Accounting AIAF114 Exam 2 Questions
with Correct Answers
FOB shipping point - ANSWER-Freight terms indicating that ownership of goods passes
to the buyer when the shipping company accepts the goods from the seller.
FOB destination - ANSWER-Freight terms indicating that ownership of goods remains
with the seller until the goods reach the buyer.
Net Revenue - ANSWER-a company's total revenues less any credit card or cash
discounts, returns, and allowances
How do credit card discounts appear in a journal entry? How do they affect cash? -
ANSWER-They appear as an expense and therefore are debited. Cash is debited as
the difference between sales revenue and the credit card discount.
T/F Credit Card Discounts reduce the amount of revenue recorded - ANSWER-False.
They reduce cash receipts
What type of account is Credit Card Discounts? - ANSWER-Contra-Revenue Account
(Stockholder's equity)
Interpret 2/10 n/30 - ANSWER-A sales discount of 2% if paid within 10 days.
Net payment of returns and allowances must be paid within 30 days.
What type of account is Sales Returns and Allowances? - ANSWER-Contra-Revenue
Account (Stockholder's equity)
When recording a return, what must be accounted for beyond Accounts receivable and
Revenues? - ANSWER-Inventory and Cost of Goods Sold
Terms to describe Accounts Receivable - ANSWER-Trade, Sales, Short-term
Terms to describe Notes Receivable - ANSWER-Nontrade, Interest, Long-term
write off a debt - ANSWER-cancel the record of a bad debt
AJE for Bad Debt - ANSWER-Bad Debt Expense is debited
Allowance for Doubtful Accounts is credited
Journal Entry for write-off - ANSWER-Allowance for Doubtful Accounts is debited
Accounts Receivable is credited
, Net accounts receivable - ANSWER-The difference between gross accounts receivable
and the allowance for uncollectible accounts
Ending balance in accounts receivable - ANSWER-Beginning + new credit sales
Less: Cash collection from customers, Write-offs
Ending balance in Allowance for Doubtful Accounts - ANSWER-Beginning + Bad Debt
Less: Write-offs
When calculating Bad Debt Expense with the aging method, - ANSWER-you must
account for the difference between beginning ADA balance and estimated uncollectable
for the period
Adjustments from the bank for the book ledger's cash balance - ANSWER-+Interest
income
-Not Sufficient Funds Checks (cash must return to accounts receivable)
-Bank Fees
+- Erros
Adjustments from the book ledger for the bank account's cash balance - ANSWER--
Outstanding checks (checks yet to be withdrawn from account)
+Deposits in transit (pending deposits)
+- Errors
Inventory Definition - ANSWER-All tangible property; Goods held for sale or used to
produce goods ready for sale
3 kind of manufacturing inventory - ANSWER-Raw Materials
Works in Progress
Finished Goods
How Manufacturing inventories exchange goods between eachother - ANSWER-The
value of raw material inventory used to make a works in progress transfers into the WIP
inventory, etc for Finished goods
Value of inventory - ANSWER-Historical Cost
Add: Shipping, Storage
Less: Supplier returns, purchase discounts
What costs are capitalized into the value of Works in Progress Inventory? - ANSWER-
Raw Material Inventory used
Direct Labor incurred
Factory Overhead incurred
How to relate inventory with cost of goods sold - ANSWER-When finished goods
inventory is reduced, it directly increased the cost of goods sold
with Correct Answers
FOB shipping point - ANSWER-Freight terms indicating that ownership of goods passes
to the buyer when the shipping company accepts the goods from the seller.
FOB destination - ANSWER-Freight terms indicating that ownership of goods remains
with the seller until the goods reach the buyer.
Net Revenue - ANSWER-a company's total revenues less any credit card or cash
discounts, returns, and allowances
How do credit card discounts appear in a journal entry? How do they affect cash? -
ANSWER-They appear as an expense and therefore are debited. Cash is debited as
the difference between sales revenue and the credit card discount.
T/F Credit Card Discounts reduce the amount of revenue recorded - ANSWER-False.
They reduce cash receipts
What type of account is Credit Card Discounts? - ANSWER-Contra-Revenue Account
(Stockholder's equity)
Interpret 2/10 n/30 - ANSWER-A sales discount of 2% if paid within 10 days.
Net payment of returns and allowances must be paid within 30 days.
What type of account is Sales Returns and Allowances? - ANSWER-Contra-Revenue
Account (Stockholder's equity)
When recording a return, what must be accounted for beyond Accounts receivable and
Revenues? - ANSWER-Inventory and Cost of Goods Sold
Terms to describe Accounts Receivable - ANSWER-Trade, Sales, Short-term
Terms to describe Notes Receivable - ANSWER-Nontrade, Interest, Long-term
write off a debt - ANSWER-cancel the record of a bad debt
AJE for Bad Debt - ANSWER-Bad Debt Expense is debited
Allowance for Doubtful Accounts is credited
Journal Entry for write-off - ANSWER-Allowance for Doubtful Accounts is debited
Accounts Receivable is credited
, Net accounts receivable - ANSWER-The difference between gross accounts receivable
and the allowance for uncollectible accounts
Ending balance in accounts receivable - ANSWER-Beginning + new credit sales
Less: Cash collection from customers, Write-offs
Ending balance in Allowance for Doubtful Accounts - ANSWER-Beginning + Bad Debt
Less: Write-offs
When calculating Bad Debt Expense with the aging method, - ANSWER-you must
account for the difference between beginning ADA balance and estimated uncollectable
for the period
Adjustments from the bank for the book ledger's cash balance - ANSWER-+Interest
income
-Not Sufficient Funds Checks (cash must return to accounts receivable)
-Bank Fees
+- Erros
Adjustments from the book ledger for the bank account's cash balance - ANSWER--
Outstanding checks (checks yet to be withdrawn from account)
+Deposits in transit (pending deposits)
+- Errors
Inventory Definition - ANSWER-All tangible property; Goods held for sale or used to
produce goods ready for sale
3 kind of manufacturing inventory - ANSWER-Raw Materials
Works in Progress
Finished Goods
How Manufacturing inventories exchange goods between eachother - ANSWER-The
value of raw material inventory used to make a works in progress transfers into the WIP
inventory, etc for Finished goods
Value of inventory - ANSWER-Historical Cost
Add: Shipping, Storage
Less: Supplier returns, purchase discounts
What costs are capitalized into the value of Works in Progress Inventory? - ANSWER-
Raw Material Inventory used
Direct Labor incurred
Factory Overhead incurred
How to relate inventory with cost of goods sold - ANSWER-When finished goods
inventory is reduced, it directly increased the cost of goods sold
