ACCOUNTING

The inventory system continually adjusts inventory throughout the accounting period is called the ________ inventory system

Perpetual

Which of the following define the terms 2/10, n/30?

The buyer will receive a 2% discount if payment is made within 10 days; otherwise the full payment is due in 30 days.

On a multistep income statement, gains and losses are shown ______.

after operating income

Accounting information is used by ______.

all business and organizations

Paying cash for freight costs on inventory delivered to customers impacts ______.

all financial statements

FOB shipping point establishes that the ________ is responsible for shipping costs, while FOB destination established that the _______ is responsible.

buyer, seller

To enable meaningful comparisons between companies of different sizes, analysts prepare ____________ financial statement

common, size or sized

Cost of goods available for sale is allocated between ending inventory and ______.

cost of goods sold

Recognizing transportation-in costs that are paid in cash ______ the amount of cash flow from operating activities.

decreases

If a merchandising company sells land for more than its cost, it will report a(n) ______.

gain on the sale of land

Gross margin appears on the ______.

income statement

When a company purchases inventory using the perpetual inventory system, the balance in the inventory account ______.

increases

When a company returns merchandise inventory that was originally purchased on account, net income ______.

is not affected

Which of the following stakeholders would most likely use managerial accounting information?

manager of restaurant

The products merchandising companies sell to customers are called

merchandise inventory

The products that merchandising companies sell to their customers are called merchandise

merchandise inventory

Ernst and Young, a public accounting firm, is a service business, while Walmart is a real-world ______ business

merchandising

Knowledgeable investors will be more attracted to companies that choose the inventory value method that ______.

minimizes tax expense

Gross margin is equal to sales revenue ______.

minus cost of goods sold

Income statements that display additional relationships rather than a single comparison of all revenues minus all expenses are called ________ income statements

multistep

The base figure used for common size income statements is usually ______.

net sales

The gross amount of sales minus sales returns and allowances and sales discounts is called ______.

net sales

Recording a purchase discount impacts ______.

only the balance sheet

Accepting a sales return or allowance on merchandise that had been sold on account affects ______.

only the balance sheet and income statement

Product costs include the ______.

purchase price of an item held for resale -cost paid to have an item delivered to a retail company

When merchandise inventory is purchased for cash, total assets ______.

remain unchanged

The specific identification cost flow method is most likely to be used when ______.

sales volume is low and cost per unit of inventory is high

Merchandising businesses generate revenue by ______.

selling goods to customers

When inventory is sold for cash, the sales part of the transaction represents a(n) ______.

source of assets

True or false: Operating income is the amount of income that is generated from the normal recurring operations of a business.

true

When inventory is sold for cash, the expense recognition part of the transaction represents a(n) ______.

use of assets

Product costs are normally expensed in the period ______.

when inventory is sold

When merchandise inventory is purchased on account, total assets ______.

will increase

remain unchanged

will increase

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assuming BLC uses double-declining-balance depreciation, depreciation expense for Year 2 is ______.

12,000

Kate Company submitted an offer to purchase a plot of land that was listed at $120,000. Kate's offer was 10% below the list price and was accepted. Kate paid $10,000 to remove an old structure in order to make the land ready for use as a building site. Title and attorney fees amounted to $3,000. Annual property taxes amounted to $5,000 per year. Based on this information, the cost of the land as shown on the balance sheet equals ______.

121,000

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. At the start of Year 2, BLC determined the limo will only last for a total of 3 years. Assuming the salvage value did not change, the depreciation expense recorded in Year 2 will be $

15,000

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. During the year, Benson sold 700 units. If Benson uses LIFO, cost of goods sold equals ______.

150,500

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. BLC uses the straight-line depreciation method. At the beginning of Year 3, BLC spent $6,000 to replace the engine of the limo, thereby extending the useful life of the asset by 2 years. Based on this information, the accumulated depreciation shown on the Year 3 balance sheet will be ______.

20,500

Cash discount terms 2/15, n/45 mean that the total amount due must be paid within Blank 1Blank 1 30 , Incorrect Unavailable days and a 2% discount will be granted on any payment made within Blank 2Blank 2 10 , Incorrect Unavailable days.

45, 15

The cost of a building includes ______.

=purchase price -renovation costs -realtor commissions

The measurement rules established by the Financial Accounting Standards Board are called

Blank 1: generally Blank 2: accepted Blank 3: accounting Blank 4: principle

How will the adjusting entry that recognizes the inventory shrinkage affect the statement of cash flows?

Cash flow from operating activities will not be affected.

Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses FIFO cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is ______.

$100

Inventory item 101 purchased in October cost $100. Inventory item 102 purchased in November cost $110. The two inventory items are identical in all respects, except the price paid to acquire them. The business uses the Last-in, first-out (LIFO) cost flow method. If item 101 is sold to a customer, the amount assigned to cost of goods sold is ______.

$110

Which of the following items appear on the balance sheet?

-Merchandise Inventory - cash

A company granted a sales discount under terms 2/10, n/30. Recognizing (recording) the sales discount ______.

-reduces accounts receivable -increases cash

Inventory shrinkage may be caused by ______.

-lost or damaged inventory -shoplifting

The purchase of merchandise on account affects ______.

-total liabilities -total assets

Price reductions offered by retailers to encourage buyers to pay promptly are called

sale discount

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. During the year, Benson sold 700 units. If Benson uses the weighted-average cost flow method, cost of goods sold equals ______.

$148,400.

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. During the year, Benson sold 700 units. If Benson uses LIFO, cost of goods sold equals ______.

$150,500

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assume BLC uses straight-line depreciation. At the beginning of Year 3, the limo is sold for $30,000 cash. As a result of the asset disposal BLC will recognize a ______.

$30,000 cash inflow from investing activities.

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the weighted-average cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______

$32

Ted's Sports Center purchased two identical basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. Assume Ted's uses the last-in, first-out (LIFO) cost flow method. If Ted's sells one of the balls in August, which of the following amounts would be charged to the Cost of Goods Sold account?

$34

If cost of goods available for sale is $60,000, beginning inventory is $10,000 and ending inventory is $12,000, cost of goods sold is ______.

$48,000 Reason: $60,000 cost of goods available for sale - $12,000 ending inventory = $48,000

Jay Co. sold merchandise with a list price of $6,000 on account. The merchandise cost Jay $3,200 and was sold with payment terms of 2/10, n/30. Recording this transaction increases Accounts Receivable by ______.

$6,000

Most companies report interest as ______.

- a nonoperating item on the income statement and in operating activities on the statement of cash flows SFAS 15 requires that interest be reported as an operating cash flow on the statement of cash flows.

The Merchandise Inventory account appears on the ______.

- balance sheet

Revenue minus cost of goods sold is called: (Select all that apply.)

- gross margin. - gross profit.

Period costs include ___.

- sales commissions - administrative salaries - interest

Arron Company had beginning inventory of 200 units that cost $200 each. During the year, Arron made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 300 units that cost $220 each. Assuming Arron uses LIFO and sells 800 units of inventory during Year 2, the amount of cost of goods available for sale equals $

-211,000 -171,000 -40,000

A company granted a sales discount under terms 2/10, n/30. How will recognizing the sales discount affect the balance sheet? (Select all that apply.)

-Assets will decrease. -Stockholders' equity will decrease.

Which of the following items appears on the income statement?

-Cost of Goods Sold -Gross Margin -Selling and Administrative Expenses

Which of the following statements are true?

-Period costs are expensed in the period in which they are incurred. -Product costs are expensed in the period in which inventory is sold.

When goods are sold, the product cost transferred to Cost of Goods Sold includes a proportionate share of ______.

-adjustments for purchase returns and allowances -transportation-in

Intangible assets may have ______.

-an indefinite useful life -a legal useful life -an identifiable useful life

Costs related to long-term assets are expensed in the period incurred when they ______

-are for minor repairs -are for routine maintenance

Recognizing transportation-out costs that are paid in cash decreases ______.

-assets -stockholders' equity

When goods are delivered FOB shipping point and freight costs are paid in cash, the ______.

-cash account decreases -inventory account increases

A capital expenditure that extends the useful life of a building will ______.

-decrease the balance in the Accumulated Depreciation account -increase the book value of the building

A purchase discount ______.

-does not impact the income statement -decreases liabilities

The recognition of depletion affects the ______.

-income statement -balance sheet

Recording the transactions for accepting a sales return of merchandise sold on account ______.

-increases merchandise inventory -both increases and decreases retained earnings

Resource providers use accounting information to identify companies with high earnings potential because those companies are better able to ______.

-pay higher salaries -make interest payments -share profits

The recognition of cash paid for a capital expenditure that increases the useful life of an existing asset will result in changes to the company's ______.

-statement of cash flows -balance sheet

Stair Company accepted a credit card with a fee for services rendered. As a result of this transaction ______.

-total assets increased -stockholders' equity increased -recorded revenue exceeds accounts receivable

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. At the start of Year 2, BLC determined the salvage value should be changed to $11,000. Based on this, the depreciation expense recorded in Year 2 will be $

9000

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assuming BLC uses straight-line depreciation, depreciation expense for Year 1 is $

10,000

Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses the weighted-average cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is ______.

105

Inventory item 101 cost $100. Inventory item 102 cost $110. If the business uses the specific identification cost flow method and Item 102 is sold to a customer, the amount assigned to cost of goods sold is ______.

110

The Black Limo Company (BLC) purchased a limo on January 1, of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assume BLC uses straight-line depreciation. At the beginning of Year 3, the limo is sold for $30,000. As a result of the asset disposal, BLC will recognize a ______.

2000 gain

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assuming BLC uses double-declining-balance depreciation, depreciation expense for Year 1 is ______.

24000

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. BLC expected to drive the limo for 100,000 miles before disposing of it. The limo had a $8,000 salvage value. Actual miles driven per year turns out to be 30,000 miles in Year 1, 40,000 miles in Year 2, 20,000 miles in Year 3, and 25,000 miles in Year 4. Based on this information, at the end of Year 2, the accumulated depreciation shown the balance sheet was

28,000

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the FIFO cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______

30

Ted's Sports Center purchased two identical basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. Assume Ted's uses the last-in, first-out (LIFO) cost flow method. If Ted's sells one of the balls in August, which of the following amounts would be charged to the Cost of Goods Sold account?

34

A company purchased inventory under terms 2/10, n/30. The effective annual interest rate for the cash discount is ______.

36.5%

A company purchased inventory under terms 2/10, n/30. The effective annual interest rate for the cash discount is ______.

36.5%.

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. BLC uses the straight-line depreciation method. At the beginning of Year 3, BLC changed the estimated useful life from 4 years to 7 years. Based on this information, the amount of depreciation expense shown on the Year 3 income statement will be ______.

4000

Company ING made a cash payment for the $6,000 balance due on the account payable. What is the impact on the statement of cash flows?

Cash outflow for operating activities increases.

True or false: When goods are sold, the product cost transferred to Cost of Goods Sold includes a proportionate share of both transferred-in and transferred-out costs.

False

Which financial statement is not affected when merchandise inventory is purchased for cash?

Income Statement

Ron Company sold land that cost $150,000 for $160,000. The company also sold inventory that cost $60,000 for $85,000. Based on this information, the company will report ______

a gain of $10,000 and gross margin of $25,000

When inventory is sold for cash, the sales part of the transaction impacts ______.

all financial statements

When inventory is sold for cash, the expense recognition part of the transaction represents a(n) ______.

asset exchange

Merchandise inventory appears on the ______.

balance sheet

The Merchandise Inventory account appears on the ______.

balance sheet

Cost of goods available for sale is the amount of the ______.

beginning inventory + purchases made during the accounting period

Cost of goods available for sale is calculated as ______.

beginning inventory balance + inventory purchased during the period

Gains and losses are shown on the income statement ____ included in the operating activities section of the statement of cash flows.

but not

The term used to recognize expense for natural resources is ______.

depletion

The term used to recognize expense for property, plant, and equipment is ______.

depreciation

True or false: Because it is highly liquid, inventory is generally presented above accounts receivable on the balance sheet.

false

True or false: Cost of Goods Sold is allocated between Cost of Goods Available for Sale and Merchandise Inventory.

false

Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $24 gross margin?

first in, first out

product costs are also called _______ costs

inventory

When a company returns merchandise that was previously purchased on account, cash flow from operating activities ______.

is not affected

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the specific identification cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______

may be $30 or $34

The products merchandising companies sell to customers are called ______.

merchandise inventory

The adjusting entry for shrinkage impacts ______.

only the balance sheet and income statement

When inventory is sold for cash, the expense recognition part of the transaction impacts ______.

only the balance sheet and income statement

Paying the balance in accounts payable impacts ______.

only the balance sheet and statement of cash flows

Cash flow from the purchase or sale of inventory appears in the __________ activities section of the statement of cash flows.

operating

Cash paid to purchase inventory appears in the ______ activities section of the statement of cash flows

operating

Income that is generated from the normal recurring activities of a business is called

operating

Since selling and administrative expenses are usually recognized when they are incurred, they are sometimes called _____costs

period

Which of the following real world companies are merchandising businesses?

sears target sams club

A term that reflects decreases in inventory for reasons other than sales to customers is ______.

shrinkage

Income statements that display a single comparison of all revenues minus all expenses are called ______ income statements.

single-step

True or false: For most companies, there is an inconsistency in the way interest expense is reported on the income statement versus the statement of cash flows.

true: Reason: SFAS 95 requires that interest expense be reported in the operating activities section of the statement of cash flows. Most companies report is as a nonoperating expense on the income statement.