Question

Inventory records for a company revealed the following:

Date Transaction Number of Units Unit Cost

Apr. 1 Beginning inventory 500 $2.40

Apr. 20 Purchase 400 $2.50

The company sold 700 units of inventory during the month. Cost of goods sold assuming FIFO would be:

	a.	$1,690
	b.	$1,720.
	c.	$1,700.
	d.	$1,730.
	e.	$1,710.

If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be

	a.	Disclosed, but not reported as a liability.
	b.	Reported as a liability, but not disclosed.
	c.	Disclosed and reported as a liability.
	d.	Neither disclosed nor reported as a liability.

On December 31, 2018, a company had balances in Accounts Receivable of $53,600 (debit) and in Allowance for Uncollectible Accounts of $1,325 (credit). During 2019, the company wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31, 2019. Bad debt expense for 2019 would be:

	a.	$1,140.
	b.	$1,420.
	c.	$1,280.
	d.	$1,365.
	e.	$1,465.

On August 10th, a company billed a customer for services that were provided on August 5th. Which of the following should be recorded on August 10th?

	a.	Debit Cash; Credit Service Revenue
	b.	Debit Cash; Credit Accounts Receivable
	c.	Debit Cash; Credit Deferred Revenue
	d.	Debit Service Revenue; Credit Cash
	e.	Debit Accounts Receivable; Credit Service Revenue

An example of an adjusting entry would include:

	a.	Interest earned on loaned amounts.
	b.	Closing expenses to retained earnings
	c.	Paying cash to setlle prior open payables.
	d.	Purchase of office supplies on account (and remain unused).
	e.	Paying cash for utilities in the current period..

if you could please post your work/reasoning, that'd be great!! thank you!

Answer 1

Answer 1:

Correct answer is:

c.

$1,700

Explanation:

Cost of goods sold using FIFO = 500 * $2.40 + 200 * $2.50 = $1,700

As such option c is correct and other options a, b. d, and e are incorrect.

Answer 2:

Correct answer is:

a.	Disclosed, but not reported as a liability.

Explanation:

The 3 specified categories of contingent liabilities as specified by GAAP are Probable, Possible and Remote.

Probable contingencies are likely to occur and can be reasonably estimated. Probable contingencies has to be reported.

If contingencies are possible, it has to be disclosed..

If contingencies are remote, neither it has to be reported nor disclosed.

As such option a is correct and other options b, c, d, and e are incorrect.

Answer 3:

Correct answer is:

b.

$1,420.

Explanation:

Bad debt expense for 2019 = Required Allowance for uncollectible accounts at December 31, 2019 - (Allowance for Uncollectible Accounts at December 31, 2018 - Amount written off during 2019)

= $1280 - ($1325 - $1465)

= $1420

Answer 4:

Correct answer is:

e.	Debit Accounts Receivable; Credit Service Revenue

Explanation:

Services have already been provided and hence on billing the entry to be recorded is debit Account receivable and credit Service Revenue

As such option e is correct and other options a, b, c, and d are incorrect.

Answer 5:

Correct answer is:

a.	Interest earned on loaned amounts.

Explanation:

Accrued Interest, Interest payable, Depreciation, Amortization, Prepaid expense are examples of adjusting entry.

Option A relates to accrual of interest revenue and is an example of adjusting entry. Other options are incorrect.