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The periodic inventory system is normally used for relatively inexpensive goods.

A) True
B) False

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What is freight out?


A) Transportation costs to ship goods into the warehouse
B) Costs that are not expensed
C) Transportation costs to ship goods out of the warehouse
D) Inventory costs

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

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The Income summary account has a $25 000 credit balance after the revenue and expense accounts have been closed.To which account is this balance closed?


A) Cost of sales
B) Capital
C) Sales revenue
D) Drawings

E) A) and B)
F) None of the above

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Which of the following is the gross profit percentage?


A) Gross profit plus net sales revenue
B) Gross profit times net sales revenue
C) Gross profit divided by net sales revenue
D) Gross profit minus net sales revenue

E) None of the above
F) A) and D)

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A firm uses the periodic inventory method.Which of the following entries would be made to record a return of $220 of inventory purchased on credit,including GST?


A) The accounting entry would be a $200 debit to Accounts payable and a $200 credit to Purchases.
B) The accounting entry would be a $220 debit to Purchases and a $220 credit to Accounts payable.
C) The accounting entry would be a $200 debit to Purchase returns and allowances, a $20 debit to GST clearing and a $220 credit to Accounts payable.
D) The accounting entry would be a $220 debit to Accounts payable a $200 credit to Purchase returns and allowances, and a $20 credit to GST clearing.

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

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The general ledger shows a balance of $23 678 in the Inventory account at the end of the period.A physical inventory shows a count of $22 078.The adjusting entry would be a:


A) debit to Inventory and a credit to Cash.
B) debit to Cost of sales and a credit to Inventory.
C) debit to Cost of sales and a credit to Cash.
D) debit to Inventory and a credit to Cost of sales.

E) C) and D)
F) A) and B)

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In a descriptive format income statement,operating expenses are often classified into distribution,administration,marketing and finance expenses.

A) True
B) False

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Credit terms of 2/10,n/30 indicate that a 2% discount may be taken if the invoice is paid within 10 days,but the total invoice amount is due if paid on the 11th to the 30th day after the invoice date.

A) True
B) False

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Which of the following is the result of Cost of sales divided by Average inventory?


A) Current ratio
B) Rate of inventory turnover
C) Gross profit percentage
D) Debt ratio

E) None of the above
F) All of the above

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Which of the following is TRUE about freight in?


A) Freight in is a selling expense.
B) Freight in is deducted from Accounts payable.
C) Freight in is added to the cost of inventory.
D) Freight in is an operating expense.

E) B) and C)
F) A) and D)

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FOB Destination means that the:


A) seller normally pays the transportation costs.
B) transportation costs are billed to the buyer.
C) buyer normally pays the transportation costs.
D) buyer and the seller split the transportation costs.

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

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On a retailer's balance sheet,inventory is listed as a(n) :


A) revenue.
B) expense.
C) current asset.
D) current liability.

E) B) and C)
F) None of the above

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The ATO will refund any GST a registered firm pays to a supplier.

A) True
B) False

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The entry to close Cost of sales results in a debit to Income summary.

A) True
B) False

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Freight in should be added to the inventory account if the firm uses the perpetual inventory method.

A) True
B) False

Correct Answer

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A firm has purchased inventory and receives an invoice that indicates that the buyer must pay the transportation costs of delivering the inventory.Which of the following will most likely be noted as the delivery terms?


A) FOB 2/10, n/30
B) FOB shipping point
C) FOB destination
D) None of the above

E) B) and D)
F) A) and D)

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A sales return is recorded with a credit to Accounts receivable.

A) True
B) False

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Which of the following correctly describes the gross profit percentage?


A) The gross profit percentage is one of the most carefully watched measures of profitability.
B) Retailing companies strive to increase the gross profit percentage.
C) For most companies, the gross profit percentage changes little from year to year.
D) All of the above are true.

E) All of the above
F) B) and C)

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Net sales revenue is equal to Sales revenue less Cost of sales.

A) True
B) False

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A company that uses the perpetual inventory system purchases inventory for $60,000 on credit,with terms of 3/10,n/30.Which of the following is the journal entry to record the payment made within 3 days?


A) a debit to Accounts payable for $60,000, a credit to Inventory for $1800 and a credit to Cash for $58,200
B) a debit to Inventory for $1800, a debit to Accounts payable for $60,000 and a credit to Cash for $61,800
C) a debit to Accounts payable for $58,200, a debit to Inventory for $1800 and a credit to Cash for $60,000
D) a debit to Accounts payable for $61,800 , a credit to Cash for $60,000 and a debit to Inventory for $1800

E) All of the above
F) None of the above

Correct Answer

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