Chapter 5 FA

Gross profit will result if:

• a. operating expenses are less than net income.

• b. net sales are greater than operating expenses.

• c. net sales are greater than cost of goods sold.

• d. operating expenses are greater than cost of goods sold.

Under a perpetual inventory system, when goods are purchased for resale by a company:

• a. purchases on account are debited to Inventory.

• b. purchases on account are debited to Purchases.

• c. purchase returns are debited to Purchase Returns and Allowances.

• d. freight costs are debited to Freight-Out.

The sales accounts that normally have a debit balance are:

• a. Sales Discounts.

• b. Sales Returns and Allowances.

• c. Both (a) and (b).

• d. Neither (a) nor (b).

A credit sale of NT$7,500 is made on June 13, terms 2/10, net/30. A return of NT$500 is granted on June 16. The amount received as payment in full on June 23 is:

• a. NT$7,000.

• b. NT$6,860.

• c. NT$6,850.

• d. NT$6,500.

Which of the following accounts will normally appear in the ledger of a merchandising company that uses a perpetual inventory system?

• a. Purchases.

• b. Freight-In.

• c. Cost of Goods Sold.

• d. Purchase Discounts.

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

• a. only one journal entry is necessary to record cost of goods sold and reduction of inventory.

• b. only one journal entry is necessary to record the receipt of cash and the sales revenue.

• c. 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.

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

The steps in the accounting cycle for a merchandising company are the same as those in a service company except:

• a. an additional adjusting journal entry for inventory may be needed in a merchandising company.

• b. closing journal entries are not required for a merchandising company.

• c. a post-closing trial balance is not required for a merchandising company

• d. an income statement is required for a merchandising company.

The income statement for a merchandising company shows each of the following features except:

• a. gross profit.

• b. cost of goods sold.

• c. a sales section.

• d. investing activities section.

If net sales are €400,000, cost of goods sold is €310,000, and operating expenses are €60,000, the gross profit is:

• a. €30,000.

• b. €90,000.

• c. €340,000.

• d. €400,000.

In a worksheet using a perpetual inventory system, Inventory is shown in the following columns:

• a. adjusted trial balance debit and statement of financial position debit

• b. income statement debit and statement of financial position debit.

• c income statement credit and statement of financial position debit.

• d. income statement credit and adjusted trial balance debit.