ACCT205 Chapter 6 & 7 Questions
Beginning inventory 10 units at $55 First purchase 25 units at $60 Second purchase 30 units at $65 Third purchase 15 units at $70 The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using LIFO is Question options: 1) $1,250 2) $1,375 3) $1,150 4) $1,350
$1,150
Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the LIFO method? Question options: 1) $1,805 2) $1,575 3) $3,815 4) $1,685
$1,575
The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. May 3 - Purchase 5 at $20 10 -Sale 3 17 - Purchase 10 at $24 20 - Sale 6 23 - Sale 3 30 - Purchase 10 at $30 Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method. Question options: 1) $120 2) $180 3) $108 4) $72
$108
A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom, FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for merchandise returned of $500 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller? Question options: 1) $12,285 2) $11,500 3) $11,385 4) $10,480
$12,285
Calculate income from operations for Jonas Company based on the following data: Sales $764,000 Operating expenses 52,500 Cost of merchandise sold 538,000 Question options: 1) $711,500 2) $485,500 3) $173,500 4) $226,000
$173,500
Calculate the gross profit for Jefferson Company based on the following: Sales $764,000 Selling Expenses 42,500 Cost of Merchandise Sold 538,000 1) $226,000 2) $183,500 3) $721,500 4) $495,500
$226,000
A retailer purchases merchandise with a catalog list price of $30,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period? Question options: 1) $24,900 2) $29,400 3) $30,000 4) $24,990
$24,990
Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. The Pound Co. paid the invoice within the discount period. What is amount of sales from the above transactions? Question options: 1) $24,990 2) $16,000 3) $26,010 4) $25,500
$24,990
If merchandise sells for $3,500, with terms of 3/15, n/45 and the cost of the inventory sold is $2,100, the amount charged to sales is Question options: 1) $3,500 2) $3,395 3) $2,037 4) $2,100
$3,395
Merchandise with an invoice price of $6,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken? 1) $6,090 2) $5,940 3) $5,880 4) $6,120
$5,880
Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of the sales discount allowable? Question options: 1) $260 2) $460 3) $500 4) $150
$500
Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions? Question options: 1) $30,772 2) $10,500 3) $31,400 4) $7,972
$7,972
Jacob Co. sells merchandise on credit to Isaiah Co. in the amount of $9,700. The invoice is dated on May 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount? Question options: 1) $194, May 15 2) $194, May 16 3) $97, May 15 4) $97, May 16
$97, May 16
Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Merchandise Inventory account? Question options: 1) $30,000 2) $20,580 3) $21,000 4) $29,400
...$20,580
Bradford Company had $700,000 in sales for the year. The total assets at the beginning of the year were $240,000 and total assets at the end of the year were $280,000. The ratio of sales to total assets is (round answer to 2 decimal places) Question options: 1) 0.34 2) 2.92 3) 0.40 4) 2.69
2.69
Bountiful Company had sales of $650,000 and cost of merchandise sold of $200,000 during the year. The total assets balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of sales to total assets. Question options: 1) 0.29 2) 3.80 3) 3.00 4) 0.26
3.80
Taking advantage of a 2/10, n/30 purchases discount is equal to a savings yearly rate of approximately Question options: 1) 20% 2) 24% 3) 36% 4) 2%
36%
When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit Question options: 1) Accounts Payable 2) Merchandise Inventory 3) Accounts Receivable 4) Purchases Returns and Allowances
Accounts Payable
Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period? 1) Accounts Payable—Emma Co., debit $15,750; Merchandise Inventory, debit $300; Cash, credit $16,050 2) Accounts Payable—Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750 3) Accounts Payable—Emma Co., debit $15,000; Cash, credit $15,000 4) Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450
Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450
Pierce Company sold to Stanton Company merchandise on account FOB shipping point, 2/10, net 30, for $20,000. Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make to record this sale? Question options: 1) Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000, and Delivery Expense, debit $500; Cash, credit $500 2) Accounts Receivable—Stanton, debit $20,100; Sales, credit $20,100 3) Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000 4) Accounts Receivable—Stanton, debit $19,600; Sales, credit $19,600, and Accounts Receivable—Stanton, debit $500; Cash, credit $500
Accounts Receivable—Stanton, debit $19,600; Sales, credit $19,600, and Accounts Receivable—Stanton, debit $500; Cash, credit $500
What is the major difference between a periodic and perpetual inventory system? Question options: 1) Under the periodic inventory system, the purchase of inventory will be debited to the Purchases account. 2) Under the periodic inventory system, no journal entry is recorded at the time of the sale of inventory for the cost of the inventory. 3) Under the periodic inventory system, all adjustments such as purchases returns and allowances and discounts are reconciled at the end of the month. 4) All of the answers are correct.
All of the answers are correct.
Kaden Co. sells merchandise on credit to Jase Co. in the amount of $9,600. The invoice is dated on July 15 with terms of 1/15, net 45. If Jase Co. chooses not to take the discount, by when should the payment be made? Question options: 1) July 30 2) August 15 3) August 29 4) July 25
August 29
If Beginning Inventory (BI) + Purchases (P) - Ending Inventory (EI) = Cost of Merchandise Sold (COMS), an equivalent equation can be written as Question options: 1) BI - P = COMS + EI 2) BI + P = COMS + EI 3) BI + P = COMS - EI 4) EI + P = COMS - BI
BI + P = COMS + EI
The Corbit Corp. sold merchandise for $10,000 cash. The cost of the merchandise sold was $7,590. The journal entries to record this transaction under the perpetual inventory system would be 1) Cash 10,000 Merchandise Inventory 10,000 Cost of Merchandise Sold 7,590 Sales 7,590 2) Cash 10,000 Sales 10,000 Cost of Merchandise Sold 10,000 Merchandise Inventory 10,000 3) Cash 10,000 Sales 10,000 Cost of Merchandise Sold 7,590 Merchandise Inventory 7,590 4) Cash 7,590 Sales 7,590 Cost of Merchandise Sold 7,590 Merchandise Inventory 7,590
Cash 10,000 Sales 10,000 Cost of Merchandise Sold 7,590 Merchandise Inventory 7,590
Which account is not classified as a selling expense? Question options: 1) Delivery Expense 2) Sales Salaries 3) Advertising Expense 4) Cost of Goods Sold
Cost of Goods Sold
When the perpetual inventory system is used, the inventory sold is debited to Question options: 1) Supplies Expense 2) Cost of Merchandise Sold 3) Merchandise Inventory 4) Sales
Cost of Merchandise Sold
Which of the following accounts should be closed to Income Summary at the end of the fiscal year? Question options: 1) Merchandise Inventory 2) Drawing 3) Accumulated Depreciation 4) Cost of Merchandise Sold
Cost of Merchandise Sold
If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as Question options: 1) FOB shipping point 2) FOB n/30 3) FOB seller 4) FOB destination
FOB destination
If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are Question options: 1) FOB shipping point 2) consigned 3) FOB destination 4) n/30
FOB destination
If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as Question options: 1) FOB buyer 2) FOB shipping point 3) FOB n/30 4) FOB destination
FOB shipping point
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are Question options: 1) FOB destination 2) consigned 3) n/30 4) FOB shipping point
FOB shipping point
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are Question options: 1) consigned 2) FOB shipping point 3) FOB destination 4) n/30
FOB shipping point
The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be Question options: 1) Jan. 1 Purchases 1,500 Accounts Payable 1,500 2) Jan. 1 Office Supplies 1,500 Cash 1,500 3) Jan. 1 Merchandise Inventory 1,500 Cash 1,500 4) Jan. 1 Cash 1,500 Accounts Receivable 1,500
Jan. 1 Merchandise Inventory 1,500 Cash 1,500
If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income? Question options: 1) weighted average 2) LIFO 3) FIFO 4) average cost
LIFO
The inventory costing method that reports the earliest costs in ending inventory is Question options: 1) LIFO 2) specific identification 3) weighted average 4) FIFO
LIFO
During times of rising prices, which of the following is not an accurate statement? Question options: 1) LIFO will result in a higher cost of merchandise sold than FIFO. 2) Average costing will yield results that are between those of FIFO and LIFO. 3) LIFO will result in higher income taxes than FIFO. 4) FIFO will result in a higher net income than LIFO.
LIFO will result in higher income taxes than FIFO.
Under the perpetual inventory system, all purchases of merchandise are debited to the account 1) Cost of Merchandise Available for Sale 2) Cost of Merchandise Sold 3) Purchases 4) Merchandise Inventory
Merchandise Inventory
Which of the following accounts has a normal debit balance? Question options: 1) Accounts Payable 2) Sales 3) Merchandise Inventory 4) Interest Revenue
Merchandise Inventory
Which of the following accounts usually has a debit balance? Question options: 1) Sales Tax Payable 2) Accounts Payable 3) Sales 4) Merchandise Inventory
Merchandise Inventory
Which of the following accounts will only be found in the chart of accounts of a merchandising company? Question options: 1) Accounts Receivable 2) Accounts Payable 3) Sales 4) Merchandise Inventory
Merchandise Inventory
Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 13; the merchandise is received by the buyer on November 18; the entry is made in the buyer's accounts on November 20. The credit period begins with what date? Question options: 1) November 18 2) November 10 3) November 13 4) November 20
November 13
Under the periodic inventory system, the journal entry to record the purchase of merchandise inventory will include a debit to Question options: 1) Accounts Payable 2) Cost of Merchandise Purchased 3) Merchandise Inventory 4) Purchases
Purchases
Generally, the revenue account for a merchandising business is entitled Question options: 1) Gross Profit 2) Sales 3) Fees Earned 4) Gross Sales
Sales
Which account will be included in both service and merchandising companies, closing entries? Question options: 1) Sales Returns and Allowances 2) Purchase Discounts 3) Cost of Merchandise Sold 4) Sales
Sales
Which of the following accounts has a normal credit balance? Question options: 1) Merchandise Inventory 2) Sales 3) Accounts Receivable 4) Delivery Expense
Sales
Which of the following is not a difference between a retail business and a service business? Question options: 1) in what is sold 2) the inclusion of gross profit on the income statement 3) accounting equation 4) merchandise inventory included on the balance sheet
accounting equation
Under a perpetual inventory system Question options: 1) accounting records continuously disclose the amount of inventory 2) there is no need for a year-end physical count 3) the purchase returns and allowances account is credited when goods are returned to vendors 4) increases in inventory resulting from purchases are debited to Purchases
accounting records continuously disclose the amount of inventory
President's salaries, depreciation of office furniture, and office supplies are Question options: 1) administrative expenses 2) miscellaneous expenses 3) inventory expenses 4) selling expenses
administrative expenses
During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be Question options: 1) assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement 2) assets and retained earnings overstated by $70,000; and net income understated by $70,000 3) assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000 4) assets, retained earnings, and net income all overstated by $70,000
assets, retained earnings, and net income all overstated by $70,000
The statement of owner's equity shows Question options: 1) only net income, beginning capital, and withdrawals 2) only net income, beginning and ending capital 3) only total assets, beginning and ending capital 4) beginning and ending capital and all the changes in the owner's capital as a result of net income (loss), and withdrawals
beginning and ending capital and all the changes in the owner's capital as a result of net income (loss), and withdrawals
Multiple-step income statements show Question options: 1) neither gross profit nor income from operations 2) gross profit but not income from operations 3) both gross profit and income from operations 4) income from operations but not gross profit
both gross profit and income from operations
Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as Question options: 1) sales returns 2) sales when the credit card company remits the cash 3) cash sales 4) sales on account
cash sales
When the perpetual inventory system is used, the inventory sold is shown on the income statement as Question options: 1) cost of merchandise sold 2) purchases returns and allowances 3) net purchases 4) purchases
cost of merchandise sold
If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a Question options: 1) sales invoice 2) debit memo 3) credit memo 4) purchase invoice
credit memo
The arrangements between buyer and seller as to when payments for merchandise are to be made are called Question options: 1) cash on demand 2) credit terms 3) net cash 4) gross cash
credit terms
Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a Question options: 1) credit to Sales 2) credit to Accounts Payable 3) debit to Cost of Merchandise Sold 4) credit to Merchandise Inventory
credit to Merchandise Inventory
Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a Question options: 1) credit to Accounts Receivable 2) credit to Merchandise Inventory 3) debit to Merchandise Inventory 4) debit to Sales
credit to Merchandise Inventory
Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would include a Question options: 1) debit to Sales Discounts for $100 2) debit to Accounts Receivable for $4,880 3) debit to Cash for $5,000 4) credit to Sales for $4,900
credit to Sales for $4,900
Merchandise inventory is classified on the balance sheet as a 1) current liability 2) long-term asset 3) current asset 4) long-term liability
current asset
Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded? Question options: 1) debit Cash, $1,250; credit Sales, $1,250 2) debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250 3) debit Accounts Receivable, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250 4) debit Cash, $2,000; credit Merchandise Inventory, $1,250
debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250
If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shrinkage? Question options: 1) debit Merchandise Inventory, $5,000; credit Cost of Merchandise Sold, $5,000 2) debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000 3) debit Merchandise Inventory, $158,000; credit Cost of Merchandise Sold, $158,000 4) debit Cost of Merchandise Sold, $163,000; credit Merchandise Inventory, $158,000
debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000
In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is Question options: 1) debit Cost of Merchandise Sold; credit Merchandise Inventory 2) debit Merchandise Inventory; credit Cost of Merchandise Sold 3) debit Accounts Receivable; credit Merchandise Inventory 4) debit Cost of Merchandise Sold; credit Sales
debit Cost of Merchandise Sold; credit Merchandise Inventory
When using a perpetual inventory system, the journal entry to record the cost of merchandise sold is: Question options: 1) debit Cost of Merchandise Sold; credit Sales 2) debit Cost of Merchandise Sold; credit Merchandise Inventory 3) debit Merchandise Inventory; credit Cost of Merchandise Sold 4) No journal entry is made to record the cost of merchandise sold.
debit Cost of Merchandise Sold; credit Merchandise Inventory
When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry? Question options: 1) debit Accounts Payable; credit Merchandise Inventory 2) debit Merchandise Inventory; credit Purchases 3) debit Merchandise Inventory; credit Cash Discounts 4) debit Merchandise Inventory; credit Accounts Payable
debit Merchandise Inventory; credit Accounts Payable
Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a Question options: 1) debit to Sales, debit to Credit Card Expense, and a credit to Cash 2) debit to Cash and a credit to Sales 3) debit to Cash, credit to Credit Card Expense, and a credit to Sales 4) debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
debit to Cash and a credit to Sales
When a buyer returns merchandise purchased for cash, the buyer will record the transaction as a Question options: 1) debit to Merchandise Inventory; a credit to Cash 2) debit to Sales; a credit to Accounts Payable 3) debit to Cash; a credit to Merchandise Inventory 4) debit to Cash; a credit to Sales
debit to Cash; a credit to Merchandise Inventory
The entry to record the return of merchandise from a customer would include a Question options: 1) debit to Sales 2) debit to Customer Refunds Payable 3) debit to Estimated Returns Inventory 4) credit to Sales
debit to Customer Refunds Payable
Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a 1) debit to Merchandise Inventory 2) debit to Accounts Payable 3) credit to Merchandise Inventory 4) credit to Sales
debit to Merchandise Inventory
Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a Question options: 1) debit to Cash 2) credit to Customer Refunds Payable 3) debit to Merchandise Inventory 4) credit to Merchandise Inventory
debit to Merchandise Inventory
Net income plus operating expenses is equal to Question options: 1) sales 2) gross profit 3) cost of merchandise available for sale 4) cost of merchandise sold
gross profit
What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? Question options: 1) gross profit 2) net income 3) gross sales 4) income from operations
gross profit
When comparing a retail business to a service business, the financial statement that changes the most is the Question options: 1) statement of cash flows 2) income statement 3) balance sheet 4) statement of owner's equity
income statement
Ending inventory is made up of the oldest purchases when a company uses Question options: 1) average cost 2) last-in, first-out 3) retail method 4) first-in, first-out
last-in, first-out
When goods are shipped FOB destination and the seller pays the freight charges, the buyer Question options: 1) does not take a discount 2) journalizes a reimbursement to the seller 3) makes no journal entry for the freight 4) journalizes a reduction for the cost of the merchandise
makes no journal entry for the freight
If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the Question options: 1) retailer 2) consignee 3) shipper 4) manufacturer
manufacturer
Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error? Question options: 1) net income is understated 2) cost of merchandise sold is understated 3) merchandise inventory reported on the balance sheet is overstated 4) net income is overstated
net income is understated
Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error? Question options: 1) cost of merchandise sold is overstated 2) gross profit is understated 3) owner's equity is overstated 4) net income is understated
owner's equity is overstated
In credit terms of 3/15, n/45, the "3" represents the Question options: 1) number of days in the discount period 2) full amount of the invoice 3) percent of the cash discount 4) number of days when the entire amount is due
percent of the cash discount
The primary difference between a periodic and perpetual inventory system is that a 1.) periodic system records the cost of the sale on the date the sale is made 2) periodic system provides an easy means to determine inventory shrinkage 3) periodic system determines the inventory on hand only at the end of the accounting period 4) periodic system keeps a record showing the inventory on hand at all times
periodic system determines the inventory on hand only at the end of the accounting period
The inventory system employing accounting records that continuously disclose the amount of inventory is called Question options: 1) retail 2) physical 3) periodic 4) perpetual
perpetual
Under the _____ inventory method, accounting records maintain a continuously updated inventory value. Question options: 1) retail 2) perpetual 3) physical 4) periodic
perpetual
Which of the following items should not be included in the cost of ending merchandise inventory? Question options: 1) purchased units in transit, shipped FOB shipping point 2) purchased units in transit, shipped FOB destination 3) units on hand in the warehouse 4) sold units in transit, not invoiced, and shipped FOB destination
purchased units in transit, shipped FOB destination
To encourage a buyer to pay before the end of the credit period, the seller may offer a Question options: 1) purchases discount 2) sales discount 3) payment discount 4) trade discount
purchases discount
When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the Question options: 1) comparative form 2) account form 3) horizontal form 4) report form
report form
Which of the following items would not affect the cost of merchandise inventory acquired during the period? Question options: 1) quantity discounts 2) sales discounts 3) freight-in 4) sales commissions
sales commissions
Gross profit is equal to Question options: 1) sales plus selling expenses 2) sales plus cost of merchandise sold 3) sales less cost of merchandise sold 4) sales less selling expenses
sales less cost of merchandise sold
Merchandise is sold for cash. The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include a credit to Question options: 1) cash for $6,000 2) sales for $6,240 3) sales tax payable for $420 4) sales for $5,580
sales tax payable for $420
Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as Question options: 1) administrative expenses 2) other expenses 3) general expenses 4) selling expenses
selling expenses
The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a Question options: 1) revenue statement 2) multiple-step statement 3) single-step statement 4) report-form statement
single-step statement
Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items? Question options: 1) specific identification 2) LIFO 3) FIFO 4) average
specific identification
When comparing a retail business to a service business, the financial statement that changes the least is the Question options: 1) statement of cash flows 2) statement of owner's equity 3) income statement 4) balance sheet
statement of owner's equity
Who is responsible for the freight costs when the terms are FOB shipping point? Question options: 1) the ultimate customer 2) either the seller or the buyer 3) the seller 4) the buyer
the buyer
The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include Question options: 1) only the sales tax 2) only the list price 3) the list price less the sales tax 4) the list price plus the sales tax
the list price plus the sales tax
Who is responsible for the freight cost when the terms are FOB destination? Question options: 1) the buyer 2) the seller 3) either the buyer or the seller 4) the customer
the seller
Inventory shrinkage is recorded when Question options: 1) there is a difference between a physical count of inventory and inventory records 2) merchandise is returned by a buyer 3) merchandise purchased from a seller is incomplete or short 4) merchandise is returned to a seller
there is a difference between a physical count of inventory and inventory records
A chart of accounts for a merchandising business Question options: 1) usually requires more accounts than does the chart of accounts for a service business 2) usually is standardized by the FASB for all merchandising businesses 3) usually is the same as the chart of accounts for a service business 4) always uses a three-digit numbering system
usually requires more accounts than does the chart of accounts for a service business
What type of company would normally offer trade discounts to its customers? Question options: 1) service companies 2) online retailers 3) retailers 4) wholesalers
wholesalers
Which of the following will be the same amount regardless of the cost flow assumption adopted? Question options: 1) gross profit 2) ending merchandise inventory 3) number of items ordered 4) cost of goods sold
number of items ordered
FIFO reports higher gross profit and net income than the LIFO method when Question options: 1) prices remain stable 2) prices are reduced by 50% 3) prices are decreasing 4) prices are increasing
prices are increasing
Which document authorizes the purchase of the inventory from an approved vendor? Question options: 1) the purchase order 2) the petty cash voucher 3) the receiving report 4) the vendor's invoice
the purchase order
