ACCOUNTING

ACCOUNTING

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QUESTION 1

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

1. 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

1. 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

1. 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
		Cost of goods sold
		Sales discounts and sales returns and allowances
		Operating expenses

5 points   

QUESTION 5

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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

1. 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?

		Cost of Goods Sold     10,750       Merchandise Inventory       10,750
		Merchandise Inventory     10,750       Cost of Goods Sold       10,750
		Cost of Goods Sold     10,000       Sales Revenue       10,000
		Cost of Goods Sold     10,000       Merchandise Inventory       10,000

5 points   

QUESTION 20

1. 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?

		Cost of Goods Sold         500       Sales Revenue           500
		Merchandise Inventory         500       Cost of Goods Sold           500
		Cost of Goods Sold         500       Merchandise Inventory           500
		Accounts Receivable         500       Sales Revenue           500

5 points