Accounting ch 4
Which of the following accounts would not be used to compute the acid-test ratio?
Plant Assets
A periodic inventory system updates the accounting records ____:
at the end of the period.
Which statement is correct regarding the closing process of a merchandiser?
Both the Sales Discounts and the Sales Returns and Allowances accounts are credited during the closing process.
When a classified balance sheet is prepared, merchandise inventory is:
Reported as a current asset.
A single-step income statement:
Reports the same amount of net income as that reported on a multiple-step income statement.
Which of the following totals and subtotals are not found on a multiple-step income statement?
Total current assets
Gross profit is:
equal to net sales less cost of goods sold.
A perpetual inventory system updates the accounting records ____:
for each purchase and each sale.
A company reports net sales of $600,000, cost of goods sold of $200,000, and net income of $100,000. Its gross profit equals:
$400,000
Which of the following statements is correct regarding the adjusting entries for a merchandiser versus a service company.
-A service company will have an adjusting entry for accrued expenses. -A merchandising company will have an adjusting entry for accrued expenses. -A service company will have an adjusting entry for unearned revenues. -A merchandising company will have an adjusting entry for unearned revenues.
Which of the following statements is correct regarding inventory shrinkage?
-Shrinkage refers to the loss of inventory. -Shrinkage can be caused by theft or deterioration. -Shrinkage is computed by comparing a physical count of inventory with the recorded amount. -Shrinkage is recorded by debiting Cost of Goods Sold.
Merchandiser's Operating Cycle
item a - Cash purchase of merchandise item b - inventory of sale item c - credit sales item d - accounts receivable item e - receipt of cash from credit sales