilities are reported on the

Answer 7

Balance Sheet

Question 8

Which of the following entries records the RECEIPT of cash for two months’ rent? The cash was received in advance of providing the service.

Answer 8

Cash, debit; Unearned Rent, credit.

Question 9

Which of the following entries records the receipt of cash from customers on account?

Answer 9

Cash, debit; Accounts Receivable, credit:

Question 10

A trial balance is prepared to

Answer 10

summarize the account balances to help prepare financial statements

Question 11

A fixed asset w/an appraisal value of $55,000 is offered for sale for $50,000. The purchaser aquires it for $20,000 in cash and 120-day $25,000 note payable. What is the amount as the cost of the equipment on the buyer’s books?

Answer 11

$45,000

Cash + Note given = 45,000

Question 12

A fixed asset with a cost of $50,000 and accumulated depreciation of $31,000 is sold for $13,000. What is the amount of the gain or loss on disposal of the fixed asset?

Answer 12

6,000 loss
Cost - accumulated depreciation = book value
50,000 - 19,000 = 31,000
Book value vs. sales price = gain or loss 19,000 vs. 13,000 = 6,000 loss