accounting exam 2

Gross Profit Equals: Multiple Choice - Net sales minus cost of goods sold. - Revenues minus expenses. - Revenues minus inventory. - Beginning inventory plus purchases minus ending inventory.

Net sales minus cost of goods sold

A company lends its supplier $151,000 for 3 years at a 7% annual interest rate. Interest payments are to be made twice a year. The entry to record this lending transaction includes a debit to: Multiple Choice - Notes Receivable and a credit to Cash for $151,000. - Cash and a credit to Interest Revenue for $10,570. - Interest Receivable and a credit to Interest Revenue for $5,285. - Cash and a credit to Notes Payable for $151,000.

Notes Receivable and a credit to Cash for $151,000

the bank will show a customer's deposit on the bank statement as as: -credit, because a deposit is a liability from the bank's point of view - debit, because cash is an asset - debit, because a deposit is a liability from the bank's point of view - credit, because cash is an asset

credit, because a deposit is a liability from the bank's point of view.

Inventory is reported as a(n) ______ on the ______. Multiple Choice - current asset; balance sheet - current asset; balance sheet and income statement - expense; income statement - expense; balance sheet

current asset; balance sheet

the bank will show a customer's withdrawal as a: - debit, because cash is an asset - credit, because a withdrawal increases its liability from the bank's point of view - debit, because a withdrawal decreases its liability from the bank's point of view - credit, because cash is an asset

debit, because a withdrawal decreases its liability from the bank's point of view.

on a bank reconciliation, the amount of an NSF check is: -added to the bank balance of cash -added to the company's balance of cash - deducted from the bank balance of cash - deducted from the company's balance of cash

deducted from the company's balance of cash.

This month's bank statement includes a check from a customer that was marked NSF. How would this item be treated on the bank reconciliation? - it would be deducted from the book balance - it would be added to the bank balance - it would be deducted from the bank balance - it would be added to the book balance

it would be deducted from the book balance

If a bank reconciliation included a deposit in transit of $735, the company's journal entry for this reconciling item would include: Multiple Choice - nothing, because the deposit has already been recorded. - a debit to cash of $735. - a credit to cash of $735. - a credit to accounts receivable for $735.

nothing, because the deposit has already been recorded

which of the following would be considered merchandise inventory - work in progress - raw materials - purchased finished goods - cost of goods sold

purchases finished goods

Which of the following would not be affected by the choice of an inventory costing method (that is, choosing between FIFO, LIFO, weighted average, and specific identification)? -sales revenue - cost of goods sold - gross profit - net income

sales revenue

if inventory is updated periodically, which of the equations is correct?

cost of goods sold= beginning inventory + purchases - ending inventory

Assume a periodic inventory system is used. The LIFO inventory costing method assumes that the cost of the units most recently purchased is the: - last to be assigned to cost of goods sold - first to be assigned to ending inventory - first to be assigned to cost of goods sold - last to be assignment to units available for sale

first to be assigned to cost of goods sold

all other things being equal, a company is better off when its receivable turnover ratio: Multiple Choice - and its days-to-collect measure are both low. - is high and its days-to-collect measure is low - and its days-to-collect measure are both high. - is low and its days-to-collect measure is high.

is high and its days-to-collect measure is low

The potential advantages of extending credit to customers include all of the following except higher: Multiple Choice -wage expenses - profits - customer satisfaction - revenues.

wage expenses

Which of the following is an activity in the operations of a manufacturer, but not in the operations of a merchandising or service company? Multiple Choice -Selling goods to consumers -Receiving cash -Selling goods to other firms -Buying raw materials

Buying raw material

Which inventory system records a change in the Inventory account every time goods are bought, sold or returned? Multiple Choice - Periodic - Perpetual - FOB Shipping Point - FOB Destination

Perpetual

A company uses the direct write-off method. The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay. What is the journal entry that would be prepared to record this write-off? - Debit Bad Debt Expense and credit Accounts Receivable for $3,000. - Debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $3,000. - Debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $3,000. - Debit Accounts Receivable and credit Bad Debt Expense for $3,000.

Debit Bad Debt Expense and credit Accounts Receivable for $3,000

All of the following will likely be incurred by a company that extends credit except: Multiple Choice - increased revenues. - increased wage costs - increased advertising expenses. - a delay in the receipt of cash.

Increased advertising expenses

The cash count sheet determines all of the following except the: Multiple Choice - cash shortage or overage, if any. - amount of cash available for deposit in the bank. - amount of cash to be reported on the balance sheet. - amount of cash received.

amount of cash to be reported on the balance sheet

FIFO, LIFO, and weighted average inventory costing methods are based on

assumption that accountants make about the flow of inventory costs