Exam 2 Review

The LIFO inventory cost flow assumes that the cost of the newest goods purchased are:

• assumed to be the first ones included ending inventory.

• not included in cost of goods sold or ending inventory

• assumed to be the first ones sold.

• assumed to be the last ones to be sold.

Coachlight Inc. has a periodic inventory system. The company purchased 200 units of inventory at $9 per unit and 300 units at $10 per unit. What is the weighted average unit cost for these purchases of inventory?

• $9.00

• $9.50

• $9.60

• $10.00

Which of the following statements about the tradeoffs of extending credit is not correct?

• Extending credit to at least some customers is necessary in a competitive market to avoid losing sales to competitors.

• Even if a company were to collect in full from customers, there would be other additional costs introduced by extending credit to customers.

• Even though additional costs are incurred if credit is extended, a company expects that the additional revenue will be more than sufficient to offset the additional costs.

• Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase additional costs beyond the increased revenue from the credit sales.

The adjusting entry to record the estimated bad debts in the period credit sales occur includes a debit to an:

• asset account and a credit to a liability account.

• expense account and a credit to an asset account.

• expense account and a credit to a revenue account.

• expense account and a credit to a contra-asset account.

The amount of uncollectible accounts at the end of the year is estimated to be $25,000, using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. What is the adjusted balance of the Allowance for Doubtful Accounts at the end of the year?

• $8,000

• $17,000

• $25,000

• $33,000

If a truck's engine is overhauled for $8,000, the journal entry would normally include a debit to:

• Vehicles.

• Accounts Payable.

• Depreciation Expense.

• Cash.

When a company records depreciation it debits:

• a liability account and credits Depreciation Expense.

• Depreciation Expense and credits Cash.

• Depreciation Expense and credits a contra-asset account.

• a long-lived tangible asset account and credits Depreciation Expense.

The book value of a long-lived tangible asset is equal to:

• its acquisition cost less the accumulated depreciation from the acquisition date to the balance sheet date.

• its acquisition cost plus accumulated depreciation from the acquisition date to the balance sheet date.

• the amount that could be obtained for the asset on the balance sheet date if it were sold.

• the annual cost of carrying the asset in inventory.

On January 1, Portillo, Inc. lends a corporate customer $240,000 at 6% interest. The amount of interest revenue that should be recorded for the quarter ending March 31 equals:

• $14,400.

• $3,600.

• $1,200.

• $4,800.

A trucking company sold its fleet of trucks for $55,000. The trucks originally cost $1,410,000 and had Accumulated Depreciation of $1,269,000 recorded through the date of disposal. What gain or loss did the trucking company record when it sold the fleet of trucks?

• Gain of $86,000.

• Gain of $55,000.

• Loss of $55,000.

• Loss of $86,000.