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