Business Department Course Name: Financial Accounting II

Business Administration and business technology Course Code: BTEC 210 & BADM 105 & ACCT151
Spring Semester 2021-2022
Assignment NO. 1 Total Marks: 10 Marks
Instructor Name: Dr. Khaled AbdElsabour Mohamed No. of Pages: 20 Pages

Question 1: Indicate whether each claim True or False

1. Goods that have been purchased FOB destination but are in transit,
should be excluded from a physical count of goods.
2. Goods out on consignment should be included in the inventory of the
consignor.
3. The first-in, first-out (FIFO) inventory method results in an ending
inventory valued at the most recent cost.
4. If the unit price of inventory is increasing during a period, a company
using the LIFO inventory method will show less gross profit for the
period, than if it had used the FIFO inventory method.
5. A company may use more than one inventory costing method
concurrently.
6. If a company changes its inventory valuation method, the effect of the
change on net income should be disclosed in the financial statements.
7. An error that overstates the ending inventory will also cause net
income for the period to be overstated.
8. Inventory turnover is calculated as cost of goods sold divided by
ending inventory

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9. Under the FIFO method, the costs of the earliest units purchased are
the first charged to cost of goods sold.
10.The cost of goods available for sale is allocated between beginning
inventory and cost of goods purchased.
11.Both accounts receivable and notes receivable represent claims that
are expected to be collected in cash.
12.Uncollectible accounts must be estimated because it is not possible to
know which accounts will not be collected.
13.Allowance for Doubtful Accounts is credited when an account is
determined to be uncollectible.
14.Under the allowance method for uncollectible accounts, the recovery
of an account receivable previously written off results in a credit to the
Bad Debt Expense account.
15.allowance for Doubtful Accounts is a contra account that is deducted
from Accounts Receivable on Balance sheet.
16.The Allowance for Doubtful Accounts is a liability account.
17.A note receivable is a written promise by the maker to the payee to
pay a specified amount of money at a definite time.
18.The two key parties to a note are the maker and the payee.
19.The maker of a promissory note is the party to whom the payment is
to be made.
20.Interest on a 3-month, 3%, $20,000 note is calculated by multiplying
$20,000 x 3% x 3.

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Question 2 : Choose The Correct answer
1. Inventories affect
a. only the balance sheet.
b. only the income statement.
c. both the balance sheet and the income statement.
d. neither the balance sheet nor the income statement
2. Under a consignment arrangement, the
a. consignor has ownership until goods are sold to a customer
b. consignor has ownership until goods are shipped to the
consignee.
c. consignee has ownership when the goods are in the consignee's
possession.
d. consigned goods are included in the inventory of the consignee.
3. Inventorial costs include all of the following except the
a. freight costs incurred when buying inventory.
b. costs of the purchasing and warehousing departments.
c. cost of the beginning inventory.
d. cost of goods purchased

4. Beginning inventory plus the cost of goods purchased equals

a. cost of goods sold.

b. cost of goods available for sale.
c. net purchases.
d. total goods purchased.

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5. A company just starting in business purchased three merchandise
inventory items at the following prices. First purchase $80; Second
purchase $95; Third purchase $85. If the company sold two units for
a total of $240 and used FIFO costing, the gross profit for the period
would be

a. $65.
b. $75.
c. $60
d. 50 $

6. The LIFO inventory method assumes that the cost of the latest
units purchased are
a. the last to be allocated to cost of goods sold.
b. the first to be allocated to ending inventory.
c. the first to be allocated to cost of goods sold.
d. not allocated to cost of goods sold or ending inventory.

7. A company purchased inventory as follows: 200 units at $10,

300 units at $12 The average unit cost for inventory is
a. $10.00.
b. $11.00.
c. $11.20.
d. $12.00.

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 8. Use the following information for questions 8 and 9 :
On May 1, 2021, Tree line Company had beginning inventory
consisting of 100 units with a unit cost of $7. During May, the
company purchased inventory as follows: 200 units at $7 , 300
units at $8 The company sold 500 units during the month for $12
per unit. Tree line uses the weighted average cost method.
The average cost per unit for May is:
a. $7.00
b. $7.50.
c. $7.60.
d. $8.00.

9. The value of Tree line's inventory at May 31, 2008 is:

a. $700.

b. $750.

c. $800.

d. $4,500.

Use the following information for questions 10-12

Tier II Company uses a periodic inventory system. Details for the

inventory account for the month of January, 2021 are as follows:

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 Units Per unit price Total

Balance, 1/1/21 200 $5.00 1,000

Purchase, 100 5.30 530

15/1/21

Purchase, 100 5.50 550

28/1/21

An end of the month (31/1/21) inventory showed that 120 units were
on hand.

10.How many units did the company sell during January, 2021?
a. 80
b. 120
c. 200
d. 280
11. the company uses FIFO, what is the value of the ending
inventory?
a. $520
b. $600
c. $656
d. $1,424
12.i f the company uses LIFO, what is the value of the ending
inventory?
a. $520

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 b. $600
c. $656
d. $1,480

use the following information for questions 13 -14

The following information was available for Carton Company at
December 31, 2021: beginning inventory $90,000; ending
inventory $70,000; cost of goods sold $660,000; and sales $900,000.
13. Carton’s inventory turnover ratio in 2021 was:
a. 9.4 times.
b. 8.25 times.
c. 7.3 times.
d. 6.0 times.
14 . Carton’s days in inventory in 2021 was
a. 38.71 days.
b. 44.0 days.
c. 50.0 days.
d. 60.8 days.

15. Inventory turnover is calculated by dividing cost of goods sold by

a. beginning inventory.
b. ending inventory.
c. average inventory.
d. 365 days.

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16. The term "receivables" refers to

(a) amounts due from individuals or companies.

(b) merchandise to be collected from individuals or companies.

(c) cash to be paid to creditors.

(d) cash to be paid to debtors

17. The account of Allowance for Doubtful Accounts is classified as

a(n)

(a) liability.

(b) contra account to Bad Debts Expense.

(c) expense.

(d) contra account to Accounts Receivable

18. When an account becomes uncollectible and must be written off

(a) Allowance for Doubtful Accounts should be credited.

(b) Accounts Receivable should be credited.

(c) Bad Debts Expense should be credited.

(d) Sales should be debited.

19. The total interest on a $10,000, 4%, 3-month note receivable is

(a) $ 100.

(b) $ 200.

(c) $ 400.

(d) $1,200.
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20. The total interest on a $6,000, 4%, 2-month note receivable is

(a) $ 20

.(b) $ 40

(c) $ 240

(d) $6,040

Question 3
A company reported the current month purchases and sales data for its
only product and uses the perpetual inventory system. Determine the cost
assigned to ending inventory and cost of goods sold using FIFO, LIFO
and weighted average method.

Date Activities Units Acquired at Units sold at

cost retail
April 1 Beginning 50 units @ $ 10
Inventory
4 Purchase 20 units @ $ 15
7 Sales 40 units @ $ 20
10 Purchase 30 units @ $ 20
16 Sales 50 units @ $ 25

Question 4
Use the following information for smart Company to compute inventory
turnover and days' sales in inventory for 2021.
Beginning inventory = 100,000
Ending inventory = 200,000
Cost of goods sold = 450,000
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Question 5
Use the following information for smart Company to compute inventory
turnover for 2021
2020: Ending inventory = 200,000 Cost of goods sold = 900,000
2021: Ending inventory = 300,000 Cost of goods sold = 900,000
Question 6
Use the following information for smart Company to compute and days'
sales in inventory for 2021.
Beginning inventory = 200,000
Ending inventory = 400,000
Cost of goods sold = 900,000
Question 7
Vaughn Company uses the perpetual inventory system and the LIFO
method.
The following information is available for the month of May,2021:

Instructions Prepare a schedule to show cost of goods sold and the

value of the ending inventory for the month of May,2021.

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Question 8
Romano Company uses the perpetual inventory system and had the
following purchases and sales during March,2021.

Question 9
Jansen Company uses the perpetual inventory system and the weighted -
average method to value inventories.
On August 1, there were 10,000 units valued at $40,000 in the beginning
inventory.
On August 10, 20,000 units were purchased for $8 per unit.
On August 15, 24,000 units were sold for $16 per unit.
Calculate the amount charged to cost of goods sold on August 15
Question 10

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Assuming that a perpetual inventory system is used, what is the ending
inventory on a FIFO and LIF0 basis?

Question 11
The following information is available for Manning Company:
Beginning inventory $ 60,000
Cost of goods sold 600,000
Ending inventory 100,000
Sales 750,000 Instructions
Compute each of the following:
(a) Inventory turnover.
(b) Days in inventory.

Question 12
At December 31, 2021, the following information was available for Rich
Company:
ending inventory $22,600;
beginning inventory $21,400;
cost of goods sold $171,000
sales revenue $430,000.
Calculate the inventory turnover ratio and days in inventory for Rich
company.

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 Question 13
The following information was available for Carton Company at
December 31, 2021:
beginning inventory $90,000; ending inventory $70,000; cost of goods
sold $660,000; and sales $900,000.
Calculate Carton’s inventory turnover and Carton’s days in inventory
ratio in 2021.

Question 14
Magic company reported the current month purchase and sales data for its
only product and uses the perpetual inventory system. Determine the cost
assigned to ending inventory and cost of goods sold using FIFO method.
And using the information given below , prepare general journal entries
to record the transactions assuming a credit sale and purchase.
Date Activities Units Acquired at cost Units sold at retail
March 1 Beginning Inventory 100 units @ $15
5 Purchase 75 units @ $ 14
10 Sale 50 units @ $ 35
12 Sales returns 20 units
15 Purchase 150 units @ $ 13
20 Sale 200 units @ $ 30
25 Purchase 125 units @ $ 12
30 Sale 100 units @ $ 33

Question 15
Smart company reported the current month purchase and sales data for its
only product and uses the perpetual inventory system. Determine the cost
assigned to ending inventory and cost of goods sold using LIFO method.
And using the information given below , prepare general journal entries
to record the transactions assuming a cash sale and purchase.

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 Date Activities Units Acquired at cost Units sold at retail
January 1 Beginning Inventory 100 units @ $18
5 Purchase 150 units @ $ 20
7 Purchases Returns 50 units
10 Sale 125 units @ $ 40
15 Purchase 200 units @ $ 22
20 Sale 250 units @ $ 42
25 Purchase 115 units @ $ 24
30 Sale 125 units @ $ 45

Question 16
Bloom company reported the current month purchase and sales data for
its only product and uses the perpetual inventory system. Determine the
cost assigned to ending inventory and cost of goods sold using weighted
average method. And using the information given below , prepare general
journal entries to record the transactions assuming a credit sale and
purchase.
Date Activities Units Acquired at cost Units sold at retail
April 1 Beginning Inventory 100 units @ $10
5 Purchase 50 units @ $ 20
10 Sale 75 units @ $ 25
15 Sales Returns 25 units
20 Purchase 150 units @ $ 15
25 Sale 100 units @ $ 30
Question 17
Use the following information for Razor Company to compute
inventory turnover and days' sales in inventory for 2020.
2019 2020
Net Sales $ 582,000 $ 647,500
Cost of goods sold $ 360,840 $ 388,500
Ending Inventory $ 79,380 $ 77,700

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Question 18
prepare general journal entries without explanations to record the
following transactions. assuming they use the Direct method to account
for uncollectible accounts:
- On Jan 1, Sold merchandise to Hillary Cosmis for $500 on account.
The merchandise cost $300 and the company uses a perpetual
inventory system.
- On Feb 1, Received $150 from Cosmis in cash.
- On Jul 1, Wrote off the balance of Cosmis’ account as
uncollectible.
- On Sep 1, Unexpectedly received payment in full from Cosmis in
cash.

Question 19
On December 31, 2020 statement of financial position of Ocean Breezes
Limited Reported Accounts Receivable of $450,000 and the Allowance
for Doubtful Accounts of $45,000. During 2021, the following
transactions occurred:
1. service revenue billed on account, $1,500,000.
2. collections from customers, $1,300,000.
3. accounts written off $37,000.
4. previously written off accounts of $4,000 were collected (in addition to
the “regular” collections)
Required : Instructions Record the 2021 transactions

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Question 20
Prepare entries to record the following transactions for a company that
uses the perpetual inventory method. assuming they use the Direct
method to account for uncollectible accounts.
- On Jan 5, Sold merchandise to Amy Ward for $1,500, terms n/15.
The merchandise cost $900.
- On Apr 15, Received partial payment of $500 from Amy Ward.
- On Aug 21, Wrote off as uncollectible the balance of the Amy
Ward account when she declared bankruptcy.
- On Oct 5, Received a cheque for $350 from Amy Ward. No further
collections are expected.

Question 21
Prepare journal entries to record the following transactions of Royal
Company , assuming they use the Direct method to account for
uncollectible accounts :
- On January 1 , sold merchandise $6,000 to Smart company on
account .
- On January 10 , Smart Company paid $4,000 in cash .
- On February 25 , Royal Company wrote off the amount owed by
Smart company .
- On April 30 , Smart Company paid $2,000 in cash .

Question 22
Prepare journal entries to record the following transactions of Al-Waha
Company , assuming they use the allowance method to account for
uncollectible accounts :
- On June 1 , sold merchandise $6,000 to Royal company on account
.

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 - On June 10 , Al-Waha company made an estimate that 70% of
accounts receivable will not be collectable.
- On June 20 , Al-Waha Company wrote off $3,000 owed by Royal
company.
- On August 25 , Royal Company paid $6,000 in cash .

Question 23
Record the following transactions for Kit-Kat Corporation:
- On Jul 1, Received a $5,000, 4%, 3-month note, dated July 1, from
Ruth Jordan in payment of her open account. Interest is due at
maturity.
- On Oct 1, Received notification from Ruth Jordan that she is
unable to honour her note at this time. It is expected that Jordan
will pay at a later date.
- On Nov 15, Received full payment from Ruth Jordan for note
receivable previously dishonoured.

Question 24
Prepare journal entries to record the following transactions of SMART
Company :
- On June 1 , sold merchandise $35,000 to Royal company on
account .
- On June 5 ,Royal Company signed a 5%, 30-day, $35,000 note to
Smart Company.
- On July 5 , Royal Company paid the amount owed on cash .

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Question 25
The financial statements of Bolero Manufacturing Inc. report net credit
sales of $900,000 and accounts receivable of $80,000 and $40,000 at the
beginning of the year and end of the year, respectively.
- What is the receivables turnover ratio for Bolero?
- What is the average collection period for accounts receivable in
days (Number of Days in Receivables)?

Question 26
The Wheeler Company had Net Credit Sales of $150,000 during 2021.
The accounts receivables increased $5,000 to $40,000 during the same
time.
- Calculate the Accounts Receivable Turnover and Number of
Days in Receivables.

Question 27
Royal Company had Net Credit Sales of $400,000 during 2021, Average
accounts receivables of $80,000 during the same time.
- Calculate the Accounts Receivable Turnover and Number of
Days in Receivables.

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Question 28
The Connecting Company uses the percent of sales method of accounting
for uncollectible accounts receivable. During the current year, the
following transactions occurred:
- On Sept. 7, Connecting company determined that the $8,100
account receivable of the Helena company was uncollectible, and
wrote it off.
- On Oct. 15, Connecting company determined that the $2,500
account receivable of the Tree company was uncollectible and
wrote it off .
- On Nov 9, Helena company paid $6,000 of the amount owed to the
Connecting company. Connecting company does not expect further
collections from the Helena company .
- On Dec 31, Connecting company estimates that 0.5% of its
$1,900,000 of credit sales would be uncollectible.
Required: Prepare the general journal entries to record these
transactions.

Question 29
Prepare journal entries to record the following transactions of Alfa
Company :
- On March 1 , sold merchandise for $10,000 to Sun company on
account .
- On March 10 , Sun Company signed a 90-day, $10,000 note to
Alfa Company.
- On March 20 , Alfa Company sold $ 10,000 worth of the note
receivable to SAIB bank charged a 2% factoring fee.

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Question 30
Prepare journal entries to record the following transactions of Smart
Company :
- On July 5 , sold merchandise for $15,000 to Magic company on
account .
- On July 15 , Magic Company signed a 60-day, $15,000 note to
Smart Company.
- On July 25 , Smart Company sold $ for 15,000 worth of the note
receivable to QNB bank charged a 3% factoring fee.

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