Exam #3

For which type of merchandise would a company most likely use the specific identification method of inventory costing? a) John Deere tractors b) Bottled Pepsi c) Paper towels d) Shampoo

a) John Deere tractors

A loss on sale of equipment would be classified on a multiple-step income statement under the heading a) Other expenses and losses b) Cost of goods sold c) Operating expenses d) Other revenues and gains

a) Other expenses and losses

In the credit terms of 1/10, n/30, the "1" represents the a) Percent of cash discount b) number of days when the entire amount is due c) Number of days in the discount period d) Full amount of the invoice

a) Percent of cash discount

A credit sale of $1500 is made on July 15, terms 2/10, net/30, on which a return of $100 is granted on July 19. What amount is received as payment in full on July 23? a) $1500 b) $1372 c) $1400 d) $1470

b) $1372

The entry to record the return of goods from a customer would include a a) Debit to sales revenue b) Debit to sales returns and allowances c) Credit to sales returns and allowances d) Credit to sales revenue

b) Debit to sales returns and allowances

The primary difference between a periodic and perpetual inventory system is that a periodic system a) Keeps a record showing the inventory on hand at all times b) Determines the inventory on hand only at the end of the accounting period c) Records cost of goods sold on the date the sale is made d) Provides better control over inventories

b) Determines the inventory on hand only at the end of the accounting period

Under the perpetual inventory system, in addition to making the entry to record sales revenue, a company would a) Debit cost of good sold and credit purchases b) Debit inventory and credit cost of goods sold c) Debit cost of goods sold and credit inventory d) Debit cost of goods sold and credit accounts payable

c) Debit cost of goods sold and credit inventory

What is an advantage of using the multiple-step income statement? a) Income from operations is not a separate item b) Net income will be higher than net income computed using the single-step income statement c) It highlights the components of net income d) It is easier to prepare than the single-step income statement

c) It highlights the components of net income

Each of the following companies is a merchandising company except a: a) Car dealership b) Furniture store c) Moving company d) Candy store

c) Moving company

If a purchaser pays the shipping costs for goods it has purchased, the a) Delivery expense account is increased b) Inventory account is decreased c) Freight-out account is increased d) Inventory account is increased

d) Inventory account is increased

Which inventory costing method results in the lowest tax expense during a period of increasing purchase prices? a) Specific identification b) FIFO c) Average cost d) LIFO

d) LIFO