ACC 422 Final Exam study guide 60 questions and answers (all correct!) 100% 1) Which of the following is NOT considered cash for financial reporting purposes? A. Coin, currency, and available funds B. Money orders, certified checks, and personal checks C. Petty cash funds and change funds D. Postdated checks and I.O.U.'s 2) What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? A. As assets but separately from other receivables. B. As offsets to capital. C. As trade notes and accounts receivable if they otherwise qualify as current assets. D. By means of footnotes only. 3) Which of the following is considered cash? A. Money market savings certificates B. Certificates of deposit (CDs) C. Postdated checks D. Money market checking accounts 4) If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as A. an item of "other expense" in the income statement B. a deduction from accounts receivable in determining the net realizable value of accounts receivable C. a deduction from sales in the income statement D. sales discounts forfeited in the cost of goods sold section of the income statement 5) Assuming that the ideal measure of short - term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does NOT make the balance sheet misleading because A. the allowance for uncollectible accounts includes a discount element B. the amount of the discount is NOT material C. most short - term receivables are NOT interest - bearing D. most receivables can be sold to a bank or factor 6) Which of the following methods of determining annual bad debt expense best achieves the matching concept? A. Direct write - off B. Percentage of average accounts receivable C. Percentage of ending accounts receivable D. Percentage of sales 7) The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007. Orion uses the periodic inventory system. The January 1, 2007 merchandise inventory balance will appear A. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet B. only as an asset on the balance sheet C. only in the cost of goods sold section of the income statement D. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet 8) Eller Co. received merchandise on consignment. As of January 31, Eller included the goods in inventory, but did NOT record the transaction. The effect of this on its financial statements for January 31 would be A. net income, current assets, and retained earnings were understated B. net income, current assets, and retained earnings were overstated C. net income was correct and current assets were understated D. net income and current assets were overstated and current liabilities were understated 9. If the beginning inventory for 2006 is overstated, the effects of this error on cost of goods sold for 2006, net income for 2006, and assets at December 31, 2007, respectively, are A. understatement, overstatement, no effect B. overstatement, understatement, overstatement C. overstatement, understatement, no effect D. understatement, overstatement, overstatement 10) Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method? A. Price trend cannot be determined from information given B. Prices decreased C. Prices remained unchanged D. Prices increased 11) Which method of inventory pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations? A. Base stock B. Average cost C. First - in, first - out D. Last - in, first - out 12) All of the following costs should be charged against revenue in the period in which costs are incurred EXCEPT for A. costs of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory B. manufacturing overhead costs for a product manufactured and sold in the same accounting period C. costs which will NOT benefit any future period D. costs from idle manufacturing capacity resulting from an unexpected plant shutdown 13) In no case can "market" in the lower - of - cost - or - market rule be more than A. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses B. estimated selling price in the ordinary course of business