FABM1_Quiz1

1.    What is the final step in completing the accounting cycle for a merchandising business?

• Prepare financial statements
• Prepare a trial balance
• Close the revenue and expense accounts
• Post transactions to the ledger

2.    What is the purpose of preparing closing entries in the accounting cycle of a merchandising business?

• To transfer balances of temporary accounts to the permanent capital account
• To record transactions in the general ledger
• To determine the cost of goods sold
• To calculate the total revenue of the business

3.    Why is it important to complete the accounting cycle in a merchandising business?

• To increase customer satisfaction
• To reduce employee workload
• To improve employee morale
• To accurately track sales, expenses, and inventory levels.

4. 4. KATAKAWAN Company purchased inventory worth 10,000 on credit. They later returned 2,000 worth of inventory to the supplier. How would you record the transaction in the accounting cycle?

• Debit Accounts Payable 8,000, Credit Inventory 8,000.

• Debit Inventory 10,000, Credit Account Receivable 10,000;

• Debit Cash 2,000, Credit Inventory 2,000

• Debit Inventory 8,000, Credit Account Payable 8,000; Debit Account Payable 2,000, Credit Inventory 2,000

5. 5. A merchandising business mistakenly recorded a purchase of inventory as an expense. How would this error impact the financial statements during the accounting cycle?

• Net income would be overstated, and assets would be understated

• Net income would be understated, and liabilities would be overstated

• Net income would be overstated, and liabilities would be understated

• Net income would be understated, and assets would be overstated

6. 6.  FERNANDEZ Company made the following adjustments at the end of the accounting period: (1) accrued salaries expense of 2,500, (2) depreciation expense of 1,200, and (3) prepaid insurance that expired, amounting to 800. Create the necessary adjusting entries for each adjustment.

• Debit Salaries Expense 2,500, Credit Salaries Payable 2,500

  Debit Depreciation Expense 1,200, Credit Accumulated Depreciation 1,200

  Debit Insurance Expense 800, Credit Prepaid Insurance 800

• Debit Salaries Payable 2,500, Credit Salaries Expense 2,500

  Debit Accumulated Depreciation 1,200, Credit Depreciation Expense 1,200

  Debit Prepaid Insurance 800, Credit Insurance Expense 800

• Debit Salaries Expense 2,500, Credit Cash 2,500

  Debit Accumulated Depreciation 1,200, Credit Depreciation Expense 1,200

  Debit Prepaid Insurance 800, Credit Cash 800

• Debit Salaries Payable 2,500, Credit Salaries Expense 2,500

  Debit Accumulated Depreciation 1,200, Credit Depreciation Expense 1,200

  Debit Prepaid Insurance 800, Credit Insurance Expense 800

7. Which of the following is included in the calculation of Gross Profit in the Statement of Cost of Goods Sold?

• Income taxes

• Cost of Goods Sold
• Net Profit
• Operating Expenses

8. 8. What is the purpose of the Statement of Cost of Goods Sold and Gross Profit in financial reporting?

• To calculate the total revenue of a company
• To determine the number of employees in a company
• To analyze the marketing strategies of a company
• To analyze the efficiency of production and inventory management

9. 9. Company A had a beginning inventory of 50,000, purchases of 100,000, and an ending inventory of 60,000. The net sales for the period were 200,000. Calculate the cost of goods sold and the gross profit for Company A.

• Cost of Goods Sold: 80,000, Gross Profit: 120,000

• Cost of Goods Sold: 90,000, Gross Profit: 110,000

• Cost of Goods Sold: 100,000, Gross Profit: 100,000

• Cost of Goods Sold: 70,000, Gross Profit: 130,000

10. 10. Company HAANMAILAKO had a cost of goods sold of 150,000 and net sales of 200,000. Calculate the gross profit margin and evaluate its impact on the company's profitability.

• 15%
• 25%
• 30%
• 20%