question

Which of the following statements about a periodic inventory system is true?

answer

Companies determine cost of goods sold only at the end of the accounting period

question

Which of the following items does not result in an adjustment in the Inventory account under a perpetual system?

answer

Payment of freight costs for goods shipped to a customer.

question

Which sales accounts normally have a debit balance?

answer

Sales discounts and Sales returns and allowances.

question

A company makes a credit sale of $750 on June 13, terms 2/10, n/30, on which it grants a return of $50 on June 16. What amount is received as payment in full on June 23?

answer

$686.((750-50)x.98)

question

To record the sale of goods for cash in a perpetual inventory system

answer

two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

question

Gross profit will result if

answer

sales revenues are greater than cost of goods sold.

question

If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, what is the gross profit?

answer

$90,000.(400,000-310,000)

question

The multiple-step income statement for a merchandising company shows each of these features

answer

gross profit, cost of goods sold, a sales revenue section

question

If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, what is cost of goods sold under a periodic system?

answer

$390,000. (60,000+380,000-50,000)

question

Bufford Corporation had reported the following amounts at December 31, 2012: Sales revenue $184,000; ending inventory $11,600; beginning inventory $17,200; purchases $60,400; purchase discounts $3,000; purchase returns and allowances $1,100; freight-in $600; freight-out $900. Calculate the cost of goods available for sale.

answer

$74,100. (17200+(60400-3000-1100+600))

question

Which of the following would affect the gross profit rate? (Assume sales remains constant.)

answer

An increase in cost of goods sold.

question

The gross profit rate is equal to:

answer

net sales minus cost of goods sold, divided by net sales.

question

During the year ended December 31, 2012, Bjornstad Corporation had the following results: Sales revenue $267,000; cost of good sold $107,000; net income $92,400; operating expenses $55,400; net cash provided by operating activities $108,950. What was the company's profit margin ratio?

answer

34.6%. (92,400/267,000)

question

A quality of earnings ratio:

answer

that is less than 1 indicates that a company might be using aggressive accounting tactics.

question

When goods are purchased for resale by a company using a periodic inventory system:

answer

purchases on account are debited to Purchases.

question

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:

answer

Inventory

question

The cost of goods sold is determined and recorded each time a sale occurs in:

answer

a perpetual inventory system only.

question

The multiple-step income statement for a merchandiser shows each of the following features except:

answer

investing activities section.

question

Which of the following would not be included in the definition of inventory under IFRS?

answer

Used office equipment held for sale by the human relations department of a plastics company.

question

Which of the following would not be a line item of a company reporting costs by nature?

answer

Manufacturing expense.

question

Which of the following would not be a line item of a company reporting costs by function?

answer

Utilities expense.

question

Which of the following would be included in the definition of inventory under IFRS?

answer

Photocopy paper held for sale by an office-supply store, Stereo equipment held for sale by an electronics store

question

Which of the following would be a line item of a company reporting costs by nature?

answer

Depreciation expense, Salaries expense, Interest expense.

question

Which of the following would be a line item of a company reporting costs by function?

answer

Administration, manufacturing, Distribution

question

When is a physical inventory usually taken?

answer

When a limited number of goods are being sold or received and At the end of the company's fiscal year.

question

Which of the following should not be included in the physical inventory of a company?

answer

Goods held on consignment from another company

question

Which of the following should be included in the physical inventory of a company?

answer

Goods shipped on consignment to another company and Goods in transit from another company shipped FOB shipping point.

question

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2012. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.

answer

$215,000. (180+35)

question

Kam Company has the following units and costs: Inventory, Jan. 1, 8,000, 11. Purchase, June 19 13,000 12. Purchase, Nov. 8 5,000 13. If 9,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO?

answer

$113,000.(5,000 x $13)+(4,000 x $12)

question

From the data in question 4, what is the cost of the ending inventory under LIFO?

answer

$100,000.(8,000x$11)+(1000x$12)

question

Davidson Electronics has the following:Inventory, Jan. 1 5,000

answer

$8. Purchase, April 2 15,000 $10. Purchase, Aug. 28 20,000 $12. If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is: $75,250.((5,000x8)+(15000x10)+(20000x12))/40,000= 10.75x10000

question

In periods of rising prices, LIFO will produce:

answer

lower net income than FIFO.

question

Considerations that affect the selection of an inventory costing method do not include:

answer

perpetual versus periodic inventory system.

question

Considerations that affect the selection of an inventory costing method do include:

answer

tax effects, balance sheet effects, income statement effects.

question

The lower-of-cost-or-market rule for inventory is an example of the application of:

answer

the conservatism constraint.

question

Which of these would cause the inventory turnover ratio to increase the most?

answer

Decreasing the amount of inventory on hand and increasing sales.

question

Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Carlos's days in inventory is:

answer

121.7 days.(285000/((80000+110000)/2)=3; 365/3)

question

The LIFO reserve is:

answer

the difference between the value of the inventory under LIFO and the value under FIFO.

question

In a perpetual inventory system:

answer

FIFO cost of goods sold will be the same as in a periodic inventory system.

question

Fran Company's ending inventory is understated by $4,000. The effects of this error on the current year's cost of goods sold and net income, respectively, are:

answer

overstated and understated.

question

Harold Company overstated its inventory by $15,000 at December 31, 2012. It did not correct the error in 2012 or 2013. As a result, Harold's stockholders' equity was:

answer

overstated at December 31, 2012, and properly stated at December 31, 2013.

question

Goods in transit should be included in the inventory of the buyer when the:

answer

terms of sale are FOB shipping point.

question

Understating ending inventory will overstate:

answer

cost of goods sold.

question

Which of the following should not be included in the inventory of a company using IFRS?

answer

Goods held on consignment from another company.

question

Which of the following should be included in the inventory of a company using IFRS?

answer

Goods shipped on consignment to another company and Goods in transit from another company shipped FOB shipping point.

question

Which method of inventory costing is prohibited under IFRS?

answer

LIFO.

question

Specific identification:

answer

must be used under IFRS if the inventory items are not interchangeable.

question

Which of the following are elements of the fraud triangle?

answer

Rationalization, Financial pressure, and Opportunity.

question

Which of the following is not an element of the fraud triangle?

answer

Segregation of duties.

question

Internal control is used in a business to enhance the accuracy and reliability of its accounting records andto:

answer

safeguard its assets.

question

The principles of internal control include:

answer

establishment of responsibility, documentation procedures, and independent internal verification.

question

Physical controls do include:

answer

safes and vaults to store cash,locked warehouses for inventories, bank safety deposit boxes for important papers.

question

Which of the following are results of the Sarbanes-Oxley Act?

answer

All publicly traded companies must maintain adequate internal controls, The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity, Corporate executives and boards of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so.

question

Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:

answer

establishment of responsibility.

question

The use of prenumbered checks in disbursing cash is an application of the principle of:

answer

documentation procedures.

question

The control features of a bank account include:

answer

minimizing the amount of cash that must be kept on hand. providing a double record of all bank trans actions. safeguarding cash by using a bank as a depos itory.

question

Which of the following control activities are relevant when a company uses a computerized (rather than manual) accounting system?

answer

Establishment of responsibility.Segregation of duties.Independent internal verification.

question

In a bank reconciliation, deposits in transit are:

answer

added to the bank balance.

question

Which of the following items in a cash drawer at November 30 is not cash?

answer

A customer check dated December 1.

question

Which statement correctly describes the reporting of cash?

answer

Cash is listed first in the current assets section.

question

Which of the following would not be an example of good cash management?

answer

Invest temporary excess cash in stock of a small company.

question

Which of the following are examples of good cash management?

answer

Provide discounts to customers to encourage early payment. Carefully monitor payments so that payments are not made early. Employ just-in-time inventory methods to keep inventory low.

question

Which of the following is not one of the sections of a cash budget?

answer

Cash from operations section.

question

Which of the following are from the sections of a cash budget?

answer

Cash receipts section, Cash disbursements section, Financing section.

question

A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $2 in cash. In recording the check:

answer

Cash Over and Short should be debited for $4.

Accounting 230 Chapter 5,6,7 – Flashcards

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