Unit 3 Review (Ch6-8)

• $1,650
• $1,800
• $4,200
• $4,350

Inventory is defined as:

• Items a company intends for sale to customers.
• Any assets of the company that can be sold.
• The amount of cash received from the sale of goods to customers during the year.
• The cost of goods sold to customers during the year.

Which of the following represents the balance of Cost of Goods Sold at the end of the year?

• The cost of inventory not yet sold by the end of the year.
• The cost of inventory purchased during the year.
• The cost of inventory at the beginning of the year.
• The cost of inventory sold during the year.

Operating income is defined as:

• All revenues minus all expenses.
• Sales Revenue minus Cost of Goods Sold.
• Gross Profit minus Operating Expenses.
• Income before Income Tax Expense.

A multiple-step income provides the advantage of:

• Placing all revenues before all expenses.
• Separating revenues and expenses based on their different types of activities.
• Placing all revenues after all expenses.
• Excluding the effects of income taxes in the calculation of net income

Net income is defined as:

• All revenues minus all expenses.
• Sales Revenue minus Cost of Goods Sold.
• Gross Profit minus Operating Expenses.
• Income before Income Tax Expense.

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

• LIFO.
• FIFO.
• Weighted-average.
• Income will be the same under each assumption.

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?

• LIFO.
• FIFO.
• Weighted-average.
• Any assumption can be used regardless of the tax reporting.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

• Accounts Payable.
• Inventory.
• Cost of Goods Sold.
• Purchases.

The entry to write down inventory from cost to net realizable value at the end of the year includes a:

• Debit to Inventory.
• Credit to Sales Revenue.
• Debit to Cost of Goods Sold.
• Credit to Accounts Payable.