ch 5

During the month, merchandise is sold for $26,500 cash and for $36,000 on account. The cost of goods sold is $41,000. What is the amount of gross profit? a.$26,500 b.$21,500 c.$41,000 d.$62,500

$21,500

After the closing entries have been posted, how has Retained Earnings been affected by closed accounts? a.A credit for revenues, a debit for dividends, and a debit for expenses b.A debit for revenues, a credit for dividends, and a credit for expenses c.A credit for revenues, a debit for dividends, and a credit for expenses d.A credit for revenues, a credit for dividends, and a debit for expenses

a.A credit for revenues, a debit for dividends, and a debit for expenses

Which of the following does not relate to either of the two adjusting entries for customer refunds, allowances, and returns? a.One entry records the sales of goods to customers. b.One entry reduces the sales account. c.One entry creates a customer refund liability account. d.One entry creates an estimated returns inventory account.

a.One entry records the sales of goods to customers.

Determine the operating income using the following information: Line Item DescriptionAmountSales$340,100Cost of goods sold250,000Selling expenses25,200Administrative expenses12,500 a.$64,900 b.$52,400 c.$340,100 d.$90,100

b.$52,400

Global Company sold merchandise to Montana Industries for cash, $4,450. The cost of goods sold was $1,650. Global Company refunded Montana Industries $900 for returned merchandise. The cost of goods sold was $600. Which of the following will be included by Global Company in the journal entry for the refund from the cost of the sale? a.Debit Estimated Returns Inventory for $900 b.Credit Estimated Returns Inventory for $600 c.Debit Inventory for $900 d.Credit Inventory for $600

b.Credit Estimated Returns Inventory for $600

Which of the following accounts would be found on the adjusted trial balance of a retail business but not on the adjusted trial balance of a service business? a.Miscellaneous Selling Expense b.Estimated Returns Inventory c.Accounts Payable d.Accounts Receivable

b.Estimated Returns Inventory

The numerator in the asset turnover ratio is a.Average Current Assets. b.Sales. c.Average Total Assets. d.Average Long-Term Assets.

b.Sales.

Inventory is reported as a(n) a.long-term asset. b.current asset. c.current liability. d.expense.

b.current asset.

The difference between the balance sheets of a service company and a retail company is that the retail company's balance sheet includes a.cost of goods sold. b.inventory. c.sales. d.gross profit.

b.inventory.

Generally accepted accounting principles (GAAP) require that sales be recorded in the amount most likely to be a.predicted. b.received. c.earned. d.anticipated.

b.received.

Credit terms are terms for when a.inventory is purchased. b.the payments for merchandise are to be made. c.the returns of merchandise are to be made. d.payments for merchandise are to be made with cash.

b.the payments for merchandise are to be made.

Under the gross method of recording for sales discounts, an invoice that includes a discount for early payment is recorded at the a.amount of the invoice plus the discount. b.total amount of the invoice. c.net amount of the invoice. d.amount of the discount only.

b.total amount of the invoice.

On a multiple-step income statement, selling expenses plus administrative expenses is equal to a.total other expense. b.total operating expenses. c.cost of goods sold. d.total expenses.

b.total operating expenses.

Each subsidiary ledger is represented in the general ledger with a summarizing account called a(n) a.asset account. b.customer account. c.controlling account. d.inventory account.

c.controlling account.

The steps in preparing closing entries under the periodic inventory system include all of the following except a a.credit to each expense account, Purchases, and Freight In. b.debit to Inventory for its end-of-period balance. c.credit to Cost of Goods Sold for its balance. d.debit to each revenue account, Purchases Discounts, and Purchases Returns and Allowances.

c.credit to Cost of Goods Sold for its balance.

When comparing the adjusting process under the perpetual and periodic inventory systems, a.the cost of goods sold account is reduced by the cost of estimated returns inventory for the current year under the perpetual inventory system. b.the inventory shrinkage adjustment is the same under both systems. c.the ending inventory is determined by a physical count under both systems. d.no entry is made for estimated returns inventory under the periodic inventory system.

c.the ending inventory is determined by a physical count under both systems.

A change in the asset turnover ratio from 2.0 to 1.8 would indicate a(n) a.increase in the effectiveness of assets in producing sales. b.favorable trend in using assets to generate sales. c.unfavorable trend in using assets to generate sales. d.None of these choices

c.unfavorable trend in using assets to generate sales.

Carver Company issued an invoice dated July 1 for $9,500 to its customer with payment terms of 2/15, n/30. If the customer chooses to pay the invoice on July 18, the customer will pay Carver Company an amount of a.$190. b.$9,310. c.$9,690. d.$9,500.

d.$9,500.

The following financial statement data are for the year ending December 31 for Agency Company: Line Item DescriptionAmountSales$294,500Total assets: Beginning of year200,000 End of year180,000 What is the asset turnover ratio for the year? a.1.64 b.1.78 c.1.47 d.1.55

d.1.55

The records of Garden Company indicate sales of $700,000, cost of goods sold of $580,000, an ending inventory balance of $100,000, and estimated returns of 1% of sales. The adjusting entries to journalize estimated returns will include a a.debit to Inventory for $5,800. b.credit to Sales for $7,000. c.credit to Customer Refunds Payable for $5,800. d.debit to Sales for $7,000.

d.debit to Sales for $7,000.