Accounting 200 Exam 2 Review

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

1. Gross Margin (Gross Profit) = Sales Revenue - Cost of Goods Sold

2. 600,000 - 200,000 = 400,000

   ✅ The statement "Gross margin is equal to $400,000" is TRUE.

4. 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.

6. 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).

8. Gross Margin is equal to $280,000
   ❌ FALSE – Gross Margin is $400,000, not $280,000.

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

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. 1. NRV = A/R - Allow. for Doubt. Accts.

2. 200,000-10,000 = 190,000

3. 2. Since the allowance for doubtful accounts reduces the expected collectible amount, SkyTech expects to collect only $190,000, not the full $200,000.

4. 3. The bad debt expense would not be equal to the net realizable value.

5. 4. The gross accounts receivable balance is $200,000—the net realizable value is $190,000 after subtracting the allowance for doubtful accounts.

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

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

Front

Cost of Goods Sold is an expense and increases on the left side of the T account.

Back

True

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!

Front

Salvage value refers to the amount that an independent buyer would pay for an item.

Back

False

Answer explanation

Fair Market Value refers to the amount that an independent buyer would pay for an item!

Salvage Value is what the item is worth at the end of its useful life.

Front

GAAP requires that intangible assets be amortized over a period not to exceed 40 years.

Back

True

Front

Why does a company reconcile its bank statements?

Back

To find discrepancies between its records and the bank's records