In: Accounting
16. Owen Company's unadjusted book balance at June 30 is $14,440. The company's bank statement reveals bank service charges of $120. Two credit memos are included in the bank statement: one for $1,490, which represents a collection that the bank made for Owen, and one for $200, which represents the amount of interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's true cash balance is:
Multiple Choice
$14,440.
$16,010.
$15,730.
$16,250.
17.
At March 31, Cummins Co. had a balance in its cash account of $10,600. At the end of March the company determined that it had outstanding checks of $1,145, deposits in transit of $710, a bank service charge of $40, and an NSF check from a customer for $225. The true cash balance at March 31 is:
Multiple Choice
$10,165
$10,335
$10,600
18. Duke Company's unadjusted bank balance at March 31 is $4,180. The bank reconciliation revealed outstanding checks amounting to $620 and deposits in transit of $460. Based on this information, Duke's true cash balance is:
Multiple Choice
$4,180.
$3,720.
$4,640.
$4,020.
19. On September 30, the bank statement of Fine Company showed a balance of $11,300. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records:
(1) deposits in transit amounted to $4,650
(2) outstanding checks amounted to $8,500
(3) a $700 check was incorrectly drawn on Fine's account
(4) NSF checks returned by the bank were $1,100
(5) bank service charge was $39
(6) credit memo for $150 for the collection of one of the company's account receivable
Based on the above information, the true cash balance was:
Multiple Choice
$8,150.
$8,261.
$7,161.
$8,911.
20. Rainey Company's true cash balance at October 31 is $4,040. The following information is available for the bank reconciliation:
Outstanding checks, $650
Deposits in transit, $490
Bank service charges, $100
The bank had collected an account receivable for Rainey Company, $1,100
The bank statement included an NSF check written by one of Rainey's customers for $660
Based on this information Rainey's unadjusted book balance at October 31 is:
Multiple Choice
$4,200.
$4,800.
$3,700.
$3,800.
21. The inventory records for Radford Co. reflected the following
Beginning inventory @ May 1 | 1,900 | units | @ | $ | 5.40 | |
First purchase @ May 7 | 2,000 | units | @ | $ | 5.60 | |
second purchase @ May 17 | 2,200 | units | @ | $ | 5.70 | |
Third purchase @ May 23 | 1,800 | units | @ | $ | 5.80 | |
Sales @ May 31 | 6,000 | units | @ | $ | 7.30 | |
Determine the amount of ending inventory assuming the FIFO cost flow method.
Multiple Choice
$11,010
$11,020
$10,260
$6,760
22. Rosewood Company made a loan of $8,400 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:
Multiple Choice
$504 and $0
$0 and $504
$378 and $126
$126 and $378
23. On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $64,000 and $1,400, respectively. During the year Kincaid reported $155,000 of credit sales. Kincaid wrote off $1,250 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $166,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.
The amount of uncollectible accounts expense recognized in the Year 2 income statement will be:
Multiple Choice
$1,550.
$640.
$1,667.
$1,700.
24. Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $30. The other, purchased in February, cost $37. One of the items was sold in March at a selling price of $90. Assuming that Poole uses a LIFO cost flow, which of the following statements is correct?
Multiple Choice
The balance in ending inventory would be $37.
The amount of gross margin would be $53.
The amount of ending inventory would be $33.50.
The amount of cost of goods sold would be $30.
25. Glasgow Enterprises started the period with 75 units in beginning inventory that cost $2.00 each. During the period, the company purchased inventory items as follows. Glasgow sold 395 units after purchase 3 for $10.20 each.
Purchase | No. of Items | Cost | ||||
1 | 370 | $ | 2.50 | |||
2 | 115 | $ | 2.60 | |||
3 | 60 | $ | 3.00 | |||
Glasgow's ending inventory under LIFO would be:
Multiple Choice
$675.
$585.
$525.
$450.
16. Owen Company : $16010
True Cash Balance = Unadjusted Book Balance - Service Charge + Collection + Interest = 14440 - 120 + 1490 + 200 = 16010
17. Cummins Co. :$10335
True Cash Balance = Unadjusted Book Balance - Service Charge - NSF check = 10600 -40 - 225 = 10335
18. Duke Company :$4020
True Cash Balance = Unadjusted Book Balance - Outstanding checks - deposits in transit = 4180 - 620 + 460 = 4020
19. Fine Company :$8150
True Cash Balance = Undajusted Book Balance - Outstanding checks + deposits in transit + error correction
True Cash Balance = 11300 - 8500 + 4650 + 700 = 8150
20. Rainey Company :$3700
True Cash Balance = Undajusted Book Balance - Service charge + Receivables collection - NSF check
4040 = Unadjusted Book Balance- 100 + 1100 - 660 = 4380
Unadjusted Book Balance = 4040 + 100 - 1100 + 660 = 3700
21. Radford Co. :$11010
Closing Stock = 1900 + 2000 + 2200 + 1800 - 6000 = 1900
FIFO Method Ending Inv. = Third purchase @ May 23 + 100 x second purchase @ May 17
FIFO Method Ending Inv. = 1800 x 5.80 + 100 x 5.70 = 10440 + 570 = 11010
22. Rosewood Company :378 and 126
Year 1 Interest = 8400 x 6% x 9/12 = 378 Year 2 Interest = 8400 x 6% x 3/12 = $126
23. Kincaid Company :$1550
The amount of uncollectible accounts expense recognized in the Year 2 income statement will be:
155000 x 1% = 1550
24. Poole Company : The amount of gross margin would be $53.
Since LIFO is used COGS would be 1 x $37 = $37 ;Gross margin = $90 - $37 = $53
25. Glasgow Enterprises : $525.
Glasgow's ending inventory under LIFO would be:
Closing Stock = 75 + 370 + 115 + 60 - 395 = 225
Since LIFO is used :Ending inventory = 75 x 2 + 150 x 2.50 = 150 + 375 = 525