Unit 2: Ch.4-7

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•             Question 1
4 out of 4 points
               
                Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.                                   
                Selected Answer:             True
                                               
•             Question 2
4 out of 4 points
               
                The operating cycle for a merchandiser that sells only for cash moves from:                                         
                Selected Answer:             Purchases of merchandise to inventory to cash sales.
                                               
•             Question 3
4 out of 4 points
               
                The amount recorded for merchandise inventory includes all of the following except:                                      
                Selected Answer:             Freight costs paid by the seller.
                                               
•             Question 4
4 out of 4 points
               
                On September 12, Vander Company sold merchandise in the amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the periodic inventory system and the gross method of accounting for sales. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is:                                     
                Selected Answer:             Cash      5,194    
Sales discounts 106        
Accounts receivable                       5,300

                                               
•             Question 5
4 out of 4 points
               
                Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The amount of the cash paid on August 16 equals:                                               
                Selected Answer:             $8,167.50.
                                               
•             Question 6
4 out of 4 points
               
                Which of the following accounts would be closed at the end of the accounting period with a debit?                                          
                Selected Answer:             Sales.
                                               
•             Question 7
4 out of 4 points
               
                Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited to close the accounts during the closing process.                                       
                Selected Answer:             False
                                               
•             Question 8
4 out of 4 points
               
                On April 24 of the current year, The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory. At the beginning of April, the company reported beginning inventory of $226,750. Inventory purchased during April (until the date of the tornado) was $197,800. Sales for the month of April through April 24 were $642,500. Assuming the company's typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the tornado.                                            
                Selected Answer:             $103,300
                                               
•             Question 9
4 out of 4 points
               
                Grays Company has inventory of 10 units at a cost of $10 each on August 1. On August 3, it purchased 20 units at $12 each. 12 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 12 units that were sold?                                      
                Selected Answer:             $124.
                                               
•             Question 10
4 out of 4 points
               
                Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is $50,000, credit terms 2/10, n/30 that apply only to the $50,000; FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000. Avanti paid within the discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales commissions. Compute the cost that should be assigned to the inventory.                                          
                Selected Answer:             $52,000
                                               
•             Question 11
0 out of 4 points
               
                A company had the following purchases and sales during its first year of operations:

                Purchases           Sales
January:               10 units at $120                 6 units
February:            20 units at $125                 5 units
May:      15 units at $130                 9 units
September:        12 units at $135                 8 units
November:         10 units at $140                 13 units
________________________________________


On December 31, there were 26 units remaining in ending inventory. Using the Periodic FIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)                                    
                Selected Answer:             $3,200.
                                               
•             Question 12
4 out of 4 points
               
                The understatement of the beginning inventory balance causes:                               
                Selected Answer:             Cost of goods sold to be understated and net income to be overstated.
                                               
•             Question 13
4 out of 4 points
               
                Oxford Packing Company reported net sales in November of the current year of $1,000,000. At the beginning of November, the company reported beginning inventory of $368,000. Cost of goods purchased during November amounted to $217,500. The company reported ending inventory at the end of November of $226,750.

The company's gross profit rate for November of the current year was:                                  
                Selected Answer:             64.1%
                                               
•             Question 14
4 out of 4 points
               
                Approved vouchers are recorded in a journal called the voucher register.                                              
                Selected Answer:             True
                                               
•             Question 15
4 out of 4 points
               
                Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $13,162. Franklin's August bank statement shows $14,237 on deposit in the bank. Determine the adjusted cash balance using the following information:

                 
Deposit in transit              $              4,500
Outstanding checks         $              3,900
Bank service fees, not yet recorded by company $              50
The bank collected on a note receivable, not yet recorded by the company            $              1,725
________________________________________

The adjusted cash balance should be:                                    
                Selected Answer:             $14,837
                                               
•             Question 16
4 out of 4 points
               
                Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $80 for office supplies, $160 for merchandise inventory, and $20 for miscellaneous expenses. There is a cash shortage of $8. The journal entry to replenish the fund on January 31 is:                                  
                Selected Answer:             Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Dr. Cash over and short, $8; Cr. Cash, $268.
                                               
•             Question 17
4 out of 4 points
               
                A key factor in a voucher system includes all of the following except:                                      
                Selected Answer:             It is not necessary if the supplier provides both receiving report and invoice with the merchandise shipped.
                                               
•             Question 18
4 out of 4 points
               
                Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.                                
                Selected Answer:             False
                                               
•             Question 19
4 out of 4 points
               
                An invoice is an itemized statement of goods prepared by the customer listing the customer's name, items sold, sales prices, and terms of sale.                                        
                Selected Answer:             False
                                               
•             Question 20
4 out of 4 points
               
                Since pledged accounts receivables only serve as collateral for a loan and are not sold, it is not necessary to disclose the pledging.                                    
                Selected Answer:             False
                                               
•             Question 21
4 out of 4 points
               
                The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not yet matured in the Notes Receivable account.                                    
                Selected Answer:             True
                                               
•             Question 22
4 out of 4 points
               
                The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)                                           
                Selected Answer:             $112.50.
                                               
•             Question 23
4 out of 4 points
               
                Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.                                   
                Selected Answer:             False
                                               
•             Question 24
4 out of 4 points
               
                Credit sales are recorded by crediting Accounts Receivable.                                         
                Selected Answer:             False
                                               
•             Question 25
4 out of 4 points
               
                A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.                                     

                Selected Answer:             False

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