Accounting 201 - Chapter 6

41 Questions  I  By Jc173
Chapter 6 study guide

  
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1.  The largest expense on the income statement for most merchandising companies is:
A.
B.
C.
D.
2.  The cost of the inventory that the business has sold to customers is called:
A.
B.
C.
D.
3.  The cost of inventory that is still on hand and has NOT been sold to customers is called:
A.
B.
C.
D.
4.  Two accounts that would appear on the financial statements of a merchandising company that are not needed by a service company are:
A.
B.
C.
D.
5.  Sales revenue is based on the _________ price of the inventory, while cost of goods sold is based on the __________ of the inventory.
A.
B.
C.
D.
6.  On the income statement, after a company computes gross profit, it subtracts:
A.
B.
C.
D.
7.  A periodic inventory system:
A.
B.
C.
D.
8.  The inventory system that uses computer software to keep a running record of inventory on hand is the:
A.
B.
C.
D.
9.   Under a perpetual inventory system, when a sale is made:
A.
B.
C.
D.
10.  How do purchase returns and allowances and purchase discounts affect net purchases?
A.
B.
C.
D.
11.  Exter Co. receives terms of 2/10, n/30 on all invoices from Garn Industries. On January 15, 2011, Exter purchased items from Garn for $4,200, excluding taxes and shipping costs. What amount would Exter use as the purchase discount if the invoice was paid on January 28, 2011?
A.
B.
C.
D.
12.  What is the formula used to calculate net purchases?
A.
B.
C.
D.
13.  Unlike the periodic inventory system, the perpetual inventory system:
A.
B.
C.
D.
14.  Using a perpetual inventory system, which of the following entries would record the cost of merchandise sold on credit?                           Debit                            credit
A.
B.
C.
D.
15.  Under a perpetual inventory system, which of the following entries would record the purchase of merchandise on credit?                         Debit                            credit
A.
B.
C.
D.
16.  A company purchased inventory for $800 per unit.  The inventory was marked up to sell for $1,000 per unit.    The entry to record the cost of a unit of inventory would include debits to which of the following accounts?
A.
B.
C.
D.
17.  BMX Co. sells item XJ15 for $1,000 per unit, and has a cost of goods sold percentage of 80%.  The gross   profit to be found for selling 20 items:
A.
B.
C.
D.
18.  A company purchased merchandise inventory on credit for $600 per unit, and later sold the inventory for     $800 per unit.  The journal entry to record the purchase of inventory included a debit to:
A.
B.
C.
D.
19.   Which of the following is added to the purchase price of the inventory to determine net purchases?
A.
B.
C.
D.
20.  Which of the following are subtracted from the purchase price of the inventory to determine net purchases?
A.
B.
C.
D.
21.  Bonz, Inc. is using a perpetual inventory system with a December 31 year end date.  The balance in this company’s inventory account as of September 30 would be equal to:
A.
B.
C.
D.
22.  The cost of inventory is the:
A.
B.
C.
D.
23.  The choice of an inventory costing method will affect:
A.
B.
C.
D.
24.  When the FIFO method is used, ending inventory is assumed to consist of the:
A.
B.
C.
D.
25.  When the LIFO method is used and there is no LIFO liquidation, the cost of goods sold is assumed to consist of:
A.
B.
C.
D.
26.  When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is:
A.
B.
C.
D.
27.  The inventory costing method by which the first costs into inventory are the first costs out to cost of goods sold is the:
A.
B.
C.
D.
28.  When using the average-cost method to determine the cost of inventory, the average cost per unit is calculated as the cost of goods:
A.
B.
C.
D.
29.  The accounting principle that states that a business should use the same accounting methods and procedures from period to period is the:
A.
B.
C.
D.
30.  The lower-of-cost-or-market rule requires a company to report inventories at the lesser of:
A.
B.
C.
D.
31.  When applying the lower-of-cost-or-market rule, market value generally refers to:
A.
B.
C.
D.
32.  A company has cost of goods available for sale of $32,000, consisting of 8,000 units.  The average cost per unit to be used to value the ending inventory:
A.
B.
C.
D.
33.  The cost of inventory includes the:
A.
B.
C.
D.
34.  A company purchased inventory for $800 per unit.  The inventory was marked up to sell for $1,000 per unit.  The entry to record the sale for cash would include a debit to which of the following accounts?
A.
B.
C.
D.
35.  Pat and Company’s ending inventory (at cost) was $87,500.  The company would have had to pay $100,000 to replace the ending inventory.  Before consideration of the lower-of-cost-or-market rule, the company’s cost of goods sold was $60,000. Which of the following statements reflect the correct application of the lower-of-cost-or-market rule?
A.
B.
C.
D.
36.  If year-end inventory is reduced from cost to a lower replacement cost, which of the following accurately depicts the results?
A.
B.
C.
D.
37.  Bronx Company’s ending inventory (at cost) was greater than the market value of the ending inventory.  What adjusting entry is required to account for this difference?              Debit                            credit
A.
B.
C.
D.
38.  The gross profit rate is calculated as:
A.
B.
C.
D.
39.  The cost-of-goods sold model is:
A.
B.
C.
D.
40.  Ending inventory for the year ended December 31, 2010, is overstated by $10,000.  How will this affect net income for 2011?
A.
B.
C.
D.
41.  Ending inventory for the year ended December 31, 2010, is understated.  How will this error affect net income for 2010 and 2011?
A.
B.
C.
D.
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