ACC Exam #3

Gross profit is calculated as the difference between net sales revenue and​ ________.

Which of the following entries would be made to record the purchase of inventory on​ account, if a company uses the perpetual inventory​ system?

The terms of an invoice are​ 3/10, n/25. This means that a​ ________.

A reduction in the amount of cash received from a customer for early payment is known as a sales discount.

When a seller grants a sales​ allowance, the customer does not return any goods to the seller.

When a company uses the perpetual inventory​ system, there is no need to conduct a physical count of inventory.

A merchandiser uses a perpetual inventory system. The beginning​ Owner, Capital balance of the merchandiser was​ $95,000. During the​ year, Sales Revenue amounted to​ $80,000, Sales Returns and Allowances were​ $1,300, Sales Discounts were​ $2,700, Cost of Goods Sold was​ $40,000, and all other expenses totaled​ $13,000. The company paid​ $24,000 in withdrawals to the owner. The last step in the closing process would include​ ________.

Operating income is gross profit minus operating expenses.

Which of the following is the correct formula for calculating gross profit​ percentage?

A company is uncertain whether a complex transaction should be recorded as an asset or an expense. Under the conservatism​ principle, it should choose to treat it as an asset.

A company discovers that its cost of goods sold is understated by an insignificant amount. It does not need to correct the error because of the materiality concept.

Changing from the LIFO​ (Last-In, First-Out) to the specific identification method of valuing inventory ignores the principle of​ ________.

Which of the following is an application of​ conservatism?

The specific identification method of inventory costing is recommended when a business deals in unique and​ high-priced inventory items.

​Malcom, Inc. had the following balances and transactions during​ 2017: Beginning Merchandise Inventory as of January​ 1, 2017 175 units at​ $82 March 10 Sold 60 units June 10 Purchased 200 units at​ $86 October 30 Sold 235 units What would be reported as Cost of Goods Sold on the income statement for the year ending December​ 31, 2017 if the perpetual inventory system and the​ first-in, first-out inventory costing method are​ used?

A company that uses the perpetual inventory system sold goods to a customer for cash for​ $3,000. The cost of the goods sold was​ $600. Which of the following journal entries correctly records this​ transaction?

Metro​ Computer, Inc. had the following balances and transactions during​ 2017: Beginning Merchandise Inventory as of January​ 1, 2017 240 units at​ $70 March 10 Sold 80 units June 10 Purchased 720 units at​ $80 October 30 Sold 125 units What would the​ company's ending merchandise inventory amount be on December​ 31, 2017 if the perpetual inventory system and the​ last-in, first-out inventory costing method are​ used?

Given the same purchase and sales​ data, and assuming the cost of inventory is​ rising, the costing methods for inventory will result in different amounts for cost of goods sold.

During a period of declining inventory​ costs, which of the following inventory costing methods should be used by a company that intends to minimize its income tax​ expenses?

Best​ Deals, Inc. has 10 units in ending merchandise inventory on December 31. The units were purchased in November for​ $160 each. The price lists from suppliers indicate the current replacement cost of the item to be​ $162 each. What would be the amount reported as Merchandise Inventory on the balance​ sheet?

If the current replacement cost of inventory is less than its historical​ cost, the business must adjust the inventory value.

​Murphy, Inc. had the following balances and transactions during 2017. Beginning Inventory 10 units at​ $72 June 10 Purchased 20 units at​ $85 December 30 Sold 15 units December 31 Replacement cost​ $67 The company maintains its records of inventory on a perpetual basis using the​ last-in, first-out inventory costing method. Calculate the amount of ending Merchandise Inventory at December​ 31, 2017 using the​ lower-of-cost-or-market rule.

​Shipman, Inc. has 6 units in inventory on December 31. The units were purchased in November for​ $200 each. The price lists from suppliers indicate the current replacement cost of the item to be​ $198 each. What is the effect on gross profit if Shipman values its ending merchandise inventory using the​ lower-of-cost-or-market rule?

An overstatement of ending merchandise inventory in the current period results in an overstatement of cost of goods sold in the current period.

Inventory turnover measures​ ________.

Gross profit is calculated as the difference between net sales revenue and​ ________.

Which of the following entries would be made to record the purchase of inventory on​ account, if a company uses the perpetual inventory​ system?

The terms of an invoice are​ 3/10, n/25. This means that a​ ________.

Owens Jewelers uses the perpetual inventory system. On April​ 2, Owens sold merchandise with a cost of​ $5,500 for​ $7,000 to a customer on account with terms of​ 1/15, n/30. Which of the following journal entries correctly records the sales​ revenue?

A merchandiser sold merchandise inventory on account. The journal entry to record sales allowances in the books of the​ merchandiser, using the perpetual inventory system would​ be:

If a physical count of inventory indicates that the Merchandise Inventory account is​ overstated, an adjusting entry is required to record the difference.

The sales revenue of a merchandiser amounted to​ $22,000, sales returns and allowances amounted to​ $2,500, and sales discounts amounted to​ $800. The merchandiser uses a perpetual inventory system. The first entry in the closing process would include​ ________.

Operating income is gross profit minus operating expenses.

The gross profit percentage is one of the most carefully watched measures of​ ________.

A company is uncertain whether a complex transaction should be recorded as gain or loss. Under the conservatism​ principle, it should choose to treat it a loss.

A company discovers that its cost of goods sold is understated by an insignificant amount. It does not need to correct the error because of the conservatism principle. *****

Which of the following principles states that a​ business's financial statements must report enough information for outsiders to make knowledgeable decisions about the​ company?

The materiality concept states that a company must​ ________.

A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for​ $10,000 and paid​ $750 for the​ freight-in. The company sold the whole lot to a supermarket chain for​ $14,000 on account. The company uses the​ specific-identification method of inventory costing. Which of the following entries correctly records the cost of goods​ sold?***

A company purchased 400 units for​ $20 each on January 31. It purchased 520 units for​ $26 each on February 28. It sold a total of 560 units for​ $40 each from March 1 through December 31. What is the amount of ending inventory on December 31 if the company uses the​ first-in, first-out​ (FIFO) inventory costing​ method? (Assume that the company uses a perpetual inventory​ system.)

A company that uses the perpetual inventory system sold goods for​ $2,500 to a customer on account. The company had purchased the inventory for​ $500. Which of the following journal entries correctly records the cost of goods​ sold?

Under the​ last-in, first-out​ (LIFO) method, the cost of goods sold is based on the oldest purchases.

In a period of rising​ costs, the​ last-in, first-out​ (LIFO) method results in higher cost of goods sold and lower net income than the​ first-in, first-out​ (FIFO) method.****

When inventory costs are​ declining, which of the following inventory costing methods will result in the highest cost of goods​ sold?****

Which of the following amounts would be reported as Merchandise Inventory on the balance sheet of a company if the cost of an item is​ $120 and the current replacement cost is​ $100?

If the current replacement cost of inventory is less than its historical​ cost, the business must adjust the inventory value.

The Cost of Goods Sold account is credited to write down the inventory as per the​ lower-of-cost-or-market rule.

When a company uses the perpetual inventory​ method, which of the following would be the entry to adjust inventory to​ lower-of-cost-or-market?

The ending merchandise inventory for the current accounting period is overstated by​ $3,500. What will be the effect of this​ error?****

A high rate of inventory turnover indicates ease in selling inventory.