Question 1

Use the information above to answer the following question.What journal entry will be prepared by Darin Company on October 8 to record the receipt of payment from Dee?

Accepted Answer

A)   Debit Cash and credit Accounts Receivable for $6,500
B)   Debit Cash for $5,880, debit Sales Discount for $120, and credit Accounts Receivable for $6,000
C)   Debit Cash for $6,370, debit Sales Discount for $130, and credit Accounts Receivable for $6,500
D)   Debit Cash for $6,300, debit Sales Returns & Allowances for $200, and credit Accounts Receivable for $6,500E) None of the above
F) A) and B)

Question 2

Berkley Company had beginning inventory of $4,000 and purchases of $20,000.If half of its inventory was sold,Berkley's goods available for sale will:

Accepted Answer

A)   be split between cost of goods sold and ending inventory
B)   appear only as an expense on the income statement
C)   appear only as an expense on the balance sheet
D)   appear only as an asset on the income statementE) A) and B)
F) A) and C)

Question 3

Assuming that all else is equal,which of the following companies is most profitable?

Accepted Answer

A)   A company with low gross profit percentage and low sales volume
B)   A company with high gross profit percentage and high sales volume
C)   A company with low gross profit percentage and high cost of goods sold
D)   A company with low sales volume and high cost of goods sold.E) None of the above
F) C) and D)

Question 4

The receipt of cash is one of the operating activities of:

Accepted Answer

A)   companies that sell goods but not companies that sell services.
B)   companies that sell to consumers but do not sell to other companies.
C)   merchandising, manufacturing, and service companies.
D)   companies that sell goods they bought from others but not of companies that make the goods they sell.E) A) and D)
F) A) and C)

Question 5

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Accepted Answer

A)   will have a higher net income.
B)   must be obtaining products at a lower cost per unit.
C)   must have increased its sales revenue.
D)   might not have had a sales volume increase.E) All of the above
F) B) and D)

Question 6

Cost of goods sold reports the:

Accepted Answer

A)   cost of merchandise available to sell
B)   cost of merchandise purchased
C)   cost times the quantity of goods sold
D)   selling price times the quantity of goods soldE) B) and D)
F) All of the above

Question 7

The gross profit equation is:

Accepted Answer

A)   (Sales Revenue + Sales Returns & Allowances)  - Cost of Goods Sold
B)   (Sales + Sales Discounts)  - Cost of Goods Sold
C)   (Sales Revenue - Sales Returns & Allowances - Sales Discounts)  - Cost of Goods Sold
D)   (Sales Revenue - Sales Returns & Allowances - Sales Discounts)  + Cost of Goods SoldE) All of the above
F) A) and D)

Question 8

Inventory began with $30,000.During the period the company purchased $61,000 of merchandise.At the end of the period,inventory was $22,000.If the gross profit percentage was 40%,what was sales revenue?

Accepted Answer

A)   $46,000
B)   $18,000
C)   $75,000
D)   $115,000E) None of the above
F) A) and D)

Question 9

Which of the following statements about gross profit percentages is correct?

Accepted Answer

A)   Because gross profit percentages are so consistent from period to period, they are not very useful for analyzing one company over time.
B)   Because gross profit percentages are so variable across industries, they are most useful in comparing companies from different industries.
C)   Because gross profit percentages are so variable across industries, they are more useful in analyzing one company over time.
D)   Because gross profit percentages are so consistent across industries, they are most useful in comparing companies from different industries.E) B) and C)
F) A) and D)

Question 10

Why is inventory reported as a current asset?

Accepted Answer

A)   Inventory is reported as a current asset because it will be converted into cash within a year of the balance sheet date.
B)   Inventory is not reported as a current asset.
C)   Inventory is not a current asset; it is a noncurrent asset because inventory is often sold on account and not for cash.
D)   Inventory is reported as a current asset because it has been sold.E) A) and B)
F) B) and C)

Question 11

Because it is an expense account,the Sales Returns & Allowances account balance is deducted from the Sales Revenue account balance in determining net sales.

Accepted Answer

A) True 
 B)False

Question 12

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Aldine Inc.as they appear on the company's adjusted trial balance.
 
-Use the information above to answer the following question.Income from operations would be:

Accepted Answer

A)   $6,000.
B)   $10,000.
C)   $11,000.
D)   $12,000.E) A) and B)
F) B) and C)

Question 13

Which of the following statements about gross profit is correct?

Accepted Answer

A)   Gross profit = Net sales - Cost of goods sold.
B)   Gross profit is recorded by a credit to the Gross Profit account.
C)   A company sells $10,000 of goods. If the gross profit percentage is 32%, net income would be $3,200.
D)   If net sales are $100 and cost of goods sold is $50 then the gross profit percentage is 100%.E) A) and C)
F) C) and D)

Question 14

Inventory cost consists of purchase price:

Accepted Answer

A)   plus freight-in
B)   plus freight-out
C)   less freight-in
D)   less freight-outE) None of the above
F) C) and D)

Question 15

Which of the following is the equation for cost of goods sold?

Accepted Answer

A)   Beginning inventory + Purchases - Ending inventory
B)   Beginning inventory + Purchases + Ending inventory
C)   Net purchases - Ending inventory
D)   Ending inventory + Purchases - Beginning inventoryE) A) and D)
F) A) and B)

Question 16

On December 31,2014,you count 300 tie clips in inventory.During the next quarter,you carefully record the effect of each purchase and sale transaction on inventory.You buy 128 tie clips during the next quarter.On March 31,2015,you count 288 tie clips in inventory.Which of the following is not correct?

Accepted Answer

A)   Ending inventory on March 31, 2015 should be 288 tie clips.
B)   Your company uses the perpetual inventory method.
C)   Your company's records would show that 140 tie clips were sold during the quarter.
D)   The amount of shrinkage cannot be determined with this type of inventory system.E) All of the above
F) C) and D)

Question 17

During its first month of operations,Purrfect Pets purchased 6,000 bags of dog food at a cost of $5 a bag and sold all 6,000 bags of dog food on account with payment terms of 3/10,net 30 for $10 each.A total of 2,600 of these bags were sold to customers who paid within the discount period; the other customers paid after the discount period had ended.Sales allowances totaling $200 were granted to customers whose dogs did not like the dog food.
Required:
Part a.Calculate the gross profit for the month.
Part b.Calculate the gross profit percentage for the month.

Accepted Answer

Part a
Sales revenue = 6,000 bags x $10 ...

Question 18

When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:

Accepted Answer

A)   inventory expense.
B)   cost of goods sold.
C)   selling, general, and administrative expenses.
D)   operating expenses.E) None of the above
F) A) and C)

Question 19

A company reported the following:
 
-Use the above information to answer the following question.What is the amount of gross profit?

Accepted Answer

A)   $94,200
B)   $98,700
C)   $105,000
D)   $32,700E) A) and D)
F) None of the above

Question 20

McLeod Corporation is a merchandising company.The year began with inventory of $27,000,Purchases for the year were $52,000,and the Ending Inventory was $14,000.What is the Cost of Goods Sold that would be reported on the income statement?

Accepted Answer

A)   $93,000
B)   $39,000
C)   $11,000
D)   $65,000E) None of the above
F) B) and D)

Exam 6: Internal Control and Financial Reporting for Cash and Merchandising Operations

Correct Answer
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Use the information above to answer the following question.What journal entry will be prepared by Darin Company on October 8 to record the receipt of payment from Dee?

Correct Answer
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Berkley Company had beginning inventory of $4,000 and purchases of $20,000.If half of its inventory was sold,Berkley's goods available for sale will:

Correct Answer
verified

Assuming that all else is equal,which of the following companies is most profitable?

Correct Answer
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Why is inventory reported as a current asset?

Correct Answer
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McLeod Corporation is a merchandising company.The year began with inventory of $27,000,Purchases for the year were $52,000,and the Ending Inventory was $14,000.What is the Cost of Goods Sold that would be reported on the income statement?

Correct Answer
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The receipt of cash is one of the operating activities of:

Correct Answer
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Which of the following statements about gross profit is correct?

Correct Answer
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If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Correct Answer
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When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:

Correct Answer
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The gross profit equation is:

Correct Answer
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Inventory began with $30,000.During the period the company purchased $61,000 of merchandise.At the end of the period,inventory was $22,000.If the gross profit percentage was 40%,what was sales revenue?

Correct Answer
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Which of the following is the equation for cost of goods sold?

Correct Answer
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A company reported the following: -Use the above information to answer the following question.What is the amount of gross profit?

Correct Answer
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Cost of goods sold reports the:

Correct Answer
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Inventory cost consists of purchase price:

Correct Answer
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Because it is an expense account,the Sales Returns & Allowances account balance is deducted from the Sales Revenue account balance in determining net sales.

Correct Answer
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The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Aldine Inc.as they appear on the company's adjusted trial balance. -Use the information above to answer the following question.Income from operations would be:

Correct Answer
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Correct Answer
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Part a
Sales revenue = 6,000 bags x $10 ...
View Answer

Which of the following statements about gross profit percentages is correct?

Correct Answer
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Exam 6: Internal Control and Financial Reporting for Cash and Merchandising Operations

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What journal entry will be prepared by Darin Company on October 8 to record the receipt of payment from Dee?

Correct AnswerverifiedShow Answer

Berkley Company had beginning inventory of $4,000 and purchases of $20,000.If half of its inventory was sold,Berkley's goods available for sale will:

Correct AnswerverifiedShow Answer

Assuming that all else is equal,which of the following companies is most profitable?

Correct AnswerverifiedShow Answer

Why is inventory reported as a current asset?

Correct AnswerverifiedShow Answer

McLeod Corporation is a merchandising company.The year began with inventory of $27,000,Purchases for the year were $52,000,and the Ending Inventory was $14,000.What is the Cost of Goods Sold that would be reported on the income statement?

Correct AnswerverifiedShow Answer

The receipt of cash is one of the operating activities of:

Correct AnswerverifiedShow Answer

Which of the following statements about gross profit is correct?

Correct AnswerverifiedShow Answer

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Correct AnswerverifiedShow Answer

When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:

Correct AnswerverifiedShow Answer

The gross profit equation is:

Correct AnswerverifiedShow Answer

Inventory began with $30,000.During the period the company purchased $61,000 of merchandise.At the end of the period,inventory was $22,000.If the gross profit percentage was 40%,what was sales revenue?

Correct AnswerverifiedShow Answer

Which of the following is the equation for cost of goods sold?

Correct AnswerverifiedShow Answer

A company reported the following: -Use the above information to answer the following question.What is the amount of gross profit?

Correct AnswerverifiedShow Answer

Cost of goods sold reports the:

Correct AnswerverifiedShow Answer

Inventory cost consists of purchase price:

Correct AnswerverifiedShow Answer

Because it is an expense account,the Sales Returns & Allowances account balance is deducted from the Sales Revenue account balance in determining net sales.

Correct AnswerverifiedShow Answer

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Aldine Inc.as they appear on the company's adjusted trial balance. -Use the information above to answer the following question.Income from operations would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart aSales revenue = 6,000 bags x $10 ...View AnswerShow Answer

Which of the following statements about gross profit percentages is correct?

Correct AnswerverifiedShow Answer

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Part a
Sales revenue = 6,000 bags x $10 ...
View Answer

Correct Answer
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