Acct. chapter 5 practice questions

Roki Inc. uses the periodic inventory system. June 1 On hand, 50 units @ $15.00 each $ 750.00 5 Purchased 115 units @ $15.10 each 1,736.50 14 Purchased 75 units @ $15.20 each 1,140.00 Total cost of goods available for sale $3,626.50 30 On hand, 90 units ​ If Roki uses the LIFO inventory method, the cost of goods sold for June would be Question 7 options: $2,200.00 $2,272.50 $2,296.08 $1,354.00

$2,272.50

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause: an overstatement of cost of goods sold for the current year. an overstatement of inventory on the year-end balance sheet. an overstatement of retained earnings at the end of the year. an understatement of gross profit in the following year.

? an overstatement of inventory on the year-end balance sheet.

Herndon Corp. purchased merchandise on account from Likert Corp. on November 18, 2016. On November 21, 2016, Herndon returned damaged merchandise to Likert and was granted an adjustment on its account. Herndon uses the periodic inventory system. What effect does the merchandise return have on Herndon's accounting equation? Assets and liabilities decrease. Assets and stockholders' equity decrease. Liabilities and stockholders' equity decrease. Liabilities decrease and stockholders' equity increases.

?? Liabilities decrease and stockholders' equity increases.

All of the following statements regarding the gross profit ratio are true except: Question 9 options: Managers, investors, and creditors use the gross profit ratio to measure one aspect of profitability. The gross profit ratio alone is sufficient to determine a company's profitability. If a company's net sales were $200,000 and cost of goods sold were $120,000, its gross profit ratio would be 40%. The gross profit ratio explains how many cents on every dollar are available to cover expenses other than cost of goods sold and to earn a profit.

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

At the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of Question 6 options: The seller The buyer Neither the buyer nor the seller

WRONG ANSWER: buyer

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016. ​ When did title to the merchandise transfer from Jay Zee Music Company to Park? Question 2 options: June 10, 2016 June 5, 2016 June 13, 2016 Cannot be determined from the information provided

WRONG ANSWER: cannot be determined

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016. ​ If Park uses the periodic inventory system, the effect of recording the payment on June 13, 2016, will include Question 5 options: a decrease to Accounts Payable for $15,000. a decrease to Purchases for $15,000. a decrease to Cash for $15,000. an increase to Inventory for $14,850.

WRONG ANSWER:a decrease to Purchases for $15,000.

A customer returned damaged goods for credit. Which of the seller's accounts decreases? Question 10 options: Sales Returns Purchase Returns Accounts Receivable Sales Revenue

acct rec

Items should be reported as part of the company's "inventory" at year end, if they are Sold during the period. Determined to be part of cost of goods sold. Purchased from a creditor, available for sale, and paid for the following year. Held in anticipation of an increase in market value.

c

Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations? Earnings per share Gross profit ratio Current ratio Profit margin

gross profit ratio

Which one of the following would not be found as an asset on the balance sheet of a manufacturer? Question 3 options: finished goods work in process merchandise inventory raw materials

merch inventory

When an inventory system updates the Inventory account at the time of each sale, this is known as: Question 1 options: a perpetual system an accrual system a periodic system a contra-purchase system

perpetual

In order to evaluate a company's gross profit ratio, Question 8 options: the ratio should be compared with other companies in the same industry. the ratio should be compared with those of both prior years and competitors. the ratio should be compared with forecasted financial statements. the ratio should be compared with those of prior years.

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