ACC 422 Week 1 CPA Solutions Herc Co.’s inventory on December 31, 2005 was $1,500,000, based on a physical count priced at cost, and before any necessary adjustment for the following: Merchandise costing $90,000, shipped FOB shipping point from a vendor on December 30, 2005, was received and recorded on January 5, 2006. Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2006. The goods, billed to the customer FOB shipping point on December 30, 2005, had a cost of $120,000. What amount should Herc report as inventory in its December 31, 2005, balance sheet? $1,500,000 $1,590,000 $1,620,000 $1,710,000 In 2005, Cobb adopted the dollar-value LIFO inventory method. At that time, Cobb’s ending inventory had a base-year cost and an end-of-year cost of $300,000. In 2006, the ending inventory had a $400,000 base-year cost and a $440,000 end-of-year cost. What dollar-value LIFO inventory cost would be reported in Cobb’s December 31, 2006, balance sheet? $440,000 $430,000 $410,000 $400,000 Garson Co. recorded goods in transit purchased FOB shipping point at year-end as purchases. The goods were excluded from the ending inventory. What effect does the omission have on Garson’s assets and retained earnings at year end? Assets Retained earnings No effect Overstated No effect Understated Understated No effect Understated Understated The following information applied to Fenn, Inc. for 2005: Merchandise purchased for resale $400,000 Freight-in 10,000 Freight-out 5,000 Purchase returns 2,000 Fenn’s 2005 inventoriable cost was $400,000 $403,000 $408,000 $413,000 In accordance with ASC Topic 255, the Consumer Price Index for All Urban Consumers is used to compute information on a Historical cost basis. Current cost basis. Constant dollar basis. Nominal dollar basis. If current assets exceed current liabilities, payments to creditors made on the last day of the month will Decrease current ratio. Increase current ratio. Decrease net working capital. Increase net working capital. At the end of its first year of operations, December 31, year 1, Wonder Company had a net realizable value of accounts receivable of $500,000. During year 1 Wonder recorded charges to bad debt expense of $80,000 and wrote off as uncollectible accounts receivable of $20,000. What should Wonder report on its balance sheet at December 31, year 1, as accounts receivable before the allowance for doubtful accounts? $500,000 $520,000 $560,000 $600,000 A company is in its first year of operations and has never written off any accounts receivable as uncollectible. When the allowance method of recognizing bad debt expense is used, the entry to recognize that expense Increases net income. Decreases current assets. Has no effect on current assets. Has no effect on net income. When the allowance method of recognizing bad debt expense is used, the allowance for doubtful accounts would decrease when a(n) Specific account receivable is collected. Account previously written off is collected. Account previously written off becomes collectible. Specific uncollectible account is written off. In accordance with ASC Topic 860, Transfers and Servicing, all of the following would be disclosed except for Carrying amount and classification of pledged assets as collateral that are reclassified and separately reported on the balance sheet. The policy for requiring collateral or other security related to repurchase agreements or securities lending transactions. Amounts of servicing assets and liabilities recognized and amortized during the period. Accounting policies for measuring the retained interest in securitized financial assets.