ACCT EXAM: CH.4-6

Which of the following is a true statement about inventory systems? A periodic system requires cost of goods sold be determined after each sale. Perpetual inventory systems require more detailed inventory records. Periodic inventory systems require more detailed inventory records. A perpetual system determines cost of goods sold only at the end of the accounting period.

Perpetual inventory systems require more detailed inventory records.

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the buyer and the seller. seller. buyer. transportation company.

buyer.

Closing entries reduce the number of permanent accounts. summarize the activity in every account. are prepared before the financial statements. cause the revenue and expense accounts to have zero balances

cause the revenue and expense accounts to have zero balances

The Sales Returns and Allowances account is classified as a(n) asset account. contra asset account. expense account. contra revenue account.

contra revenue account.

Two categories of expenses for merchandising companies are sales and cost of goods sold. cost of goods sold and financing expenses. operating expenses and financing expenses. cost of goods sold and operating expenses.

cost of goods sold and operating expenses.

Sales revenue less cost of goods sold is called marginal income. gross profit. net profit. net income.

gross profit.

Closing entries are made in order to terminate the business as an operating entity. so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts. in order to transfer net income (or loss) and owner's drawings to the owner's capital account. so that financial statements can be prepared.

in order to transfer net income (or loss) and owner's drawings to the owner's capital account.

The income summary account appears on the income statement. is a temporary account. is a permanent account. appears on the balance sheet.

is a temporary account.

In order to close the owner's drawings account, the owner's capital account should be debited. income summary account should be debited. income summary account should be credited. owner's capital account should be credited.

owner's capital account should be debited.

All of the following statements about the post-closing trial balance are correct except it provides evidence that the journalizing and posting of closing entries have been properly completed. contains only permanent accounts. proves that all transactions have been recorded. shows that the accounting equation is in balance.

proves that all transactions have been recorded.

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales discount. return. contra asset. allowance.

return.

Closing entries are necessary for permanent accounts only. both permanent and temporary accounts. temporary accounts only. permanent or real accounts only.

temporary accounts only.