ACT test 2

When the weighted average cost method is used in a perpetual inventory system, a weighted average unit cost for each item is computed

each time a purchase is made.

Which of the following items are not considered "other revenue" on the multiple-step income statement?

fees earned

Inventory shrinkage is recorded by which of the following adjusting entries?

Debit Cost of Goods Sold, credit Inventory

On the work sheet, the cash balance in the Adjusted Trial Balance Debit column will flow into the

Balance Sheet

Which cost flow assumption assumes that the last units purchased are the first units sold?

LIFO

Which inventory method results in the highest net income during periods of falling prices?

LIFO

Which of the following is an example of a fixed asset?

Land

The last step of the accounting cycle is to

prepare a post-closing trial balance.

When merchandise is sold, the revenue is reported as sales, and its cost is recognized as an expense called

the cost of goods sold.

Revenue accounts appear on

the income statement

Using the data below, determine the ending inventory amount assuming the weighted average method under a periodic inventory system. Beginning inventory 10 units Purchases 20 units Total cost of units available for sale $3,000 Ending inventory 12 units

$1,200 Weighted average unit cost = $100 ($3,000 ÷ 30 units); ending inventory = $1,200 (12 units × $100).

Using the data below, calculate the cost of goods sold. Beginning inventory $1,000 Inventory purchased 3,000 Net income 40,000 Ending inventory 2,000 Sales 185,000

$2,000 $1,000 + $3,000 = $4,000 goods available for sale; $4,000 ─ $2,000 inventory = $2,000 cost of goods sold; net income and sales are irrelevant.

Jacobs Company had inventory of 15 units at a cost of $12 each on June 1. On June 5, Jacobs purchased 10 units at $13 per unit. On June 12, it purchased 20 units at $14 per unit. On June 17, it sold 30 units. Using FIFO, what is the value of the inventory at June 17 after the sale?

$210 Units remaining in inventory = 15 + 10 + 20 ─ 30 = 15 units from most recent purchase; 15 × $14 per unit = $210

Which of the following describes how a merchandise income statement is different from a service income statement?

A merchandise business shows a gross profit line.

Which of the following is reported on both a multiple-step income statement and a single-step income statement?

Cost of goods sold

Which cost flow assumption assumes that the first units purchased are the first units sold?

FIFO

Which inventory method results in the highest net income during periods of rising prices?

FIFO

Which of the following accounts will NOT appear on the post-closing trial balance?

Fees Earned

Cost Flow Methods The following three identical units of Item K113 are purchased during April: Item Beta Units Cost April 2 Purchase 1 $212 April 15 Purchase 1 214 April 20 Purchase 1 216 Total 3 $642 Average cost per unit $214($642 ÷ 3 units) Assume that one unit is sold on April 27 for $261. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost method.

Gross ProfitApril Ending InventoryApril 30 a.$49 ($261 - $212) $430 ($214 + $216) b.$45 ($261 - $216) $426 ($212 + $214) c.$47 ($261 - $214) $428 ($214 × 2) Cost Flow Methods

For a service business, which of the following would NOT be a line item on the income statement?

Gross profit

All of the following accounts/account types are closed at the end of the accounting period EXCEPT

Retained Earnings.

The first step of the accounting cycle is to

analyze transactions and record them in the journal.

When the physical inventory on hand at the end of the accounting period is less than the balance of Inventory, the difference is known as

inventory shrinkage.

Land used in the operations of the business is classified under __________ on the balance sheet.

property, plant, and equipment

How is gross profit for a merchandise business determined?

sales minus cost of goods sold

On the work sheet, the Dividends balance in the Adjusted Trial Balance Debit column will flow into the

statement of stockholders' equity