Acc 1 Final Exam Review

Assume both Sampson Co. and Batson Co. use a perpetual inventory system. Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the merchandise sold is $38,500. Batson Co. paid the invoice within the discount period. What is the amount that should be debited to accounts receivable?

• 46,000

• 920

• 45,080

• 30,000

Answer explanation

The amount debited to accounts receivable is $45,080, which is the selling price of $46,000 minus the discount of $920 (2% of $46,000).

Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within the discount period. What is the amount of sales from these transactions?

• $25,500

• $24,990

• $16,000

• $26,010

Answer explanation

The correct amount of sales from these transactions is $24,990, which is the result after applying the 2% discount to the original amount of $25,500.

For Sullivan Company, the asset turnover increased from 1.25 to 1.50. This is an unfavorable change.

• True

• False

Answer explanation

The correct answer is False because an increase in asset turnover from 1.25 to 1.50 is actually a favorable change, indicating more efficient use of assets.

Which term is applied to the excess of revenue from sales over the cost of merchandise sold?

• net income

• gross sales

• income from operations

• gross profit

Answer explanation

The term 'gross profit' is applied to the excess of revenue from sales over the cost of merchandise sold.

The inventory system employing accounting records that continuously disclose the amount of inventory is called

• retail

• perpetual

• periodic

• FIFO

Answer explanation

The inventory system employing accounting records that continuously disclose the amount of inventory is called perpetual.

Which of the following accounts has a normal debit balance?

• Accounts Payable

• Sales

• Interest Revenue

• Merchandise Inventory

Answer explanation

Merchandise Inventory has a normal debit balance, meaning an increase in this account is recorded as a debit entry.

During the current year, merchandise is sold for $137,500 cash and $425,600 on account. The cost of the merchandise sold is $322,325. What is the amount of the gross profit?

Mathematical Equivalence

OFF

Answer explanation

$137,500 + $425,600 – $322,325 = $240,775

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: Inventory on September 1 is 20 units at $20 each, 10 units are sold on September 4, 30 units are purchased at $25 each on September 10, 20 units are sold on September 17, and 10 units are purchased at $30 each on September 30. If Addison uses FIFO, what is the cost of the ending merchandise inventory on September 30?

• a. $800

• b. $750

• c. $650

• $500

Answer explanation

Ending Inventory Using FIFO = 20 units (at $25 from the September 10 purchase) + 10 units (at $30 from the September 30 purchase) = $500 + $300 = $800

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: September 1 Inventory 20 units at $20, 4 Sale 10 units, 10 Purchase 30 units at $25, 17 Sale 20 units, 30 Purchase 10 units at $30. Use the information for Addison, Inc. If Addison uses LIFO, the cost of the ending merchandise inventory on September 30 is:

• a. $750

• b. $700

• c. $650

• d. $800

Answer explanation

Ending Inventory Using LIFO = 10 units (at $20 from the beginning inventory) + 10 units (at $25 from the September 10 purchase) + 10 units (at $30 from the September 30 purchase) = $200 + $250 + $300 = $750

Which of the following companies would be more likely to use the specific identification inventory costing method?

• a. Best Buy

• b. Gordon’s Jewelers

• c. Lowe’s

• d. Walmart

Answer explanation

Gordon’s Jewelers would be more likely to use the specific identification inventory costing method due to the unique and high-value nature of their inventory items like jewelry.