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Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $1,960.

A) True
B) False

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Non-operating activities that include interest expense,losses from asset disposals,and casualty losses are reported as ________.

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other expe...

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Either the gross method or net method may be used to record sales with cash discounts,but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

A) True
B) False

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On May 1,Shilling Company sold merchandise in the amount of $5,800 to Anders,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Shilling uses the perpetual inventory system and the gross method.The journal entry or entries that Shilling will make on May 1 is:


A)  Sales 5,800 Accourits receivable 5,800\begin{array} { | l | r | r | } \hline \text { Sales } & 5,800 & \\\hline \text { Accourits receivable } & & 5,800 \\\hline\end{array}
B)  Sales 5,800 Accounts receivable 5,800 Cost of goods sold 4,000 Merchandise Inventory 4,000\begin{array}{|l|r|r|}\hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise Inventory } & & 4,000 \\\hline\end{array}
C)  Accourits receivable 5,800 Sales 5,800\begin{array} { | l | r | r | } \hline \text { Accourits receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline\end{array}
D)  Accourts receivable 5,800 Sales 5,800 Cost of goods sold 4,000 Merchandise Irventory 4,000\begin{array} { | l | r | r | } \hline \text { Accourts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise Irventory } & & 4,000 \\\hline\end{array}
E)  Accourits receivable 4,000 Sales 4,000\begin{array} { | l | r | r | } \hline \text { Accourits receivable } & 4,000 & \\\hline \text { Sales } & & 4,000 \\\hline\end{array}

F) B) and E)
G) A) and E)

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Describe the difference between wholesalers and retailers.

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A wholesaler is an intermediary that buy...

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On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Johnson uses the periodic inventory system and the net method of accounting for purchases.The journal entry that Johnson will make on September 12 is:


A)  Purchases 5,800 Accourits payable 5,800\begin{array} { | l | r | r | } \hline \text { Purchases } & 5,800 & \\\hline \text { Accourits payable } & & 5,800 \\\hline\end{array}
B)  Purchases 5,684 Accourits payable 5,684\begin{array} { | l | r | r | } \hline \text { Purchases } & 5,684 & \\\hline \text { Accourits payable } & & 5,684 \\\hline\end{array}
C)  Merchandise inventory 5,684 Accounts payable 5,684\begin{array}{|l|r|r|}\hline \text { Merchandise inventory } & 5,684 & \\\hline \text { Accounts payable } & & 5,684 \\\hline\end{array}
D)  Merchandise inventory 5,800 Accounts payable 5,800\begin{array}{|l|r|r|}\hline \text { Merchandise inventory } & 5,800 & \\\hline \text { Accounts payable } & & 5,800 \\\hline\end{array}
E)  Accounts payable 4,000 Merchandise inventory 4,000\begin{array}{|l|r|r|}\hline \text { Accounts payable } & 4,000 & \\\hline \text { Merchandise inventory } & & 4,000 \\\hline\end{array}

F) B) and E)
G) A) and E)

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A buyer issues a ________ to inform the seller of a debit made to the seller's account payable in the buyer's records.

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Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses.Gross profit equals:


A) $770,000.
B) $115,000.
C) $390,000.
D) $402,000.
E) $408,000.

F) C) and D)
G) A) and E)

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Using the following year-end information for Calvin's Clothing,calculate the current ratio and acid-test ratio for the business:  Cash $5,000 Short-term investments 12,000 Accounts receivable 54,000 Inventory 325,000 Prepaid expenses 17,500 Accounts payable 106,500 Other current payables 25,000\begin{array}{lr}\text { Cash } & \$ 5,000 \\\text { Short-term investments } & 12,000 \\\text { Accounts receivable } & 54,000 \\\text { Inventory } & 325,000 \\\text { Prepaid expenses } & 17,500 \\\text { Accounts payable } & 106,500 \\\text { Other current payables } & 25,000\end{array}


A) 1.80 and 1
B) 1.97 and 1.52
C) 2.73 and 1.52
D) 3.50 and 0.90
E) 1.80 and 0.90

F) A) and B)
G) B) and C)

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Expenses that support the overall operations of a business and include the expenses relating to accounting,human resource management,and financial management are called:


A) Cost of goods sold.
B) Selling expenses.
C) Purchasing expenses.
D) General and administrative expenses.
E) Non-operating activities.

F) B) and E)
G) A) and C)

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A buyer failed to take advantage of the vendor's credit terms of 2/15,n/45,but instead paid the invoice in full at the end of 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:


A) 12.2%
B) 16.2%
C) 18.9%
D) 24.3%
E) 24.5%

F) C) and D)
G) B) and D)

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From the adjusted trial balance given below for the Grayson Company,prepare a multiple-step income statement in good form.Salaries expense and building depreciation expense should be equally divided between selling activities and the general and administrative activities. From the adjusted trial balance given below for the Grayson Company,prepare a multiple-step income statement in good form.Salaries expense and building depreciation expense should be equally divided between selling activities and the general and administrative activities.

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Describe the recording process (including costs)for the types of transactions involved in purchasing merchandise inventory when a perpetual inventory system is used.

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The cost of merchandise purchased for re...

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Quick assets are defined as:


A) Cash,short-term investments,and inventory.
B) Cash,short-term investments,and current receivables.
C) Cash,inventory,and current receivables.
D) Cash,noncurrent receivables,and prepaid expenses.
E) Accounts receivable,inventory,and prepaid expenses.

F) A) and C)
G) All of the above

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A ________ income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

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Merchandise inventory:


A) Is a long-term asset.
B) Is a current asset.
C) Includes supplies the company will use in future periods.
D) Is classified with investments on the balance sheet.
E) Must be sold within one month.

F) D) and E)
G) B) and C)

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Frisco Company's Merchandise Inventory account at year-end has a balance of $62,115,but a physical count reveals that only $61,900 of inventory exists.The adjusting entry to record this $215 of inventory shrinkage is:


A)  Merchandise Inventory 215 Inventory shrinkage expense 215\begin{array}{|l|r|r|}\hline \text { Merchandise Inventory } & 215 & \\\hline \text { Inventory shrinkage expense } & & 215 \\\hline\end{array}
B)  Purchases discourits 215 Cost of goods sold 215\begin{array} { | l | r | r | } \hline \text { Purchases discourits } & 215 & \\\hline \text { Cost of goods sold } & & 215 \\\hline\end{array}
C)  Cost of goods sold 215 Purchases discounts 215\begin{array}{|l|r|r|}\hline \text { Cost of goods sold } & 215 & \\\hline \text { Purchases discounts } & & 215 \\\hline\end{array}
D)  Inventory shrinkage expense 215 Cost of goods sold 215\begin{array}{|l|r|r|}\hline \text { Inventory shrinkage expense } & 215 & \\\hline \text { Cost of goods sold } & & 215 \\\hline\end{array}
E)  Cost of goods sold 215 Merchandise Inventory 215\begin{array}{|l|r|r|}\hline \text { Cost of goods sold } & 215 & \\\hline \text { Merchandise Inventory } & & 215 \\\hline\end{array}

F) C) and E)
G) C) and D)

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Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

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Sellers are required to estimate both ex...

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Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses.Net income equals:


A) $770,000.
B) $402,000.
C) $390,000.
D) $115,000.
E) $408,000.

F) C) and D)
G) B) and E)

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Inventory shrinkage can be computed by comparing the ________ of inventory with recorded quantities and amounts.

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physical c...

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