Acct. Final exam 2

The major difference in the Balance sheet between a service business and a merchandising business is:

That the balance sheet of a merchandising business includes Inventory as a current asset

Under a perpetual inventory system, when goods are returned to the retailer from a customer, as part of the journal entry:

Sales returns and allowances is debited; Cost of goods sold is credited

Which of the following indicates that the shipment is free on board and the buyer pays all of the shipping and freight costs?

FOB shipping point

Under a perpetual inventory system, the account to which transportation charges on incoming merchandise is generally entered is:

Inventory

Cost of goods sold is shown on the

Income Statement before gross profit

Bach Co. had an inventory balance of $15,250 on January 1, purchased $34000 during the accounting period, and the cost of goods sold was $28000. What is the ending balance in the inventory account?

$21,250

A company has net sales of $137,000, cost of goods sold of $73,000, operating expenses of $42,000, and other expenses of $1000. The company's operating income is:

$22,000

Ceasar company returned $800 of goods it had purchased from another company. The original invoice was for $4,200, 3/10, n/30. Shipping cost was $100 FOB destination point. What is the inventory balance if Ceasar pays the balance within the discount period?

$3,298

A company has $8,100 in net sales, $1,00 in gross profit, $2,300 in ending inventory and $1,900 in beginning inventory. The company's cost of goods sold is:

$7,100

Kramer and Associates has the following account balances listed in alphabetical order; Accumulated Depreciation, $24,000; Accounts Payable, $9,500, Accounts Receivable, $11,000; Cash, $4000; Equipment; $47000, Land, $23000, Mortgage Payable, $46000; Prepaid Insurance, $7500; Supplies, $1000; Unearned Revenue, $5000; Wages payable, $2000. Kramer and Associates current liabilities are:

16,500

Which of the following credit terms allows a discount of 4% if payment is made within 20 days of the invoice; otherwise, the total amount of the invoice must be paid within 30 days from the date of the invoice?

4/20, n/30

Inventory is shown on the:

Balance sheet as a current asset

Under the LIFO method, the flow of costs through the accounting records will:

Be nearly the opposite of the physical flow of goods through the business

Cost of Goods Sold equals:

Beginning inventory plus net purchases minus ending inventory

Transferring title refers to a

Change of ownership

Applying LCM to the items that make up ending inventory is an application of which of the following concepts?

Conservatism

Changing from LIFO to FIFO over two accounting periods could be viewed as a violation of which accounting concept or principle?

Consistency

If there is a difference between the physical count and the perpetual record, the account in which the difference is recorded is:

Cost of Goods Sold

C & S Company purchased 80 keyboards for $15 each from keyboards-for-less. When they unpacked the keyboards, C & S found that 30 of the keyboards were damaged in shipping. What is the journal entry that C & S will make to record the purchase return?

Debit Accounts Payable-Keyboards-For-Less and credit inventory, $450

If shrinkage is found for $400, an adjusting entry would be made as follows:

Debit Cost of Goods Sold for $400; credit Inventory for $400

If the inventory shows an actual count of $405 and the perpetual inventory according to the records shows $420, the adjusting entry for the $15 would:

Debit Cost of Goods Sold; Credit inventory

On April 1, the Ceaser Coffee Company sold coffee to Charbucks for $300, with credit terms of 2/15, n/30 Charbucks paid Ceaser's on April 10. The journal entry that Ceaser would make to record the payment would include a:

Debit to Cash $294; debit to Sales Discounts $6; credit to Accounts Receivable-Charbucks $300

Archer Manufacturing had sales for the week of $3,145, of which $2500 was on credit and $645 in cash sales. The cost of the merchandise sold was $1716. The journal entries would include a:

Debit to Cost of Goods Sold for 1716; credit to inventory for 1716

When a retailer sells merchandise on account, the general entry for the sales price would be:

Debiting Accounts Receivable and crediting Sales Revenue.

The time period within which an invoice may be paid early to receive a discount is called the

Discount period

Net sales is computed by taking:

Gross Sales - Sales Returns and Allowances - Sales Discounts

________ produces the highest cost of goods sold and the lowest gross profit when prices are increasing.

LIFO

A method of valuing inventory based on the assumption that the newest goods will be sold first is called the

LIFO method

What is Liquidity?

Liquidity is the ability to convert an asset to cash quickly

The major difference in the Statement of Retained Earnings between a service business and a merchandising business is:

Nothing. There are no differences between the two.

Under the periodic inventory system, the amount of inventory on hand is:

Only known when a physical count is taken.

If gross profit is overstated in Period 1, then the ending inventory and net income in period 1 were respectively

Overstated, and overstated

The accounting principle that relates to the expensing of freight charges is:

The matching principle

Which of the following is NOT a selling expense?

Utility Bill

Current assets are listed on the balance sheet in:

order of liquidity