Accounting - CH 6
Each of the following accounts is closed to Income Summary except
Dividends
Which of the following items will increase inventoriable costs for the buyer of goods?
Freight charges paid by the purchaser
Of the following companies, which one would not likely employ the specific identification method for inventory costing?
Hardware store
Which of the following is a true statement about inventory systems?
Perpetual inventory systems require a more detailed inventory records
Which of the following depicts the proper sequence of steps in the accounting cycle
Prepare a trail balance, prepare adjusting entries, prepare financial statements
Which of the following statements is correct with respect to inventories
Under FIFO, the ending inventor is based on the latest units purchased
Cost of goods sold is determined only at the end of the accounting period in
a periodic inventory system
A perpetual inventory system would likely be used by a(n)
automobile dealership
Paden Company purchased merchandise from Emmet Company with freight terms of FOB shipping point. The freight costs will be paid by the
buyer
Two categories of expenses for merchandising companies are
cost of goods sold and operating expenses
If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a
credit to the retained earnings account
If a company is given credit terms of 2/10, n/30, it should
pay within the discount period and recognize a savings
All of the following statements about post-closing trial balance are correct except it
proves that all transactions have been recorded
If the total debit column exceeds the total credit column of the income statement columns on a worksheet then the company has
suffered a net loss for the period
Closing entries are necessary for
temporary accounts only
After closing entries are posted, the balance in the retained earnings account in the ledger will be equal to
the amount of the retained earnings reported on the balance sheet
The LIFO inventory method assumes that the cost of the latest units purchased are
the first to be allocated to cost of goods sold
The balance in the income summary account before it is closed will be equal to
the net income or loss on the income statement
In a perpetual inventory system, cost of goods sold is recorded
with each sale
Which of the following statements is true regarding inventory cost flow assumptions?
A company may use more than one costing method concurrently
sales revenue less cost of goods sold is called
gross profit
Freight costs paid by a seller on merchandise sold to customers will cause an increase
in operating expenses for the seller
Closing entries are made
in order to transfer next income (or loss) and dividends to the retained earnings account
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit
inventory
Under a perpetual inventory system, acquisition of merchandise for resale is debited to the
inventory account
The income summary account
is a temporary account
Closing entries are
journalized in the general journal
The selection of an appropriate inventory cost flow assumption for an individual company is made by
management
A problem with specific identification method is that
management an manipulate income
Manufacturers usually classify inventory into all the following general categories except
merchandise inventory
The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is
nonexistent; that is, there is no accounting requirement