Accounting Test (Chapter 5) – Flashcards
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Net income will result if gross profit exceeds
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operating expenses.
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In a perpetual inventory system, cost of goods sold is recorded
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each time a sale occurs.
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The primary difference between a periodic and perpetual inventory system is that a periodic system
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determines the inventory on hand only at the end of the accounting period.
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Under a perpetual inventory system, acquisition of merchandise for resale is debited to
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the inventory account
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Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system?
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Payment of freight costs for goods shipped to a customer
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Which of the following accounts is classified as a contra revenue account?
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Sales Returns and Allowances
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The entry to record the return of goods from a customer would include a
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debit to Sales Returns and Allowances.
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If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales
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allowance
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Gross profit does not appear
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on a single-step income statement.
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An advantage of the single-step income statement over the multiple-step form is
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its simplicity.
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What is an advantage of using the multiple-step income statement?
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It highlights the components of net income.
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Which of the following is not considered in computing net cost of purchases?
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Freight paid on goods shipped to customers
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A decline in a company's gross profit could be caused by all of the following except
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paying lower prices to its suppliers.
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Which of the following is a merchandiser that sells directly to consumers?
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retailer
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Which of the following statements about a periodic inventory system is true?
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Companies determine cost of goods sold only at the end of the accounting period.
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The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm.
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longer than
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Which of the following statements is correct?
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A perpetual inventory system provides better control over inventories than does a periodic inventory system
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Which inventory system will likely be used by a company with merchandise that has a high unit value?
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Perpetual inventory system
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Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200?
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A debit to Inventory for $200
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When credit terms of 1/15, n/60 are offered, how long is the discount period?
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15 days
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Which of the following items does not result in an entry to the Inventory account under a perpetual system?
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Payment of freight costs for goods shipped to a customer
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Which of these accounts normally have a debit balance?
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Both Sales Discounts and Sales Returns and Allowances
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Which of the following is classified in an income statement as a nonoperating activity?
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interest expense
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Which of the following is classified in an income statement as a nonoperating activity?
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Receiving dividend revenue from an investment
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Which of the following would appear on both a single-step and a multiple-step income statement?
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cost of goods sold
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Which one of the following will result in gross profit?
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Sales revenue less cost of goods sold
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Under what system is cost of goods sold determined at the end of an accounting period?
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periodic inventory system
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Which of the following would affect the gross profit rate if sales remain constant?
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increase of cost of goods sold
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When using a periodic inventory system and the purchaser directly incurs the freight costs, which account is debited?
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freight in
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Which statement is true when goods are purchased for resale by a company using a periodic inventory system?
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Purchases on account are debited to the Purchases account.
