ACCOUNTING
ACCOUNTING
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QUESTION 1
- Which of the following statements is FALSE?
In a perpetual inventory system, the “cash register” at the store is a computer terminal that records sales and updates inventory records. | ||
Even in a perpetual inventory system, a business must count inventory at least one a year. | ||
Restaurants and small retail stores often use the periodic inventory system. | ||
In a periodic inventory system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue. |
5 points
QUESTION 2
- Which of the following is true of freight in?
It is an administrative expense. | ||
It is a selling expense. | ||
It is the transportation cost on purchases. | ||
It is the transportation cost on sales. |
5 points
QUESTION 3
- Merchandise inventory accounting systems can be broadly categorized into two types. They are __________.
FIFO and LIFO | ||
perpetual and periodic | ||
wholesale and retail | ||
manufacturer and producer |
5 points
QUESTION 4
- Which of the following is subtracted from net sales revenue to arrive at gross profit on a multi-step income statement?
Cost of goods available for sale
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Cost of goods sold
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Sales discounts and sales returns and allowances | ||
Operating expenses |
5 points
QUESTION 5
- A company that uses the perpetual inventory system purchases inventory for $61,000 on account, with terms of 3/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?
A debit to Accounts Payable for $61,000, a credit to Cash for $59,170, and a debit to Merchandise Inventory for $1,830 | ||
A debit to Accounts Payable for $61,000, a credit to Merchandise Inventory for $1,830, and a credit to Cash for $59,170 | ||
A debit to Merchandise Inventory for $1,830, a debit to Accounts Payable for $61,000, and a credit to Cash for $62,830 | ||
A debit to Accounts Payable for $59,170, a debit to Merchandise Inventory for $1,830, and a credit to Cash for $61,000 |
5 points
QUESTION 6
- What does “2/10” mean, with respect to “credit terms of 2/10, n/30”?
A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date. | ||
Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice. | ||
A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date. | ||
Interest of 10 percent will be charged if invoice is paid after two days. |
5 points
QUESTION 7
- The term “freight out” refers to __________.
transportation costs on purchases | ||
cost of inventory purchased | ||
costs that are not actually paid in cash | ||
transportation costs on sales |
5 points
QUESTION 8
- If goods are sold on terms free on board (FOB) shipping point, the __________.
seller normally pays the transportation costs | ||
buyer normally pays the transportation costs | ||
buyer and the seller split the transportation costs | ||
shipping company bears the transportation cost |
5 points
QUESTION 9
- Changing from the LIFO (Last-In, First-Out) to the specific identification method of valuing inventory ignores the principle of __________.
conservatism | ||
consistency | ||
disclosure | ||
materiality |
5 points
QUESTION 10
- A company decides to ignore a very small error in its inventory balance. This is an example of the application of the __________.
conservatism | ||
materiality concept | ||
disclosure principle | ||
consistency principle |
5 points
QUESTION 11
- A company purchased 400 units for $20 each on January 31. It purchased 520 units for $26 each on February 28. It sold a total of 560 units for $40 each from March 1 through December 31. What is the amount of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.)
$9,360 | ||
$4,960 | ||
$7,200 | ||
$2,240 |
5 points
QUESTION 12
- Which of the following is the correct formula to calculate weighted-average unit cost for merchandise inventory?
Weighted-average unit cost = Cost of goods available for sale + Number of units available | ||
Weighted-average unit cost = Cost of goods available for sale × Number of units available | ||
Weighted-average unit cost = Cost of goods available for sale – Number of units available | ||
Weighted-average unit cost = Cost of goods available for sale / Number of units available |
5 points
QUESTION 13
- Blanchard, Inc. provided the following for 2017:
Cost of Goods Sold (Cost of sales) | $1,200,000 |
Beginning Merchandise Inventory | 325,000 |
Ending Merchandise Inventory | 625,000 |
Calculate the company’s inventory turnover ratio for the year. (Round your answer to two decimal places.)
3.69 times per year | ||
2.53 times per year | ||
1.92 times per year | ||
1.26 times per year |
5 points
QUESTION 14
- Under the weighted-average method for inventory costing, the cost per unit is determined by __________.
dividing the cost of goods available for sale by the number of units available | ||
dividing the cost of goods available for sale by the number of units in beginning inventory | ||
multiplying the number of units purchased with the weighted-average cost | ||
multiplying the cost of goods available for sale by the ending weighted-average cost of the previous accounting period |
5 points
QUESTION 15
- A company purchased 100 units for $30 each on January 31. It purchased 400 units for $20 each on February 28. It sold a total of 470 units for $110 each from March 1 through December 31. If the company uses the last-in, first-out inventory costing method, calculate the amount of ending inventory on December 31. (Assume that the company uses a perpetual inventory system.)
$600 | ||
$2,400 | ||
$900 | ||
$30 |
5 points
QUESTION 16
- Misty, Inc. had 24,000 units of ending inventory that were recorded at the cost of $8.00 per unit using the FIFO method. The current replacement cost is $4.50 per unit. Which of the following amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?
$192,000 | ||
$300,000 | ||
$216,000 | ||
$108,000 |
5 points
QUESTION 17
- Which of the following is the correct formula to calculate inventory turnover?
Inventory turnover = Cost of goods sold / Average merchandise inventory | ||
Inventory turnover = Cost of goods sold × Average merchandise inventory | ||
Inventory turnover = Cost of goods sold + Average merchandise inventory | ||
Inventory turnover = Cost of goods sold – Average merchandise inventory |
5 points
QUESTION 18
- The ending merchandise inventory for the current year is overstated by $25,000. What effect will this error have on the following year’s net income?
The net income will be overstated by $50,000. | ||
The net income will be overstated by $25,000. | ||
The net income will be understated by $25,000. | ||
The net income will be understated by $50,000. |
5 points
QUESTION 19
- A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $10,000 and paid $750 for the freight-in. The company sold the whole lot to a supermarket chain for $14,000 on account. The company uses the specific-identification method of inventory costing. Which of the following entries correctly records the cost of goods sold?
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5 points
QUESTION 20
- A company that uses the perpetual inventory system sold goods for $2,500 to a customer on account. The company had purchased the inventory for $500. Which of the following journal entries correctly records the cost of goods sold?
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5 points