ACC 2024 Exam 2 Questions & Answers 2024/2025
FOB distribution definition - ANSWERSsellers responsible until it gets to the destination
FOB Shipping point definition - ANSWERSMinute firm gets t-shirt to ship becomes customers shirt
How to deal with sale discounts, returns and allowances,...
FOB distribution definition - ANSWERSsellers responsible until it gets to the destination
FOB Shipping point definition - ANSWERSMinute firm gets t-shirt to ship becomes customers shirt
How to deal with sale discounts, returns and allowances, and credit card charges? - ANSWERSCompanies
record sales discounts, sales returns and credit card discounts separately to allow management
monitoring of these transactions
What does Net sales consist of? - ANSWERS- sales revenue
- less contra-revenue accounts
- sales returns and allowances
- cash discounts
- credit card discounts
Assume a customer bought $3,000 of merchandise using a VISA card and the company has an agreement
calling for 1.5% fee with VISA. What would the journal entry look like upon the sale? - ANSWERSCash
3000 x .985 2955
Credit Card Discount 3000 x .015 45
Sales 3000
2/10, n/30 : meaning of numbers - ANSWERS- two ten, net thirty
- 2 is percentage of discount
- 10 is number of days discount is available
- n indicates if not paid with the discount period, full amount is due
- 30 is days when full amount is due
,On January 6, Timberland sold $1,000 of merchandise on credit with terms of 2/10, n/30. Prepare the
Timberland Journal Entry - ANSWERSAccounts Receivable 1000
Sales 1000
On January 14, Timberland receives the appropriate payment from the customer for the January 6 sale.
What is the correct journal entry? - ANSWERSCash 980
Cash Discount 20
Accounts Rec. 1000
If the customer remits the appropriate amount on January 20 instead of January 14, what entry would
Timberland make? - ANSWERSCash 1000
Account Rec. 1000
What do cash discounts encourage? - ANSWERSearly payment
What do trade discounts encourage? - ANSWERSSales
- lower price for higher volumes
- end of season discounts
What are trade discounts absorbed into? - ANSWERSrevenues
A merchant provides a service with a retail value of $100 and Groupon sells a coupon to receive the
service for $50. Groupon receives $50 and pays the merchant $25. What is the journal entry and should
it be the gross amount owed to the merchant or net? - ANSWERS- Gross amount owed
Cash 50
Sales 50
Expense 25
Payable to Merchant 25
, Primary Considerations for reporting gross - ANSWERS- company must be the primary obligor
- it should be responsible for providing the product or service desired by the customer
- groupon should recognize gross revenue only if it is the primary obligor
Examples of Account Receivables - ANSWERS- customers
- short term
Examples of Notes Receivables - ANSWERS- longer term
- unique contracts
T/F? Groupon had been reporting its revenues at the gross amount but the SEC made them restate their
financial statements to report its revenues at net because Groupon is not primarily responsible for
providing the underlying service? - ANSWERSTrue
How should accounts receivable be recognized on the balance sheet? - ANSWERS- the amount the
company thinks it will collect
Under the matching principle, what should expense be matched to? - ANSWERSSales
Under the matching principle, when should bad debts be recognized? - ANSWERSin the period of sale
Assume that in 2015 Gophers Inc. had $1,000,000 of credit sales and estimates its bad debts to be 3% of
credit sales. What entry is requested to recognize bad debts in the year of the sales? and effect on
equation? pg 78 - ANSWERSBad debit expense 30,000
Allowance for Doubtful Acc. 30,000
- do accounting equations on paper
Assume at the end of 2015 the total accounts receivable for Gophers is $80,000 and the allowance for
doubtful accounts has a $5,000 balance before the entry to recognize the bad debt expense. What is the
net book value of the accounts receivable after the above entry? pg 78 - ANSWERS$45,000
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