ACCT 1080 Exam 2

Preparation of the Financial Statements goes in the following order:

1.Income Statement (Revenues and Expenses, displays net income/loss) - 2. Statement of Owner's Equity (Capital, Withdrawals)- 3. Balance Sheet (Assets, Liabilities)- 4. Cash Flows

purchase return

A situation in which sellers allow purchasers to return merchandise that is defective, damaged, or otherwise unsuitable.

What is included in a post-closing trial balance?

Accumulated Depreciation-building

purchase allowance

An amount granted to the purchaser as an incentive to keep goods that are not "as ordered"

Liquidity

Assets are listed in order of their ________ on the balance sheet.

Current

Assets that are expressed to bee converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year are called ______________ assets.

Current Assets

Cash, supplies, prepaid insurance, accounts receivable are:

When a company pays its outstanding balance during the discount terms period, what accounts do you journal?

Debit -Accounts Payable Credit -Cash Credit -Merchandise INV

When a company returns inventory, what accounts do you journal?

Debit -Accounts Payable Credit -Merchandise INV

When a company purchases inventory from a wholesaler, what accounts do you journal?

Debit -Merchandise INV Credit -Accounts Payable

When a company purchases inventory for cash, what accounts do you journal?

Debit -Merchandise INV Credit -Cash

When a freight bill is paid (fob), what accounts do you journal?

Debit -Merchandise INV Credit -Cash

Which of the following entries is necessary to close the appropriate depreciation account at the end of the year?

Debit Income Summary Credit Depreciation Expense

Which of the following inventory costing methods yields the highest net income during a period of rising inventory cost?

FIFO (First in - first out)

Which of the following inventory costing methods yields the lowest cost of goods sold during a period of rising inventory cost?

FIFO (First in - first out)

Which of the following inventory costing methods uses the cost of the oldest purchases to calculate the cost of goods sold?

FIFO (first in-first out)

Which of the following inventory costing methods yields the highest cost of goods sold during a period of rising inventory cost?

LIFO (last in-first out)

Inventory Shrinkage

Occurs when inventory is stolen, lost, misplaced, etc. Requires a journal entry to bring the inventory balance to actual. Debit COGS, Credit Merchandise Inventory.

Current Liabilities

Salaries payable, interest payable and unearned revenue are examples of:

current ratio measures

ability to pay current liabilities with current assets

Permanent Account

an account that is not closed at the end of the period is called:

long term assets

are NOT converted to cash, sold, or used up during the next 12 months or within the business' operating cycle (Building, Machinery, Furniture, Land "Plant Assets")

Which of the following is subtracted from net sales revenue to arrive at gross profit on a multi step income statement?

cost of goods sold

On a balance sheet for a merchandiser, merchandise inventory is listed as a

current asset

Current Ratio Formula

current assets / by current liabilities

A company sold merchandise with a cost of $238 for $440 on account. Using the perpetual system, what is the entry too record cost of merchandise sold?

debit cost of goods sold 238 credit merchandise inventory 238

Which of the following entries would be made to record the purchase inventory on account, if a company uses the perpetual inventory system?

debit merchandise inventory credit accounts payable

Cosignor

goods on consignment are goods sent by owner

long-term liabilities

liability that does NOT need to be paid within one year or within the entity's operating cycle (Mortgage, note payable, bond payable)

Which of the following assets must be reported at the lower-of-cost-or-market value?

merchandise inventory

temporary accounts

revenues, expenses, owner's withdrawals

consignee

sells goods for the owner

FOB destination

the buyer takes ownership of the goods at the delivery destination point. Seller pays freight.

FOB shipping point

the buyer takes ownership to the goods after the goods leave the seller's place of business. Buyer pays freight.

Cost of goods sold

the main expense of a merchandiser is usually__________.

Which of the following inventory costing methods requires the calculation of a new average cost after each purchase?

weighted-average