ACC201 Exam 2 Practice Questions

Two categories of expenses in merchandising companies are

• operating expenses and financing expenses.

  
  

• purchases and cost of goods sold.

  
  

• cost of goods sold and financing expenses.

  
  

• cost of goods sold and operating expenses.

  
  

A company using a perpetual inventory system that returns goods previously purchased on credit would

• debit Sales and credit Accounts Payable.

  
  

• debit Accounts Payable and credit Purchases.

  
  

• debit Cash and credit Accounts Payable.

  
  

• debit Accounts Payable and credit Inventory.

  
  

The Sales Returns and Allowances account is classified as a(n)

• contra asset account.

  
  

• contra revenue account.

  
  

• asset account.

  
  

• expense account.

  
  

What is the term applied to the excess of net sales over the cost of goods sold?

• Gross profit

  
  

• Net income

  
  

• Income from operations

  
  

• Income before income taxes

  
  

The LIFO inventory method assumes that the cost of the latest units purchased is

• the last to be allocated to cost of goods sold.

  
  

• the first to be allocated to ending inventory.

  
  

• the first to be allocated to cost of goods sold.

  
  

• not allocated to cost of goods sold or ending inventory.

  
  

Which of the following is not a common cost flow assumption used in costing inventory?

• Average-cost

  
  

• First-in, first-out

  
  

• Middle-in, first-out

  
  

• Last-in, first-out

  
  

In a perpetual inventory system,

• a new average is computed under the Average-Cost method after each sale.

  
  

• Average-Costs are based entirely on unit cost simple averages.

  
  

• FIFO cost of goods sold will be the same as in a periodic inventory system.

  
  

• LIFO cost of goods sold will be the same as in a periodic inventory system.

  
  

Interest is usually associated with

• accounts receivable.

  
  

• bad debts.

  
  

• notes receivable.

  
  

• doubtful accounts.

  
  

The account Allowance for Doubtful Accounts is classified as a(n)

• expense.

  
  

• contra account to Bad Debt Expense.

  
  

• contra account to Accounts Receivable.

  
  

• liability.

  
  

Under the allowance method, writing off an uncollectible account

• affects only income statement accounts.

  
  

• affects both balance sheet and income statement accounts.

  
  

• affects only balance sheet accounts.

  
  

• is not an acceptable practice.