ACTG Practice Exam | 100% Correct Answers | Verified | Latest 2024 Version

A company uses the Allowance method of accounting for Bad Debts. This means that in the period when an Account Receivable actually becomes uncollectible, the company will reduce Accounts Receivable and: - Decrease the Allowance for Doubtful Accounts account (This is a "write-off". The journal entry is a debit to Allowance for Doubtful Accounts and credit to Accounts Receivable.) The concept of "accrual" accounting - Recognizes revenues when they are earned, and expenses when they are incurred. The beginning balance in Accounts Receivable was $5,000. Sales on account amounted to $20,000 and sales for cash amounted to $18,000. During the period, $7,000 of Accounts Receivable was written off. If the ending balance in accounts receivable was $1,200, the amount of cash collected from customers is: - 16,800 (When sales revenue occurs and cash is immediately collected, you increase (debit) Cash and increase (credit) Revenue. Therefore, the $18,000 is not included as an increase (debit) in A/R. The $7,000 write-off decreases A/R.) Our customer pays us in advance $500 for services which our company is to provide in a future period. This event: - Increases Assets and increases Liabilities Which of the following accounts are NOT found in the "Closing Entry - contributed capital As a piece of equipment or property loses its value due to usage or the mere passage of time, the company records an entry which: - Credits Accumulated Depreciation If we provide cash to our vendor in a period before the expense is actually incurred & recorded, the expense is known as: - deferral or deferred expense ABC Company purchases 150 units of inventory at $400 each, under terms of FOB Shipping Point, 2-10- Net 30. They pay $6 per unit transportation costs on inbound freight with cash. They pay the vendor's invoice early, taking the early-payment cash discount. This means that one unit of inventory now has a total acquisition cost of: - 398 (Set up an inventory T-account to help you solve this problem. Update the T-account after each event takes place, starting with buying the inventory on account for $60,000 (= 150 units * $400). The journal entry is a debit to Inventory and credit to Accounts Payable.Next, record the cash payment of the freight expense of $900 (= 150 units * $6) as a debit to Inventory and credit to Cash. The Inventory account incr