Chapter 7&8

If a company uses the perpetual and net price inventory methods and it purchases inventory on account worth $6,000 with terms 1/10 n/30 what will be the cost of the inventory when the inventory is purchased? A)$6,000 B)$5,940 C)$5,400 D)$6,600

$6,000 x .01 = $60 and therefore ($6,000 - $60) $5,940 is recorded in the inventory account.

Filipi Inc. reported wages expense of $617,000, wages payable of $132,000 at the beginning of the year, and wages payable of $91,700 at the end of the year. Cash payments for wages during the year were: A)$617,000 B)$393,300 C)$576,700 D)$657,300

$657,300

Old Navy reported cost of goods sold of $1,065,000, beginning and ending inventory of $288,700 and $130,400, respectively, and beginning and ending accounts payable of $148,200 and $71,600, respectively. Cash payments for merchandise inventory during the year were: A)$906,700 B)$983,300 C)$1,299,900 D)$830,100

$983,300

Net income would increase as a result of which of the following adjustments? A)Adjusting unearned revenue B)Accruing an expense C)Recording depreciation D)Adjusting Prepaid Rent

A)Adjusting unearned revenue

Which of the following appears on both the statement of cash flows and the balance sheet? A)Cash balance at the end of the year B)Net income C)Retained earnings D)Accounts payable

A)Cash balance at the end of the year

In a computer-based transaction system which of the following serves as the ledger? A)Master file B)Transaction file C)Accumulation file D)Data file

A)Master file

The gross method records the purchase discount. A)When it is taken B)When the inventory is purchased C)When the inventory is sold D)When the inventory is returned

A)When it is taken

Which of the following entries is made when a discount is taken and the perpetual system uses the net method.

AP Cash

The purpose of a trail balance is to A)insure that correct accounts have been debited and credited B)check to see if the total debits equal the total credits C)check to determine whether all journal entries were made D)all of the above are correct.

B) check to see if the total debits equal the total credits

In a sales journal only one amount is recorded but that amount is posted by A)Debiting cost of goods sold and crediting inventory B)Debiting accounts receivable and crediting sales C)Debiting cash and crediting sales D)Debiting accounts receivable and crediting cash

B)Debiting accounts receivable and crediting sales

The total of the accounts payable subsidiary ledger is equal to the balance in the accounts payable account in the general ledger: A)At all times. B)Only at the end of specified time periods. C)Never D)At random times during the year.

B)Only at the end of specified time periods.

An accounts receivable subsidiary ledger would be associated with which of the following journals? A)Depreciation journal B)Sales journal C)Cash receipts journal D)Purchases journal

B)Sales journal

The entry on November 1,2010 to record the payment with cash of rent for a full year would include a: A)debit to rent expense B)debit to prepaid rent C)credit to prepaid rent D)credit to accounts payable.

B)debit to prepaid rent

If the year-end depreciation adjustment was too big which of the following would not be true? A)assets and owners' equity would be understated B)liabilities would be overstated and owners' equity would be understated C)assets and net income would be understated D)net income and owners' equity would be understated

B)liabilities would be overstated and owners' equity would be understated

To identify the individuals and the amount they owe the company is the purpose of which of the following? A)Sales Journal B)Purchases Journal C)Accounts Receivable Subsidiary Ledger D)Accounts Payable Subsidiary Ledger

C)Accounts Receivable Subsidiary Ledger

Which of the following entries reflects the use of a perpetual inventory system?

COGS Inventory

On November 4, 2010, Pauley & James, Chartered paid $12,000 for two years rent in advance. Assuming that Pauley & James's fiscal year ends on December 31, 2010, what would be the required adjusting entry: A)Rent expense 1000 Rent revenue 1000 B) Prepaid expense 10000 Rent expense 10000 C) Rent expense 1000 Prepaid rent 1000 D) Rent expense 1000 Cash 1000

D) Rent expense 1000 Cash 1000

Which of the following results in a revenue event? A)Stock is issued for cash B)A telephone bill is received but not paid C)A customer pays for merchandise purchased earlier D)A customer buys merchandise on account.

D)A customer buys merchandise on account.

Accountants use the term "debit" to refer to A)a firm has incurred debt B)a reduction in amounts owed C)events that increase accounts D)an amount entered on the left-hand side of an account

D)An amount entered on the left-hand side of an account

Which of the following statements is Not true about permanent accounts? A)Permanent accounts are never closed. B)An asset is a permanent account. C)All balance sheet accounts are permanent. D)An expense is a permanent account.

D)An expense is a permanent account

The statement of retained earnings describes all of the following except: A)Dividends B)Net income C)Beginning balance of retained earnings D)Cash generated by operations

D)Cash generated by operations

Which of the following is true about the purchase discount lost account? A)It is used with the gross method and the periodic system and the terms of the discount are not met. B)It is used when the net method is used with the perpetual system and the terms of the discount are met. C)It is used when the gross method is used with the periodic system and the terms of the discount are not met. D)It is used when the net method is applied to either the periodic or perpetual systems and the terms of the discount are not met.

D)It is used when the net method is applied to either the periodic or perpetual systems and the terms of the discount are not met.

Insurance expense xxxx Prepaid insurance xxxx A)increasing assets and increasing liabilities B)decreasing liabilities and increasing owners' equity C)increasing assets and increasing owners' equity D)decreasing assets and decreasing owners' equity

D)decreasing assets and decreasing owners equity

The 7th of 8 steps in the accounting cycle is to prepare: A)the post-closing trial balance B)adjusting entries C)financial statements D)make and post closing entries

D)make and post closing entries

he most likely explanation for the following journal entry would be: Cash xxx AR xxxx A)performed a service and immediately received the cash B)performed a service and billed the customer C)performed a service for a customer who had paid for the service ahead of time D)recorded the receipt of cash from a customer for services previously performed

D)recorded the receipt of cash from a customer for services previously performed

Which of the following entries would not be associated with the use of a perpetual inventory system?

Purchase AP

Harry's Hideaway has one expense account, insurance expense, which is to be closed out at year end. The closing entry would be

Retained earings Insurance expense

Which of the following is not deducted from gross pay to determine net pay? A)FICA B)Federal Income Taxes C)Charitable Contributions D)Unemployment Taxes

Unemployment Taxes

Peeves Party Supply purchased $4,000 of merchandise on account, terms 2/15, n/30. Assuming Peeves uses the net price method to account for purchase discounts, the journal entry to record the purchase would include a: A)debit to Inventory for $4,000 B)credit to Accounts Payable for $3,920 C)credit to Cash for $3,920 D)credit to Purchase Discounts for $80

credit to Accounts Payable for $3,920

Markson & Pettyjohn (M&P) purchased $8,000 of merchandise on account for resale purposes. M&P plans to sell the merchandise for $14,000. If M&P returned $3,000 of merchandise for credit, the journal entry to record the return using the perpetual inventory system and the gross price method would include a: A)credit to Accounts Payable for $3,000 B)credit to Inventory for $3,000 C)debit to Sales for $2,000 D)debit to Cash for $3,000

credit to Inventory for $3,000