acct

A contra-revenue

Sales Discounts is classified as what type of account?

3, 2, 4, 5, 1

Some of the steps in the accounting cycle are listed below. Select the choice that places these steps in the correct order. 1. Close the accounts. 2. Post transactions to accounts in the ledger. 3. Journalize daily transactions. 4. Record and post adjustments. 5. Prepare financial statements.

Nominal account

The Dividend account is known as which of the following?

Cost of storing inventory before it is sold.

The Ramien Store held inventory items at the end of 2014. Which items should Ramien include as part of its total inventory cost?

Goods available for sale less ending inventory

The cost of goods sold is

Unexpired costs and is reported on the balance sheet as an asset.

The ending inventory balance represents

Finished goods inventory

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

matching principle.

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the:

Reliability over relevance

The selection of historical cost over current value as the attribute to be measured for assets is an example of the trade-off of

Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

What does the phrase, "Revenue is recognized at the point of sale" mean?

Understated Overstated

If a company overstates its ending inventory for the current year, what are the effects on cost of goods sold and net income for the current year?

Understated by $15,500 No effect

If a company understates its ending inventory balance for 2015 by $15,500, what are the effects on its net income for 2015 and 2014?

Both the balance sheet and the income statement are affected

If the amount assigned to ending inventory is incorrect,

An integral part of the calculation of cost of goods sold

In a periodic inventory system, the cost of purchases is recognized as

Both the periodic and perpetual inventory systems

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

the ratio should be compared with those of both prior years and competitors.

In order to evaluate a company's gross profit ratio,

Nominal accounts

Income statement accounts are also known as which of the following?

Purchased from a creditor, available for sale, and paid for the following year.

Items should be reported as part of the company's "inventory" at year end, if they are

Cost/Benefit

Many companies assign only the net invoice price for merchandise to inventory and cost of goods sold. All other costs, including transportation and other costs of bringing merchandise to the place of business, are charged to expense of the period in which they are incurred. Which accounting principle or concept is applied in this example?

Recording the economic effects in the financial statements

Measurement of the economic effects on an entity involves each of the following except

Inventory losses can be identified and controlled better under the perpetual system.

Which one of the following is correct?

Transportation-in

Which one of the following is not a contra account?

Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays

Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period?

Closing the accounts

Which one of the following is the last step in the accounting cycle?

Gross profit ratio

Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?

A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.

Which one of the following statements is false?

Differences in cash flows between LIFO and FIFO inventory methods are a direct result of the differences in the purchases.

Which one of the following statements is false?

Accountants have developed methods which make assumptions concerning how costs should be assigned to inventory and cost of goods sold.

Which one of the following statements is true?

Measurement is concerned with how economic effects should be quantified.

Which one of the following statements is true?

Changing inventory methods affects consistency.

Which one of the following statements regarding changing inventory methods is true?

Adjustments are recorded

Which one of the following steps in the accounting cycle is completed only at the end of an accounting period?

Work sheets are prepared

Which one of the following steps in the accounting cycle is optional rather than required?

Merchandise inventory

Which one of the following types of inventory accounts would be used by a wholesaler or retailer?

U.S. dollar is the medium of monetary exchange in the U.S.

Why is the use of the U.S. dollar as a unit of measure for financial statement data in the U.S. widely accepted?

part of cost of goods purchased

Transportation-in is

Replacement Cost

Which method of inventory costing is not acceptable for financial accounting purposes?

None of the Above

Which of the following adjusting entries involves the cash account?

Liabilities being understated

Failure to record accrued interest expense would result in which of the following?

Total assets being understated

Failure to record amounts earned for services provided to customers but not yet paid results in which of the following

Both a and c above

Failure to record depreciation expense for the period results in which of the following?

Stockholders' equity being overstated

Failure to record dividends paid would result in which of the following?

Net income being understated

Failure to record the earned portion of unearned revenue would result in which of the following?

Stockholders' equity being overstated

Failure to record the supplies used during the year would result in which of the following?

LIFO FIFO

Federal income tax rules allow businesses to use different inventory costing methods for tax reporting and financial reporting with one exception. Which of the following situations is not allowed by federal income tax rules?

Business activity has reached a slow period that is suited to the preparation of its financial statements at the end of the year.

For what reason might retailers like Target select an accounting period that ends on or near the end of January?

Custom designed diamond rings

For which type of inventory would a company most likely use the specific identification method?

In contra accounts to the Purchases account.

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Overstated by $5,000 Overstated by $5,000

If a company overstates its ending inventory balance for 2015 by $10,000, and overstates its ending inventory balance for 2014 by $5,000 what are the effects on its net income for 2015 and 2014?

Overstated by $15,000 Understated by $5,000

If a company overstates its ending inventory balance for 2015 by $10,000, and understates its ending inventory balance for 2014 by $5,000 what are the effects on its net income for 2015 and 2014?

decreases assets.

Accumulated Depreciation

Cash is received prior to providing the services to customers

Which one of the following is an example of a deferred revenue?

Wages have been earned by employees, but have not been paid at the end of the period

Which one of the following is an example of an accrued liability?

an overstatement of cost of goods sold for the current year.

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

Prepaid insurance is not reduced for the portion of the policy that has expired during the period

A company forgot to record four adjustments during 2015. Which one of the following omissions of adjustments will overstate assets?

Sales made during the last week of the period are not recorded

A company forgot to record four adjustments during 2015. Which one of the following omissions of adjustments will understate net income?

Accounts Receivable

A customer returned damaged goods for credit. Which of the seller's accounts decreases?

It is relatively easy to apply

A major advantage of the weighted average method of inventory costing is that

All of these could result.

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

increases when the monthly adjustment for depreciation is recognized.

Accumulated Depreciation

Cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting

Adjustments are necessary only if

The gross profit ratio alone is sufficient to determine a company's profitability.

All of the following statements regarding the gross profit ratio are true except:

Recognition

An accountant describes the effects of an economic event on an entity by recording the transaction and reporting the amount on the financial statements. What is this called?

An increase to an expense and an increase to a revenue.

An adjusting entry could not consist of:

Products are sold to customers on credit with payment due in 30 days

As a general rule, revenue is recognized at the point of sale. Which one of the following situations illustrates this rule?

The seller

At the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of

The buyer

At the year-end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of

Real accounts

Balance sheet accounts are also known as which of the following?

the cost of merchandise purchased plus transportation-in costs plus beginning inventory minus purchase returns and allowances and purchase discounts minus ending inventory.

Cost of goods sold is equal to:

Expired costs during a period and is reported on the income statement.

Cost of goods sold represents

FIFO

During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?

Merchandise in transit sold to customers FOB destination

Ending inventory is equal to the cost of items on hand plus

Through allocation to the accounting periods in which the benefits are recognized

Expenses can be matched against revenue

Using an asset or recognizing liabilities

Expenses originate from

liabilities increase and stockholders' equity decreases

What effect does "recognizing an accrued liability for utilities at the end of the accounting period" have on the accounting equation?

Liabilities decrease and stockholders' equity increases

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for an insurance company?

Assets and stockholders' equity decrease.

What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded?

Assets decrease and stockholders' equity decreases

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

Assets increase and stockholders' equity increases

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded?

Net income increases

What is the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers?

a perpetual system.

When an inventory system updates the Inventory account at the time of each sale, this is known as:

Under the cash basis of accounting

When are revenues and expenses recognized in the same accounting period that cash receipts and payments occur?

On the date the sale is made.

When is revenue from the sale of merchandise normally recognized?

As a result of selling more units than are purchased during the period.

When would LIFO liquidation occur?

FIFO

Which inventory costing method results in the highest inventory balance during a period of rising prices?

FIFO

Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?

LIFO

Which method assigns the cost of the most recent items purchased to cost of goods sold?

FIFO

Which method assigns the cost of the most recent items purchased to ending inventory?

Weighted average cost

Which method assigns the same cost to all units whether sold or left in ending inventory?

LIFO

Which method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income?

Time period, because accrual accounting divides earnings into time periods

Which of the following concepts is important to accrual accounting?

Historical cost

Which of the following is the attribute used to measure many assets that are recognized on a balance sheet, because it is more objective and verifiable?

At the end of May, Bolton Industries pays the custodian for May office cleaning services.

Which of the following situations does not require an adjusting entry at the end of May?

Statement of Cash Flows

Which of the following statements does not present financial information based on the accrual basis of accounting?

Assets become expenses when their economic benefits expire

Which of the following statements is true concerning assets?

Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year

Which of the following terms best describes "Cost of goods available for sale"?

Rent owed by a tenant but not yet collected

Which of the following transactions involves an accrued asset?

Cost of Goods Sold

Which one of the following accounts most likely would appear on the income statement of a merchandise company, but not on the income statement of a service company?

Recognition of depreciation on plant assets

Which one of the following adjustments decreases net income for the period?

Recognition of interest on a note receivable.

Which one of the following adjustments increases net income for the period?

Rent revenue is recorded for amounts owed by a tenant but not yet paid

Which one of the following adjustments will increase assets?