Payables, Receivables and Inventory
Payables, Receivables and Inventory

Payables, Receivables and Inventory

Lead Author(s): Saylor Academy

Source: Saylor

Student Price: FREE

This question pack looks at some practical examples in payables, receivables and inventory amongst broader contextualizing questions.

This content is licensed under the Creative Commons Attribution 3.0 Unported License.

Payables, Receivables and Inventory Question 1

Complete the following statement. The direct write‑off method can only be used if the bad debt is:

A

material and will not significantly alter the financial statements.

B

material and will significantly alter the financial statements.

C

immaterial and will significantly alter the financial statements.

D

immaterial and will not significantly alter the financial statements.

Payables, Receivables and Inventory Question 2

Helping Hands, a construction company, recorded the following for the current fiscal year: $220,000 in credit sales; $125,000 in cash sales; a $350,000 ending accounts receivable balance; and a $145,000 ending accounts payable balance. What is the accounts receivable turnover for Helping Hands?

A

0.36

B

0.63

C

0.66

D

0.86

Payables, Receivables and Inventory Question 3

Ice Ice Cream, a new ice cream restaurant, allows customers to order food and pay with their Ice Ice Cream credit card. Currently there are 5 customers who have an outstanding balance that has not been paid for 9 months or more. What should the company do about these unreceived funds?

A

Take the customers to small claims court.

B

Continue to collect the balances owed for another 48 months.

C

Consider writing off the balances as a bad debt expense.

D

Reduce the balance owed to encourage customers to pay their bill.

Payables, Receivables and Inventory Question 4

Which of the following statements regarding how writing off a bad debt expense affects a company's accounts receivable balance is true?

A

Writing off a bad debt expense will increase a company's accounts receivable balance.

B

Writing off a bad debt expense will decrease a company's accounts receivable balance.

C

Writing off a bad debt expense will eliminate a company's accounts receivable balance.

D

Writing off bad debt does not affect a company's accounts receivable balance.

Payables, Receivables and Inventory Question 5

A customer purchases a computer from your retail store. The selling price is $1,200. The customer pays $200 in cash and charges the remaining balance on the store's credit card. The $1,000 charged would be recorded in which account?

A

Accounts payable

B

Accounts receivable

C

Credit payable

D

Liability

Payables, Receivables and Inventory Question 6

Community Builders is a local company that builds pine wood sheds to sell to homeowners. On February 15th, the company purchased $1,000 of pine wood ($1.25 per wood plank), and then the company purchased $850 more inventory when prices fell in April to $0.85 per wood plank. In the first 6 months of the current fiscal year, Community Builders sold 30 sheds (each shed uses 40 wood planks). What is the LIFO reserve for this inventory?

A

180

B

240

C

300

D

410

Payables, Receivables and Inventory Question 7

Complete the following statement. The fundamental difference between FIFO and LIFO cost assumptions is:

A

which inventory is used first and which is used last.

B

the way a company makes its final product.

C

the way that the inventory that gets sold is priced.

D

the way a company calculates its depreciation.

Payables, Receivables and Inventory Question 8

How are LIFO inventory numbers converted into FIFO inventory numbers?

A

Add the LIFO reserve and the LIFO inventory numbers.

B

Add the FIFO reserve and the LIFO inventory numbers.

C

Subtract the LIFO reserve and the LIFO inventory numbers.

D

Subtract the FIFO reserve and the LIFO inventory numbers.

Payables, Receivables and Inventory Question 9

Which of the following best describes the difference between merchandising and manufacturing firms?

A

Manufacturing firms purchase raw materials to make products, whereas merchandising firms purchase finished goods to sell to customers.

B

Merchandising firms purchase raw materials to make products, whereas manufacturing firms purchase finished goods to sell to customers.

C

Both manufacturing and merchandising firms purchase raw materials, but manufacturing firms sell to other businesses, while merchandising firms sell to individual customers.

D

Merchandising firms keep excess inventory in a warehouse, whereas manufacturing firms do not keep any excess inventory.

Payables, Receivables and Inventory Question 10

Which of the following is NOT a type of inventory reporting method for a merchandising firm?

A

First in, last out

B

Last in, first out

C

First in, first out

D

Weighted average cost

Payables, Receivables and Inventory Question 11

You purchase a shipment of inventory on January 31st and another shipment March 15th of the same year. If you use the January 31st inventory first and record its price, then what type of inventory reporting method are you most likely using?

A

Weighted Average Cost

B

LIFO reserve

C

LIFO

D

FIFO

Payables, Receivables and Inventory Question 12

Which of the following are needed to generate an income statement for a merchandising firm?

A

Revenues, cost of goods sold, and expenses

B

Cost of goods sold, inventory, and expenses

C

Expenses, pre‑paid payments, and inventory

D

Cost of goods sold, raw materials, and expenses

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