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Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

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Question 31

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Which of the following would be included in Latimer Company's sales in 2014?

A) Goods shipped from a supplier in 2014 with terms of FOB shipping point. Latimer received the goods in 2014.
B) Goods shipped to customers in 2014 with terms of FOB destination. The customer received the goods in 2015.
C) Goods shipped to customers in 2013 with terms of FOB destination. The customer received the goods in 2014.
D) Goods shipped to customers in 2013 with terms of FOB shipping point. The customer received the goods in 2014.

E) A) and D)
F) A) and B)

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Question 32

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Which of the following transactions does not affect gross profit?

A) A customer returning merchandise that was sold for a profit.
B) The collection of cash on an account receivable, which was paid for by the customer within the discount period.
C) The journal entry to record bad debt expense.
D) Accepting a credit card for a sale and paying a service fee to the credit card company.

E) A) and D)
F) B) and C)

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Question 33

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Cyclone Inc. reported the following figures from its financial statements for the years 2013 through 2015: $\begin{array}{l}&\underline { 2015 }& \underline { 2014 } & \underline { 2013 }\\\text { Net revenues } & \$ 717,422 & \$ 1,110,178 & \$ 591,786 \\\text { Gross profit } & 560,421 & 960,434 & 498,605 \\\text { Net income (net loss) } & ( 92,788 ) & 70,776 & 47,811 \\\text { Cash flow from operations } & 106,850 & 509,707 & 204,496 \\\text { Accounts receivable } & 68,648 & 90,561 & 56,454\end{array}$ Describe how the change in accounts receivable will affect the calculation of cash flow from operating activities for 2015 and 2014.

When goods are shipped FOB shipping point, title passes to the buyer on the shipment date.

Which of the following accounts is not a contra-revenue account?

When a particular account receivable is determined to be uncollectible, the journal entry to write-off the account reduces cash.

At year-end, Chief Company has a balance of $10,000 in accounts receivable of which $1,000 is more than 30 days overdue. Chief has a credit balance of $100 in the allowance for doubtful accounts before any year-end adjustments. Chief estimates that 1% of current accounts and 10% of accounts over thirty days are uncollectible. How much is bad debt expense?

What would be incorrect about reporting accounts receivable in the balance sheet?

The Rye Corporation has provided the following information: • Total sales were $1,200,000. • Beginning net accounts receivable was $45,000. • Ending net accounts receivable was $65,000. • Sales returns and allowances totaled $100,000. What was Rye's receivables turnover ratio?

The cash account and the December bank statement of Gomez Company showed the following: deposits made by Gomez Company during December $90,000; deposits reflected on the December bank statement, $88,000; and deposits in transit on November 30, $5,000. How much were the deposits in transit at the end of December?

When goods are shipped FOB destination, the revenue from the sale is recognized on the shipment date.

The Conner Company's August 31, 2014 cash balance on its books was $90,000. As of August 31, outstanding checks total $44,000 and deposits in transit total $30,000. How much was Conner's August 31, 2014 cash balance on Conner's bank statement?

A customer purchased and received $5,000 of goods on credit from Discount Paper Supply on September 1. The customer received the bill on September 13 and mailed a $5,000 check on September 30. Discount Paper Supply received the check on October 4. On which of the following dates should Discount Paper Supply record sales revenue?

If a check received from a customer has been deposited by the seller and is marked on the bank statement as a nonsufficient funds (NSF) amount, then it would appear on the seller's bank reconciliation as a deduction from the ending bank statement balance.

The Soft Company has provided the following information after year-end adjustments: • Allowance for doubtful accounts was $11,000 at the beginning of the year and $30,000 at the end of the year. • Accounts receivable were $80,000 at the beginning of the year and $420,000 at the end of the year. • Accounts written off as uncollectible totaled $20,000. • Net sales totaled $2,700,000. • Sales discounts were $100,000. How much was Soft's bad debt expense for the year?

Newark Company has provided the following information: • Cash sales, $450,000 • Credit sales, $1,350,000 • Selling and administrative expenses, $330,000 • Sales returns and allowances, $90,000 • Gross profit, $1,360,000 • Increase in accounts receivable, $55,000 • Bad debt expense, $33,000 • Sales discounts, $43,000 • Net income, $1,030,000 What is the effect of collections from customers on cash flow from operating activities, using the indirect method?

Redwing Company sold inventory costing $500 to a customer on account for $700. Which of the following correctly describes the collection of $686 cash when the customer takes advantage of a sales discount?

CHS Company has just finished preparing its bank reconciliation. If CHS did everything correctly, which items would have been included as an addition to the company's cash account?

When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What percent (rounded) would this savings amount to on an annual basis?

The Tanner Company has provided the following information after year-end adjustments: • Allowance for doubtful accounts increased $19,000. • Accounts receivable increased $390,000 during the year. • Accounts written off as uncollectible totaled $20,000. • Sales totaled $2,500,000. • Sales discounts were $100,000. How much were Tanner's net sales?