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1. (Points 2) The Corbit Corp. sold merchandise for

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1. (Points: 2)...
1. (Points: 2)
The Corbit Corp. sold merchandise for cash, $7,200. The cost of the merchandise sold was $3,950. The journal entry(s) to record this transaction would be



1. Cash 7,200
Sales 7,200

Cost of Merchandise Sold 7,200
Merchandise Inventory 7,200

2. Cash 7,200
Sales 7,200

Cost of Merchandise Sold 3,950
Merchandise Inventory 3,950

3. Cash 3,950
Sales 3,950

Cost of Merchandise Sold 3,950
Merchandise Inventory 3,950

4. Cash 7,200
Merchandise Inventory 7,200

Cost of Merchandise Sold 3,950
Sales 3,950


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2. (Points: 2)
The ratio of net sales to assets measures how effectively a business is using its assets to generate sales.



1. False

2. True


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3. (Points: 2)
Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made.



1. True

2. False


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4. (Points: 2)
The seller records the sales tax as part of the sales amount.



1. True

2. False


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5. (Points: 2)
Using the following information, what is the amount of cost of merchandise sold?


Purchases $32,000 Purchases discounts $960
Merchandise inventory September 1 5,700 Merchandise inventory
September 30 6,370
Sales returns and allowances 910 Sales 63,000
Purchases returns and allowances 1,200 Freight In 1,040





1. 26,900

2. 28,130

3. 30,210

4. 20,530


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6. (Points: 2)
The buyer will include the sales tax as part of the cost of merchandise purchased.



1. True

2. False


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7. (Points: 2)
Which one of the following is not a difference between a retail business and a service business?



1. accounting equation

2. merchandise inventory included in the balance sheet

3. the inclusion of gross profit in the income statement

4. in what is sold


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8. (Points: 2)
Under the periodic inventory system, the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory.



1. False

2. True


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9. (Points: 2)
Emma Co. sold Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $25,000. Emma Co. prepaid the $500 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make if Isabella Co. pays within the discount period?



1. Accounts Payable-Emma Co., debit $25,500; Merchandise Inventory, debit $500; Cash, credit $26,000

2. Accounts Payable-Emma Co., debit $25,000; Freight In, credit $500; Cash, credit $24,500

3. Accounts Payable-Emma Co., debit $25,000; Freight In, debit $500; Cash, credit $25,500

4. Accounts Payable-Emma Co., debit $25,500; Merchandise Inventory, credit $500; Cash, credit $25,000


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10. (Points: 2)
Cumberland Co. sells $1,200 of inventory to Hancock Co.for cash. Cumberland paid $850 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?



1. Cash 1,200 Dr, Sales 1,200 Cr, Cost of Merchandise Sold 850 Dr, Merchandise Inventory 850 Cr.

2. Cash 1,200 Dr, Sales 1,200 Cr

3. Cash 1,200 Dr, Merchandise Inventory 850 Cr

4. Accounts Receivable 1,200 Dr, Sales 1,200 Cr, Cost of Merchandise Sold 850 Dr, Merchandise Inventory 850 Cr.


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11. (Points: 2)
When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry



1. debit Merchandise Inventory; credit Cash

2. debit Cash; credit Merchandise Inventory

3. debit Sales Returns and Allowances; credit Cash

4. debit Cash; credit Sales Returns and Allowances


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12. (Points: 2)
Which of the following accounts has a normal credit balance?



1. Sales

2. Sales Returns and Allowances

3. Merchandise Inventory

4. Delivery Expense


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13. (Points: 2)
Who pays the freight cost when the terms are FOB destination?



1. the seller

2. either the buyer or the seller

3. the customer

4. the buyer


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14. (Points: 2)
In credit terms of 3/15, n/45, the "3" represents the



1. full amount of the invoice

2. number of days when the entire amount is due

3. percent of the cash discount

4. number of days in the discount period


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15. (Points: 2)
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



1. revenue statement

2. report-form statement

3. multiple-step statement

4. single-step statement


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16. (Points: 2)
When comparing a retail business to a service business, the financial statement that changes the least is the



1. Statement of Cash Flow

2. Retained Earnings Statement

3. Income Statement

4. Balance Sheet


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17. (Points: 2)
If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as



1. FOB buyer

2. FOB shipping point

3. FOB destination

4. FOB n/30


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18. (Points: 2)
Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?



1. administrative expense

2. other expense

3. selling expense

4. miscellaneous expense


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19. (Points: 2)
Merchandise is sold for cash. The selling price of the merchandise is $3,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include



1. A credit to Sales Tax Payable for $210.

2. None of the above.

3. A credit to Sales for $3,210.

4. A debit to Cash for $3,000.


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20. (Points: 2)
When the terms of sale are FOB shipping point, the buyer should pay the freight charges.



1. True

2. False


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21. (Points: 2)
When merchandise sold is assumed to be in the order in which the expenditures were made, the inventory method is called



1. last-in, first-out

2. average cost

3. first-in, last-out

4. first-in, first-out


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22. (Points: 2)
In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the good sold.



1. False

2. True


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23. (Points: 2)
Which of the following companies would be more likely to use the specific identification inventory costing method?



1. Wal-Mart

2. Gordon’s Jewelers

3. Best Buy

4. Lowe’s


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24. (Points: 2)
If the retail inventory method is used, inventory figures can be provided for interim statements without the necessity of taking a physical inventory.



1. True

2. False


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25. (Points: 2)
Beginning inventory, purchases and sales data for tennis rackets are as follows:


Apr 3 Inventory 12 units @ $45
11 Purchase 13 units @ $47
14 Sale 18 units
21 Purchase 9 units @ $60
25 Sale 10 units


Assuming the business maintains a perpetual inventory system, calculate the cost of merchandise sold and ending inventory under First-in, first-out:



1. cost of merchandise sold $1,151; ending inventory $180

2. cost of merchandise sold $180; ending inventory $1,151

3. cost of merchandise sold $1,331; ending inventory $360

4. cost of merchandise sold $360; ending inventory $1,331


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26. (Points: 2)
The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory.



1. True

2. False


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27. (Points: 2)
The inventory costing method that reflects the cost flow in the reverse order and will report the earliest costs in ending inventory is



1. Last in first out

2. Average cost

3. First in first out

4. Specific identification


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28. (Points: 2)
Inventory controls start when the merchandise is shelved in the store area.



1. True

2. False


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29. (Points: 2)
Under a perpetual inventory system, when a shortage is discovered



1. Merchandise Inventory is debited

2. Cost of Merchandise Sold is credited

3. Merchandise Inventory is credited

4. Inventory Shortages is credited


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30. (Points: 2)
Use the following information to answer Questions 23-28.

The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May.

Date Product Z Units Cost
May 3 Purchase 5 $30
May 10 Sale 3
May 17 Purchase 10 $34
May 20 Sale 6
May 23 Sale 3
May 30 Purchase 10 $40



Assuming that the company uses the perpetual inventory system, determine the ending inventory for the month of May using the average inventory cost method.



1. $452

2. $450

3. $500

4. $502


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31. (Points: 2)
One of the two internal control procedures over inventory is to properly report inventory on the financial statements.



1. True

2. False


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32. (Points: 2)
If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the



1. retailer

2. shipper

3. consignee

4. manufacturer


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33. (Points: 2)
When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold.



1. False

2. True


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34. (Points: 2)
In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is



1. debit Accounts Receivable; credit Sales

2. debit Cost of Merchandise Sold; credit Sales

3. debit Merchandise Inventory; credit Cost of Merchandise Sold

4. debit Cost of Merchandise Sold; credit Merchandise Inventory


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35. (Points: 2)
If the perpetual inventory system is used and a physical count disclosed a shortage, the cost of merchandise sold should be debited and the merchandise inventory account credited.



1. True

2. False


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36. (Points: 2)
Of the three widely used inventory costing methods (FIFO, LIFO, and average), the LIFO method of costing inventory is based on the assumption that costs are charged against revenues in the reverse order in which they were incurred.



1. False

2. True


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37. (Points: 2)
In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs.



1. True

2. False


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38. (Points: 2)
Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.



1. False

2. True


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39. (Points: 2)
During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory.



1. can not tell without more information

2. FIFO method

3. LIFO method

4. average method


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40. (Points: 2)
During deflationary periods, the use of the LIFO method of costing inventory will result in a lower amount of current assets than would result from the use of the FIFO method.



1. True

2. False
Submitted: 7 years ago.Category: Homework
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