Question

25) Z-Mart made a bank deposit on September 30 that did not appear on September's bank statement. In preparing September's bank reconciliation, the company should

A Deduct the deposit from September's book balance and add it to October's book balance

B Add the deposit to the book balance of cash

C Deduct the deposit from the bank statement balance

D Send the bank a debit memorandum

E Add the deposit to the bank statement balance

24) In reconciling the bank balance, an unrecorded debit memorandum for printing cheques should be *

A Noted as a memo

B Added to the bank balance of cash

C Added to the book balance of cash

D Deducted from the bank balance of cash

E Deducted from the book balance of cash

23) DVDs usually sell for $14 per unit, and have a profit margin of 25%. However, the expected selling price has fallen to $7 per unit. The Movie Company's current inventory includes 200 units purchased at $10 per unit. Calculate the value of the inventory at the lower of cost and net realizable value.

A $1,400

B $1,800

C $1,350

D $2,000

E $1,500

22) The difference between a company's gross profit on sales and total operating expenses is

A Income from operations

B Net sale

C Profit

D Income summary

E Net loss

21) A debit to Sales Returns and Allowances and a credit to Accounts Receivable *

A Recognizes that a customer returned merchandise

B Requires a debit memorandum to recognize the customer's return

C Is not possible; it should be a credit to Sales Returns and Allowances and a debit to Accounts Receivable

D All of the above

E Recognizes a cash discount taken by a customer

Answer 1

Q.No.	Correct Option	Reason
25	Correct Option E i.e. Add the deposit to the bank statement balance	It does not require to record in books, because it is just due to time difference,
24	Correct Option E i.e. Deducted from the book balance of cash	It is deducted because it was not recorded in books, now recorded.
23	Correct Option A $1400	inventory units are valued at lower of historical cost of net realizable which ever is lower
		Historical cost	Net realizable value	Lower of two
		2000	1400	1400
22	Correct Option A i.e. Income from operations	Income from operations = Gross Profit - Operating expense
21	Correct Option A i.e. Recognizes that a customer returned merchandise	When customer returned the sale earlier made to him, sales return and allowance is debited and accounts receivable is credited