Acct Test Bank #8- Merchandise Inventory

When a company purchases merchandise inventory, it increases the Cost of Goods Sold account in the journal entry.

• True

• False

Merchandise Inventory is a revenue account.

• True

• False

When a company sells merchandise inventory, it records two journal entries.

• True

• False

An alternative to the perpetual inventory system is the periodic inventory system.

• True

• False

What type of account is Cost of Goods Sold?

• Asset

• Liability

• Revenue

• Expense

Match each item to its best definition.

• Cost of Goods Sold

• Merchandise figures constantly kept up to date

• Periodic inventory system

• Merchandise figures updated at the end of the period

• Merchandise Inventory

• Expense account that increases when merchandise inventory is sold

• Perpetual inventory system

• Asset account that represents the cost of goods a business intends to sell

The FIFO method can be used by a company that employs the perpetual inventory system but not one that uses the periodic inventory system.

• True

• False

• $31

• $32

• $33

• $85

• $14

• $15

• $16

• $32

• $10.00

• $10.25

• $10.75

• $11.00