WSU Accounting 230 Exam 2 Questions And Complete Answers 2024/25 || Verified

What is the primary benefit of using the allowance method of recording accounts receivable (in relation to GAAP)? - Correct Answer Follow GAAP ~matching~ concept to match revenues with expenses/report Accounts Receivable at Net Realizable Value. During the bank reconciliation, what are the two adjustments that are normally made to the bank statement ending balance to arrive at adjusted cash balance? - Correct Answer +Deposits in Transit -Outstanding Checks How do you calculate Net Sales? - Correct Answer Sales - Sales Returns and Allowances - Sales Discounts = Net Sales What does the effect of writing off a bad account under the allowance method have on the accounting equation? - Correct Answer No effect; the Asset account and Contra-Asset account cancel each other out. What are the three cost flow methods of recording inventory? - Correct Answer LIFO, FIFO, and Average-Weighted Cost. What is the primary benefit of choosing the LIFO method of valuing inventory? - Correct Answer Lower Net Income and lower Net Sales; therefore lower income tax expenses. What is the primary benefit of choosing the FIFO method of valuing inventory? - Correct Answer Higher reported net income and net sales, potentially making the company more attractive to investors. Reflects actual physical flow of goods/higher net income in periods of rising prices. The company paid $3,000 for freight charges for inventory they purchased. Write out the journal entry to record this transaction using the perpetual inventory system. - Correct Answer Debit: Inventory $3,000 Credit: Cash $3,000 Why do companies choose to use the multiple-step format of income statement? - Correct Answer Show the revenues and expenses that arise from different types of activities. What is the relationship between Inventory and Cost of Goods Sold? - Correct Answer Goods available for Sale - Ending Inventory = Cost of Goods Sold What are the three classifications of inventory for Manufacturing Companies? - Correct Answer Raw Materials, Work in Process, and Finished Goods. If a company had underestimated the bad debt expense for 2016 by $1,000 at December 31 2015 what does that mean for the calculation of bad debt expense when the year-end adjustment is made at the end of 2016? - Correct Answer Increase the Bad Debt Expense for 2016 by $1,000 over the estimated bad debt account and credit the allowance for the same amount. The company uses the allowance method in recording receivables. The company wrote off a $400 of a bad account. Write out the journal entry to record this transaction. -