ACC201 C5: Multiple Choice

If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, cost of goods sold is: (a) $390,000. (b) $370,000. (c) $330,000. (d) $420,000.

(a) $390,000. (60,000+380,000=440,000; 440,000-50,000=390,000)

Which one of the following is shown on a multiple-step but not on a single-step income statement? (a) Gross profit (b) Cost of goods sold (c) Net sales (d) Net income

(a) Gross profit

Which of the following would not be included in the definition of inventory under IFRS? (a) Office computer used by the accounting department of a company. (b) Photocopy paper held for sale by an office supply store. (c) Office furniture held for sale by an office furniture store. (d) All of these answer choices are correct.

(a) Office computer used by the accounting department of a company.

Marigold Company's financial information is presented below. Sales Revenue: $ ???? Cost of Goods Sold: 550000 Sales Returns and Allowances: 35000 Gross Profit: ???? Net Sales: 862000 Entry field with correct answer (a) Sales Revenue $897000; Gross Profit $312000 (b) Sales Revenue $812000; Gross Profit $312000 (c) Sales Revenue $897000; Gross Profit $430000 (d) Sales Revenue $812000; Gross Profit $430000

(a) Sales Revenue $897000; Gross Profit $312000 ($862000 + $35000 = $897000; $862000 - $550000 = $312000.)

In a worksheet using a perpetual inventory system, Inventory is shown in the following columns: (a) adjusted trial balance debit and balance sheet debit. (b) income statement debit and balance sheet debit. (c) income statement credit and balance sheet debit. (d) income statement credit and adjusted trial balance debit.

(a) adjusted trial balance debit and balance sheet debit.

The steps in the accounting cycle for a merchandising company are the same as those in a service company except: (a) an additional adjusting journal entry for inventory may be needed in a merchandising company. (b) closing journal entries are not required for a merchandising company. (c) a post-closing trial balance is not required for a merchandising company. (d) a multiple-step income statement is required for a merchandising company.

(a) an additional adjusting journal entry for inventory may be needed in a merchandising company.

Two categories of expenses for merchandising companies are (a) cost of goods sold and operating expenses. (b) sales and cost of goods sold. (c) cost of goods sold and financing expenses. (d) operating expenses and financing expenses.

(a) cost of goods sold and operating expenses.

Net income is gross profit less (a) operating expenses. (b) other gains and losses. (c) selling expenses. (d) administrative expenses.

(a) operating expenses.

Under a perpetual inventory system, when goods are purchased for resale by a company: (a) purchases on account are debited to Inventory. (b) purchases on account are debited to Purchases. (c) purchase returns are debited to Purchase Returns and Allowances. (d) freight costs are debited to Freight-Out.

(a) purchases on account are debited to Inventory.

A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on June 16. The amount received as payment in full on June 23 is: (a) $700. (b) $686. (c) $685. (d) $650.

(b) $686. ($750-50=700; 700*0.02=14; 700-14=686)

If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, the gross profit is: (a) $30,000. (b) $90,000. (c) $340,000. (d) $400,000.

(b) $90,000. ($400,00-310,000=$90,000)

In a periodic inventory system, a return of defective merchandise to a supplier is recorded by crediting (a) Accounts Payable. (b) Purchase Returns and Allowances. (c) Inventory. (d) Purchases.

(b) Purchase Returns and Allowances.

A company that maintains a perpetual inventory system has an inventory account balance of $50,000. The physical count of goods on hand totals $49,600. Which of the following adjusting entries is correct? (a) debit Purchases and credit Inventory. (b) debit Cost of Goods Sold and credit Inventory. (c) debit Inventory and credit Purchases. (d) debit Sales Discounts and credit Inventory.

(b) debit Cost of Goods Sold and credit Inventory.

When goods are purchased for resale by a company using a periodic inventory system: (a) purchases on account are debited to Inventory. (b) purchases on account are debited to Purchases. (c) purchase returns are debited to Purchase Returns and Allowances. (d) freight costs are debited to Purchases.

(b) purchases on account are debited to Purchases.

During August, 2018, Coronado's Supply Store generated revenues of $59600. The company's expenses were as follows: cost of goods sold of $35600 and operating expenses of $4500. The company also had rent revenue of $1100 and a gain on the sale of a delivery truck of $1600. Coronado's non-operating income (loss) for the month of August, 2018 is (a) $2900. (b) $500. (c) $2700. (d) $0.

(c) $2700. ($1100 + $1600 = $2700)

Financial information is presented below: Operating Expenses: $ 93000 Sales Returns and Allowances: 28000 Sales Discounts: 11000 Sales Revenue: 289000 Cost of Goods Sold: 159000 The gross profit rate would be (a) 0.440. (b) 0.509. (c) 0.364. (d) 0.314.

(c) 0.364. ($289000 - $28000 - $11000 = $250000; ($250000 - $159000) ÷ $250000 = 0.364.)

The sales accounts that normally have a debit balance are: (a) Sales Discounts. (b) Sales Returns and Allowances. (c) Both (a) and (b). (d) Neither (a) nor (b).

(c) Both (a) and (b).

Which of the following accounts will normally appear in the ledger of a merchandising company that uses a perpetual inventory system? (a) Purchases. (b) Freight-In. (c) Cost of Goods Sold. (d) Purchase Discounts.

(c) Cost of Goods Sold.

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting (a) Purchases. (b) Purchase Returns and Allowances. (c) Inventory. (d) Purchase Discounts.

(c) Inventory.

Income from operations appears on (a) both a multiple-step and a single-step income statement. (b) neither a multiple-step nor a single-step income statement. (c) a multiple-step income statement only. (d) a single-step income statement only.

(c) a multiple-step income statement only.

Income from operations will always result if (a) revenues exceed operating expenses. (b) revenues exceed cost of goods sold. (c) gross profit exceeds operating expenses. (d) the cost of goods sold exceeds operating expenses.

(c) gross profit exceeds operating expenses.

A single-step income statement: (a) reports gross profit. (b) does not report cost of goods sold. (c) reports sales revenue and "Other revenues and gains" in the revenues section of the income statement. (d) reports operating income separately.

(c) reports sales revenue and "Other revenues and gains" in the revenues section of the income statement.

Gross profit will result if: (a) operating expenses are less than net income. (b) sales revenues are greater than operating expenses. (c) sales revenues are greater than cost of goods sold. (d) operating expenses are greater than cost of goods sold.

(c) sales revenues are greater than cost of goods sold.

To record the sale of goods for cash in a perpetual inventory system: (a) only one journal entry is necessary to record cost of goods sold and reduction of inventory. (b) only one journal entry is necessary to record the receipt of cash and the sales revenue. (c) two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory. (d) two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the cost of goods sold and sales revenue.

(c) two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? (a) $980 (b) $800 (c) $780 (d) $784

(d) $784

Which of the following appears on both a single-step and a multiple-step income statement? (a) Inventory. (b) Gross profit. (c) Income from operations. (d) Cost of goods sold.

(d) Cost of goods sold.

The journal entry to record a credit sale of merchandise is (a) Debit Cash and credit Sales Revenue (b) Debit Accounts Receivable and credit Service Revenue (c) Debit Cash and credit Service Revenue (d) Debit Accounts Receivable and credit Sales Revenue

(d) Debit Accounts Receivable and credit Sales Revenue

The contra revenue account that normally has a debit balance is (a) Freight-Out. (b) Purchase Discounts. (c) Purchase Returns and Allowances. (d) Sales Returns and Allowances.

(d) Sales Returns and Allowances.

The multiple-step income statement for a merchandising company shows each of the following features except: (a) gross profit. (b) cost of goods sold. (c) a sales section. (d) an investing activities section.

(d) an investing activities section.

In determining cost of goods sold in a periodic system: (a) purchase discounts are deducted from net purchases. (b) freight-out is added to net purchases. (c) purchase returns and allowances are deducted from net purchases. (d) freight-in is added to net purchases.

(d) freight-in is added to net purchases.

Sales revenue (a) will always equal cash collections in a month. (b) is only recorded after cash is collected. (c) only results from credit sales. (d) may be recorded before cash is collected.

(d) may be recorded before cash is collected.