Advanced Accounting Final Exam

Assume the gross amount of an invoice is $100 and a discount of 20% is allowed. The net amount is $65 $80. $20. $40.

$80.

An invoice in the amount of $916 is subject to a trade discount of 10% and credit terms on 3/10, n/30. If the invoice is not paid within the discount period, the amount that would be paid to satisfy the invoice would be $824.40. $888.52. $981.27. $916.00.

$824.40.

Merchandise is sold on account for $90, and the sale is subject to a retail sales tax of $5.40. The sales account should be credited for $84.60. $90.00. $95.40. $93.60.

$90.00.

Which of the following credit terms allows a discount of 3% if payment is made within 15 days from the date of the invoice; otherwise, the total amount of the invoice must be paid within 30 days from its date? 3/15, EOM 3/EOM, n/30 3/15, n/30 15/3, n/30

3/15, n/30

Assume the gross amount of an invoice is $200 and a trade discount of 10% is allowed. The amount to be entered in the accounting records would be $20. $220. $200. $180.

$180.

An invoice of $237.50 dated April 2 is subject to credit terms of 2/10, n/30. The amount to be paid if the invoice is paid on or before April 12 is $4.75. $23.75. $232.75. $237.50.

$232.75.

A record used to keep the amount owed to each supplier is called a(n) accounts receivable ledger. accounts payable ledger. transportation ledger. general ledger for accounts payable.

accounts payable ledger.

After posting is completed in the accounts receivable ledger and the general ledger, the total of the accounts receivable ledger balances should equal the accounts payable account balance. accounts receivable account balance. cash account balance. net income amount.

accounts receivable account balance.

(Appendix) When the net-price method of recording purchases is used, the debit to Purchases is for the full amount of the invoice. amount of the invoice less available cash discounts. amount actually paid on the invoice. amount of the invoice plus available cash discounts.

amount of the invoice less available cash discounts.

A discount offered as an inducement for prompt payment of an invoice is called a(n) trade discount. invoice discount. early discount. cash discount.

cash discount.

A journal that is not used by a business is a sales journal. purchase journal. cash flow journal. cash receipts journal.

cash flow journal.

For the merchant, bank credit card sales are treated in a manner similar to sales on account. cash sales. installment sales. layaway sales

cash sales

A summary accounts receivable account is called a(n) controlling account. balance account. master account. lead account.

controlling account.

The entry to record the purchase on account of merchandise for resale under the periodic inventory system includes debiting Purchases and crediting Cash. debiting Purchases and crediting Accounts Payable. debiting Merchandise Inventory and crediting Cash. debiting Merchandise Inventory and crediting Accounts Payable.

debiting Purchases and crediting Accounts Payable.

A method of allocating merchandise cost that assigns the most recent purchased costs to the ending inventory shown on the balance sheet is called the last-in, first-out method. first-in, first-out method. specific identification method. weighted-average method.

first-in, first-out method.

A method of allocating merchandise cost that assumes the sales in the period were made from the recently purchased merchandise and its earliest merchandise bought remains in the inventory is called the last-in, first-out method. first-in, first-out method. specific identification method. weighted-average method.

last-in, first-out method.

A schedule of accounts receivable is prepared from the list of customer accounts in the accounts receivable ledger. general journal. sales journal. general ledger.

list of customer accounts in the accounts receivable ledger.

A printed price of a manufacturer or wholesaler that is subject to trade discounts is called net price. gross price. list price. retail price.

list price.

When a fiscal year that starts and ends at the time the stock of merchandise is normally at its lowest level is selected, it is known as a(n) natural business year. calendar year. base year. accounting cycle.

natural business year.

Total sales less the sales price of any goods returned by customers, less any reduction in price given to customers, less cash discounts allowed by the seller, is called cost of goods sold. gross margin. net sales. gross profit.

net sales.

The inventory system that uses the merchandise inventory account as an active account is called perpetual. LIFO. FIFO. periodic.

perpetual.

A written order by a buyer for merchandise or other property specified in a purchase requisition is known as a purchase invoice. purchase order. purchase requisition. receiving report.

purchase order.

Copies of a sales invoice are used to do all of the following EXCEPT ship the merchandise. bill the customer. record the sale. record the receipt of merchandise.

record the receipt of merchandise.

A journal designed for entering only sales on account is called the cash receipts journal. cash payments journal. sales journal. general journal.

sales journal

Merchandise returned by the customer for a refund is called a sales return. sales allowance. credit memo. debit memo.

sales return.

A list showing the amount due to each supplier as of a specified date is known as the schedule of accounts receivable. trial balance. balance sheet. schedule of accounts payable.

schedule of accounts payable.

A list showing the amount due from each customer as of a specified date is known as a trial balance. schedule of accounts payable. schedule of accounts receivable. work sheet.

schedule of accounts receivable.

A method of allocating merchandise cost requiring each item sold and each item remaining in inventory to be separately identified with respect to its purchase cost is called the last-in, first-out method. first-in, first-out method. specific identification method. weighted-average method.

specific identification method.

A common approach to keeping a record of each customer's accounts receivable is to use a sales journal. subsidiary accounts receivable ledger. controlling account. general journal.

subsidiary accounts receivable ledger.

Special discounts from list prices, granted by manufacturers to different classes of customers, are known as cash discounts. trade discounts. manufacturers' discount. customers' discounts.

trade discounts.

A method of allocating merchandise cost that is based on the average cost of identical units is called the last-in, first-out method. first-in, first-out method. specific identification method. weighted-average method.

weighted-average method.

Which of the following accounts is NOT used to account for merchandise sales transactions? Sales Sales Tax Payable Sales Returns and Allowances Accounts Payable

Accounts Payable

Which of the following indicates that a shipment is free on board at the destination of the shipment and the seller will pay the transportation costs? COD FOB shipping point FOB destination 4/10, EOM

FOB destination

"S14" in the Posting Reference column of a general ledger account would indicate that amount came from the sales journal on the 14th of the month. True or False

False

A method of assigning merchandise cost that requires that each item sold and each item remaining in inventory be separately identified with respect to its purchase cost is called last-in, first-out. True or False

False

A purchases journal is a special journal used to record purchases of merchandise for cash and on account. True or False

False

A recommended accounting practice in order to eliminate a General Debit column in the cash payments journal is to provide separate columns for special groups of entries such as Accounts Payable, Purchases, Purchases Discounts, and Cash. True or False

False

Accurate inventory amounts are not necessary for accounting purposes because an error in inventory will "wash out" over a two-year period. True or False

False

Firms should report a loss due to write-down of inventory in the cost of goods sold account on the income statement. True or False

False

For the merchant, bank credit card sales are nothing like cash sales. True or False

False

If the schedule of accounts receivable total and the Accounts Receivable balance total do not agree, a correcting entry is made to balance the two totals. True or False

False

If the terms specified on an invoice are 2/10, n/30, this means that a discount of 2% will be allowed if payment is made within 30 days from the date of the invoice. True or False

False

It is important to post every column total from the cash receipts journal to the general ledger. True or False

False

Posting to the accounts payable ledger should be made at the end of the month. True or False

False

Purchases Returns and Allowances are recorded in the purchases journal. True or False

False

Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise are called merchandise sales. True or False

False

The first step in the purchasing process involves preparing a purchase order. True or False

False

The gross profit (inventory valuation) method requires keeping records of the selling prices of merchandise purchased. True or False

False

The sales tax payable account is a revenue account that is credited for the amount of tax imposed on sales. True or False

False

The term "FIFO" relates to the merchandise in inventory at the end of the accounting period, not to the merchandise sold during the period. True or False

False

To verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance, a schedule of accounts payable is prepared. True or False

False

Under the perpetual inventory system, the balance in the merchandise inventory account is merely a record of the most recent physical inventory account. True or False

False

Under the retail (inventory valuation) method, the amount of sales during the period is reduced by the normal profit percentage to determine the estimated cost of merchandise sold. True or False

False

When posting the cash receipts journal to the general ledger, insert the date in the Date column and your initials in the Posting Reference column of each ledger account. True or False

False

The account to which transportation charges on incoming merchandise are generally entered is Freight-In. FOB-In. Freight-Out. Delivery-In.

Freight-In.

A credit memorandum for $156 (sale price of merchandise $150; sales tax of $6) was issued to a customer for goods returned that had been purchased on account. To enter this transaction properly, Sales would be debited for $6. Sales would be debited for $150. Sales would be debited for $156. Sales would not be debited.

Sales would not be debited.

A method of allocating merchandise cost that is based on the average cost of identical units is known as weighted-average cost or average cost. True or False

True

A retail business allows customers to enter the store, select the merchandise they want, and bring it to a sales clerk. True or False

True

A trade discount is often offered by wholesalers. True or False

True

After all posting to the general ledger is completed, the accounts receivable, sales tax payable, and sales accounts in the general ledger are up to date. True or False

True

After the posting of the accounts payable ledger and the general ledger is completed, the total of the accounts payable ledger balances should equal the Accounts Payable balance in the general ledger. True or False

True

After the posting of the accounts receivable ledger and the general ledger is completed, the total of the accounts receivable ledger balances should equal the Accounts Receivable balance in the general ledger. True or False

True

An account number in the Posting Reference column of the general journal indicates that the account has been posted to the general ledger. True or False

True

Each amount in the General Debit column of the cash payments journal should be posted daily. True or False

True

FOB destination means free on board at the destination of the shipment. True or False

True

If any merchandise has been returned, the sales discount is calculated on the net sales amount. True or False

True

If merchandise is shipped FOB destination, the merchandise is the property of the selling company until it is received by the buying company. True or False

True

In the perpetual inventory system, no year-end adjusting entry is necessary, as long as the physical inventory agrees with the amount reported in the merchandise inventory account. True or False

True

It is an acceptable business practice to post the accounts receivable ledger daily and the general ledger monthly. True or False

True

It is inefficient to record all cash payments in a general journal. True or False

True

Purchases Returns and Allowances is the contra-purchases account to which purchases returns and purchases allowances are credited. True or False

True

Sales Tax Payable is a liability account. True or False

True

Special journals enable a substantial time savings and make for a more efficient posting process. True or False

True

The "FIFO" and "LIFO" inventory costing methods are based on assumed cost flows that are not required to reflect the actual physical movement of merchandise within the company. True or False

True

The "FIFO" and "LIFO" inventory costing methods are based on assumed cost flows that are not required to reflect the actual physical movement of merchandise within the company. True or False

True

The cash receipts journal is posted to the general ledger in two stages. First, the individual amounts in the General Credit column are posted and then the total of the other amounts columns are posted. True or False

True

The gross profit (inventory valuation) method is appropriate if a firm's normal gross profit on sales has been relatively stable over time and for estimating the cost of inventory that was destroyed by casualty. True or False

True

The gross profit method estimates the ending inventory and cost of goods sold by using the firm's normal gross profit as a percentage of net sales. True or False

True

The increasing use of computers and optical scanning devices at the point-of-sale probably will cause more businesses to switch from periodic to perpetual inventories. True or False

True

The principle of conservatism states that gains should not be anticipated but that all potential losses should be recognized. True or False

True

The sales account is a revenue account. True or False

True

The types of special journals a business uses should depend on the types of transactions that occur most frequently for a business. True or False

True

To a seller, cash discounts are considered the same as sales discounts. True or False

True

Transactions that are similar in type and recorded frequently are likely to have a special journal. True or False

True

Under conditions of rising prices, the FIFO inventory method provides the highest gross profit because the most recent purchase costs are matched against sales revenue. True or False

True

Under the periodic inventory system, no entries are made to the merchandise inventory or cost of goods sold accounts during the year. True or False

True

Under the periodic system of accounting for inventory, the purchases account is debited for the cost of all merchandise purchased. True or False

True

When perpetual inventory records are kept, the merchandise inventory account in the general ledger is usually a control account. True or False

True

When prices are rising, net income calculated by using the last-in, first-out method is smaller than the amount determined from using either the first-in, first-out or the weighted-average method. True or False

True

While sales returns and allowances can be debited directly to the sales account, it is better to debit a separate sales returns and allowances account. True or False

True

The terms on an invoice are 4/15, n/30. This means that a discount of 4% will be allowed if payment is made within 15 days from the date of the invoice. a discount of 15% will be allowed if payment is made with 4 days from the date of the invoice. a discount of 4% will be allowed if payment is made by the 15th of the month. a discount of 15% will be allowed if payment is made by the 4th day after the date of the invoice.

a discount of 4% will be allowed if payment is made within 15 days from the date of the invoice.

After the posting of the accounts payable ledger and general ledger is completed, the total of the accounts payable ledger balances should equal the general ledger balance of Purchases. Accounts Receivable. Accounts Payable. Purchases Returns and Allowances.

Accounts Payable.

A credit memorandum for $156 (sales price of merchandise, $150; sales tax $6) was issued to a customer for goods returned that had been purchased on account. To enter this transaction properly, Accounts Receivable would be credited for $6. Accounts Receivable would be credited for $150. Accounts Receivable would be credited for $156. Accounts Receivable would not be credited.

Accounts Receivable would be credited for $156.

Summary posting from the sales journal normally would be completed in which of the following orders? Accounts Receivable, Sales, and Sales Tax Payable columns Sales Tax Payable, Sales, and Accounts Receivable columns Sales, Sales Tax Payable, and Accounts Receivable columns Accounts Receivable, Sales Tax Payable, and Sales columns

Accounts Receivable, Sales, and Sales Tax Payable columns

A customer returns merchandise that was delivered in poor condition and that does not meet specification. The account that the seller would debit for the amount of the return is Sales Returns and Allowances. Purchase Returns and Allowances. Sales. Purchases.

Sales Returns and Allowances.

The account that would be credited for the amount of tax collected and paid on sales would be Sales. Sales Tax Payable. Cash. Accounts Payable.

Sales Tax Payable.

(Appendix) If purchases are recorded at the net amount, assuming that all available cash discounts will be taken, the net-price method of recording the purchase has been used. True or False

True

A common approach to keeping a record of each customer's accounts receivable is to use a subsidiary accounts receivable ledger. True or False

True