Payables, Receivables and Inventory
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This question pack looks at some practical examples in payables, receivables and inventory amongst broader contextualizing questions.
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Complete the following statement. The direct write‑off method can only be used if the bad debt is:
material and will not significantly alter the financial statements.
material and will significantly alter the financial statements.
immaterial and will significantly alter the financial statements.
immaterial and will not significantly alter the financial statements.
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?
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?
Take the customers to small claims court.
Continue to collect the balances owed for another 48 months.
Consider writing off the balances as a bad debt expense.
Reduce the balance owed to encourage customers to pay their bill.
Which of the following statements regarding how writing off a bad debt expense affects a company's accounts receivable balance is true?
Writing off a bad debt expense will increase a company's accounts receivable balance.
Writing off a bad debt expense will decrease a company's accounts receivable balance.
Writing off a bad debt expense will eliminate a company's accounts receivable balance.
Writing off bad debt does not affect a company's accounts receivable balance.
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?
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?
Complete the following statement. The fundamental difference between FIFO and LIFO cost assumptions is:
which inventory is used first and which is used last.
the way a company makes its final product.
the way that the inventory that gets sold is priced.
the way a company calculates its depreciation.
How are LIFO inventory numbers converted into FIFO inventory numbers?
Add the LIFO reserve and the LIFO inventory numbers.
Add the FIFO reserve and the LIFO inventory numbers.
Subtract the LIFO reserve and the LIFO inventory numbers.
Subtract the FIFO reserve and the LIFO inventory numbers.
Which of the following best describes the difference between merchandising and manufacturing firms?
Manufacturing firms purchase raw materials to make products, whereas merchandising firms purchase finished goods to sell to customers.
Merchandising firms purchase raw materials to make products, whereas manufacturing firms purchase finished goods to sell to customers.
Both manufacturing and merchandising firms purchase raw materials, but manufacturing firms sell to other businesses, while merchandising firms sell to individual customers.
Merchandising firms keep excess inventory in a warehouse, whereas manufacturing firms do not keep any excess inventory.
Which of the following is NOT a type of inventory reporting method for a merchandising firm?
First in, last out
Last in, first out
First in, first out
Weighted average cost
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?
Weighted Average Cost
Which of the following are needed to generate an income statement for a merchandising firm?
Revenues, cost of goods sold, and expenses
Cost of goods sold, inventory, and expenses
Expenses, pre‑paid payments, and inventory
Cost of goods sold, raw materials, and expenses
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