Accounting 200 Exam 2 Review
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Business
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University
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Practice Problem
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Hard
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1.
FLASHCARD QUESTION
Front
A company reported sales revenue for the period of $600,000, cost of goods sold of $200,000, and general operating expenses of $120,000. Which of the following is true?
Back
Gross margin is equal to $400,000
Answer explanation
Gross Margin (Gross Profit) = Sales Revenue - Cost of Goods Sold
600,000 - 200,000 = 400,000
✅ The statement "Gross margin is equal to $400,000" is TRUE.
Gross Profit Rate = (Gross Profit ÷ Sales Revenue) × 100
(400,000÷600,000)×100=66.67%
❌ The statement "Gross profit rate is equal to 50%" is FALSE.
Net Income = Gross Profit - General Operating Expenses
400,000−120,000=280,000
❌ The statement "Net Income is equal to $300,000" is FALSE (Net Income is actually $280,000).
Gross Margin is equal to $280,000
❌ FALSE – Gross Margin is $400,000, not $280,000.
Gross Margin (Gross Profit) = Sales Revenue - Cost of Goods Sold
600,000 - 200,000 = 400,000
✅ The statement "Gross margin is equal to $400,000" is TRUE.
Gross Profit Rate = (Gross Profit ÷ Sales Revenue) × 100
(400,000÷600,000)×100=66.67%
❌ The statement "Gross profit rate is equal to 50%" is FALSE.
Net Income = Gross Profit - General Operating Expenses
400,000−120,000=280,000
❌ The statement "Net Income is equal to $300,000" is FALSE (Net Income is actually $280,000).
Gross Margin is equal to $280,000
❌ FALSE – Gross Margin is $400,000, not $280,000.
2.
FLASHCARD QUESTION
Front
A company has an end-of-year 2024 balance in Accounts Receivable of $450,000 and a beginning-of-year 2024 credit balance of $6,000 in Allowance for Doubtful Accounts. Assume the company uses the Percentage of Receivables method to estimate bad debt expense for this year. If the company estimates 4% of all receivables will not be collected, what is the Bad Debt Expense for 2024?
Back
$12,000
Answer explanation
Start with 450,000×4%=18,000
Then, Bad Debt Expense=
18,000 − 6,000= 12,000
3.
FLASHCARD QUESTION
Front
At the end of the year, SkyTech was owed $200,000 from its customers. SkyTech also had a $10,000 ending credit balance in the allowance for doubtful accounts. Which of the following statements is true? The net realizable value of SkyTech's accounts receivable was $190,000, SkyTech expects to collect $200,000 from its customers., SkyTech should record bad debt expense for $190,000., $190,000 is the ending balance in SkyTech's accounts receivable account.
Back
The net realizable value of SkyTech's accounts receivable was $190,000
Answer explanation
1. NRV = A/R - Allow. for Doubt. Accts.
200,000-10,000 = 190,000
2. Since the allowance for doubtful accounts reduces the expected collectible amount, SkyTech expects to collect only $190,000, not the full $200,000.
3. The bad debt expense would not be equal to the net realizable value.
4. The gross accounts receivable balance is $200,000—the net realizable value is $190,000 after subtracting the allowance for doubtful accounts.
1. NRV = A/R - Allow. for Doubt. Accts.
200,000-10,000 = 190,000
2. Since the allowance for doubtful accounts reduces the expected collectible amount, SkyTech expects to collect only $190,000, not the full $200,000.
3. The bad debt expense would not be equal to the net realizable value.
4. The gross accounts receivable balance is $200,000—the net realizable value is $190,000 after subtracting the allowance for doubtful accounts.
4.
FLASHCARD QUESTION
Front
What is the total amount of costs capitalized for the machine purchased by Jordan, which includes $50,000 for the machine, $500 for shipping and delivery, and $2,000 for installation and setup?
Back
$52,500
Answer explanation
$50,000 to purchase the machine +
$500 for shipping and delivery +
$2,000 for installation and setup = 52,500
5.
FLASHCARD QUESTION
Front
On March 31, 2025, a company sold an asset that originally cost $50,000 and has accumulated depreciation of $30,000. The company receives $25,000 in cash from the sale. Does the sale of this asset result in a gain or loss for the company?
Back
$5,000 Gain
Answer explanation
Step 1. Net Book Value = Original cost - Accumulated Depreciation
50,000-30,000=20,000
Step 2. Gain/Loss = Sale Price - NBV
25,000-20,000 = $5,000 Gain
6.
FLASHCARD QUESTION
Front
Cost of Goods Sold is an expense and increases on the left side of the T account.
Back
True
7.
FLASHCARD QUESTION
Front
The periodic inventory system lets a company know exactly how much is in inventory at any given point of time.
Back
False
Answer explanation
The perpetual inventory system lets a company know exactly how much is in inventory at any given point of time!
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