Accounting ch 4

Which of the following accounts would not be used to compute the acid-test ratio?

Plant Assets

A periodic inventory system updates the accounting records ____:

at the end of the period.

Which statement is correct regarding the closing process of a merchandiser?

Both the Sales Discounts and the Sales Returns and Allowances accounts are credited during the closing process.

When a classified balance sheet is prepared, merchandise inventory is:

Reported as a current asset.

A single-step income statement:

Reports the same amount of net income as that reported on a multiple-step income statement.

Which of the following totals and subtotals are not found on a multiple-step income statement?

Total current assets

Gross profit is:

equal to net sales less cost of goods sold.

A perpetual inventory system updates the accounting records ____:

for each purchase and each sale.

A company reports net sales of $600,000, cost of goods sold of $200,000, and net income of $100,000. Its gross profit equals:

$400,000

Which of the following statements is correct regarding the adjusting entries for a merchandiser versus a service company.

-A service company will have an adjusting entry for accrued expenses. -A merchandising company will have an adjusting entry for accrued expenses. -A service company will have an adjusting entry for unearned revenues. -A merchandising company will have an adjusting entry for unearned revenues.

Which of the following statements is correct regarding inventory shrinkage?

-Shrinkage refers to the loss of inventory. -Shrinkage can be caused by theft or deterioration. -Shrinkage is computed by comparing a physical count of inventory with the recorded amount. -Shrinkage is recorded by debiting Cost of Goods Sold.

Merchandiser's Operating Cycle

item a - Cash purchase of merchandise item b - inventory of sale item c - credit sales item d - accounts receivable item e - receipt of cash from credit sales