ACCT 2110 Ch 6 - Overall

What is inventory classified as on the balance sheet?

• A) A long-term asset

• B) A current asset

• C) A liability

• D) An equity

What does the cost of goods sold represent?

• A) The total revenue from sales

• B) The inflow of resources from sales

• C) The outflow of resources caused by the sale of inventory

• D) The net profit from sales

What is the formula for Gross Margin?

• A) Net Sales + Cost of Goods Sold

• B) Net Sales - Cost of Goods Sold

• C) Net Sales * Cost of Goods Sold

• D) Net Sales / Cost of Goods Sold

Which of the following is NOT a type of merchandiser?

• A) Retailers

• B) Wholesalers

• C) Manufacturers

• D) Companies that sell inventory directly to consumers

What is Gross Margin a key performance measure of?

• A) The total sales revenue

• B) The extent to which resources generated by sales can be used to pay expenses and provide for net income

• C) The total cost of goods sold

• D) The total inventory available for sale

What does the term "2/10, n/30" mean in the context of a purchase discount?

• A. A 2% discount can be taken if payment is made within 10 days of the invoice date.

• B. A 10% discount can be taken if payment is made within 2 days of the invoice date.

• C. A 30% discount can be taken if payment is made within 2 days of the invoice date.

• D. A 2% discount can be taken if payment is made within 30 days of the invoice date.

In a perpetual inventory system, how is the discount recorded when payment is made within the discount period?

• A. As an increase to the inventory account.

• B. As a decrease to the inventory account.

• C. As an increase to the sales account.

• D. As a decrease to the sales account.

What does F.O.B. shipping point mean?

• A. Ownership of the inventory passes from the seller to the buyer at the shipping point.

• B. Ownership of the inventory passes from the buyer to the seller at the shipping point.

• C. Ownership of the inventory passes from the seller to the buyer at the destination.

• D. Ownership of the inventory passes from the buyer to the seller at the destination.

Who pays the transportation costs termed "freight-in"?

• A. The seller

• B. The buyer

• C. The shipping company

• D. The manufacturer

In a perpetual inventory system, what happens to the inventory account for the freight costs?

• A. The inventory account is decreased.

• B. The inventory account is increased.

• C. The inventory account remains unchanged.

• D. The inventory account is closed.