Exam 2 Review: Handout
Supplemental Instruction
Iowa State University / Leader:
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  1. On October 1, 2010, Jenson CO. paid $75,000 for its rent for the five months from October 2010 through February 2011. The entire amount of the payment was recorded in the Prepaid Rent account. No adjustments have been recorded relating to this account. If the company makes an adjustment as of December 31, 2010, what amount should be included in the related adjusting journal entry?
  2. $30,000
  3. $45,000
  4. $60,000
  5. $75,000
  6. The Property . A company had been selling its product for $20 per unit, but recently lowered the selling price to $15 per unit. The company's current inventory consists of 200 units purchased at $16 per unit. The replacement cost of this merchandise is currently $13 per unit. At what amount should the company's inventory to be reported on the balance sheet under the lower of cost or market rule?
  7. 2,600
  8. 3,200
  9. 3,000
  10. 4,000
  11. Which of the following statements regarding closing journal entries is correct?
  12. Closing entries transfer net income (or loss) to the Retained Earnings account.
  13. The balance of the Dividends Declared account is transferred to the Retained Earnings account when closing entries are recorded
  14. All income statement accounts and the Dividends Declared account are reset to zero in the closing entry process
  15. All of the above are correct statements
  16. Toyota Inc. began the year with supplies on hand of $43,600. In May and October they purchased $4,700 in supplies. A physical count at year end showed they had $21,850 of supplies left on hand. What amount should Toyota Inc. record as their supplies expense for the year?
  17. $9,400
  18. $21,850
  19. $31,150
  20. $25,550
  21. Which of the following is not a part of the fraud triangle?
  22. Opportunity to commit fraud
  23. Effective internal controls
  24. Incentive to commit fraud
  25. Character to rationalize and conceal fraud
  26. What item listed below is an item on the bank reconciliation that the bank doesn’t know about?
  27. Outstanding check
  28. Interest deposited
  29. NSF checks
  30. Service charges
  31. Consider the following information: beginning inventory (physically counted) was $4,000, ending inventory (physically counted) was $2,000; purchases during the period totaled $10,000; and the recorded cost of goods sold during the period totaled $9,000. What was the amount of shrinkage during the period?
  32. $1,000
  33. $2,000
  34. $3,000
  35. $5,000
  36. Apple Inc. had beginning inventory of $379,000, ending inventory of $124,000, and purchases of $200,000. What was their cost of goods available for sale (COGAS) and cost of goods sold (COGS) for the year respectively?

COGAS COGS

  1. $579,000 and $455,000
  2. $455,000 and $579,000
  3. $179,000 and $55,000
  4. $55,000 and $179,000
  1. When a perpetual inventory system is used, recording a sale on account (on the day of the sale) would involve all of the following accounts except:
  2. Sales Discounts
  3. Cost of Goods Sold
  4. Inventory
  5. Sales Revenue
  6. Klem Corp. makes a $1,000 sale to a customer with terms of 2/15.n/45. The customer the returns $200 of the merchandise. If the customer pays Klem within the discount period, what is the total amount that the customer will remit to Klem Corp. in full payment of its account?
  7. $800
  8. $784
  9. $980
  10. $1,000
  11. Which of the following is not a type of inventory?
  12. Finished Goods
  13. FOB destination
  14. Work in Process
  15. All of the above
  16. Which of the following statements regarding the lower-of-cost or market rule is correct?
  17. One of the most common types of financial statement errors is to estimate themarket value of inventories incorrectly
  18. It ensures that inventories are always reported at what they are worth
  19. Replacement cost must be used when inventories fall below or rise above original cost
  20. Market value can fall below cost when an item can be easily replaced by identical goods at a higher cost
  21. Barnett Co. reports beginning inventory of $62,000, ending inventory of $73,000, Cost of Goods Sold of $330,000, and Net Sales of $700,000. What is the inventory turnover ratio?
  22. 4.89 times
  23. 7.05 times
  24. 8.31 times
  25. None of the above

Akin Corp had the following information:

Jan. 1 Beginning Inventory is comprised of 7 units @ $20 each

Apr. 13Purchased 8 units @ $22 each

Aug. 31Purchased 25 units @ $25 each

Dec. 28 Sold 30 units

  1. What is LIFO COGS using the above information?
  2. 735
  3. 710
  4. 800
  5. 691
  6. What is the FIFO COGS using the above information
  7. 756
  8. 691
  9. 815
  10. 745
  11. On February 1 Google borrowed $11,000 and signed a note that promises repayment in a year. During the year Google incurred $165 of interest expense. The adjusting entry will include…
  12. Debit to Interest Expense of 165
  13. Debit to Interest Payable of 165
  14. Credit to Interest Expense of 165
  15. Credit to Interest Payable of 11,000
  16. If ending inventory is understated in the current year
  17. COGS will be overstated in the following year
  18. COGS will be understated in the following year
  19. Retained earnings will be understated in the following year.
  20. Net income will be understated in the following year
  21. Inventory belongs to the customer the second it leaves the seller’s location in _____
  22. FOB Shipping Point
  23. FOB Destination
  24. Target had beginning inventory equal to 1,000 and ending inventory equal to 2000. COGS was equal to 6,000. What was there days to sell?
  25. 84 Days
  26. 99 Days
  27. 91 Days
  28. 87 Days
  29. Net Sales were 10,000. Income from operations was equal to 3,000 and operating expenses were 1,500. What was COGS?
  30. 6000
  31. 10,500
  32. 5,500
  33. 4500