WorksheetsACCT 2001 Exam 2 Review
Total questions: 41
Worksheet time: 21mins
By using a perpetual inventory system, companies can better track when to replenish inventory, thus reducing
storage costs.
income.
sales.
sales returns.
A department store uses a perpetual inventory system. At year-end, it shows a balance in the merchandise inventory account of $2 million. Assuming that the inventory records have been maintained properly, a year-end physical inventory
will show that a periodic inventory system should be implemented.
will confirm that a perpetual inventory system was used correctly.
will most likely indicate more than $2 million in merchandise on hand.
will most likely indicate less than $2 million in merchandise on hand due to handling and related losses.
Pristine Products, a wholesaler, uses a periodic inventory system. At year-end, Pristine conducts a physical inventory count to determine
source of discrepancies in inventory records.
inventory purchases for the year.
ending inventory.
beginning inventory.
Price Company, a wholesaler, records annual sales revenue of $425,000, and reports cost of goods sold of $145,000. What would Price report as its gross profit for the year?
$280,000.00
$570,000.00
$135,000.00
$285,000.00
An enterprise that sells merchandise directly to a retailer is called a
corporation.
wholesaler.
broker.
service company.
In a merchandising company, gross profit less operating expenses equals
sales revenue.
cost of goods sold.
net income.
comprehensive income.
Net income for a merchandising enterprise is computed by
adding operating expenses and cost of goods sold.
subtracting cost of goods sold from sales revenue.
deducting operating expenses from cost of goods sold.
subtracting operating expenses from gross profit.
When gross profit equals operating expenses, a merchandiser will earn an operating income of
more than $0.
$0.
the difference between sales revenue and cost of goods sold.
the difference between gross profit and net income.
Ace Corp. is a headhunting firm. Uno Corp. sells office furniture. Which firm has a longer operating cycle? Why?
Uno Corp. because it purchases and sells inventory
Ace Corp. because it deals with human relations
Uno Corp. because it deals with human relations and inventory
Ace Corp. because it has no inventory
Seneca Company sold goods on account to Rogers Enterprises with terms of 2/10, n/30. The goods had a cost of $1,600 and a selling price of $2,500. Both Seneca and Rogers use a perpetual inventory system. What does the sale look like on Seneca’s books? What does the purchase look like on Rogers’s books?
Seneca: $2,500 Debit to Accounts Receivable, $2,500 Credit to Sales Revenue. $1,600 Debit to Cost of Goods Sold, $1,600 Credit to Inventory; Rogers: $2,500 Credit to Inventory, $2,500 Debit to Accounts Payable
Seneca: $2,500 Credit to Accounts Receivable, $2,500 Debit to Sales Revenue, $1,600 Credit to Cost of Goods Sold, $1,600 Debit to Inventory; Rogers: $2,500 Debit to Inventory, $2,500 Credit to Accounts Payable
Seneca: $2,500 Debit to Accounts Receivable, $2,500 Credit to Sales Revenue, $1,600 Debit to Cost of Goods Sold, $1,600 Credit to Inventory; Rogers: $2,500 Debit to Inventory, $2,500 Credit to Accounts Payable
Seneca: $2,500 Credit to Accounts Receivable, $2,500 Debit to Sales Revenue, $1,600 Credit to Cost of Goods Sold, $1,600 Debit to Inventory; Rogers: $2,500 Credit to Inventory, $2,500 Debit to Accounts Payable
If there are no sales discounts, subtracting sales returns and allowances from sales revenue results in
gross sales.
net income.
gross profit.
net sales.
Which of the following is a contra revenue account?
Sales Discounts
Freight-out
Sales Revenue
Inventory
Which of the following journal entries records a credit sale?
Account Receivable
Sales Revenue
Cash
Sales revenue
Accounts Receivable
Sales returns and allowances
Cash
Service revenue
________ has a normal credit balance.
Sales Revenue
Sales Discounts
Selling Expense
Sales Returns and Allowances
What is a main reason why businesses may offer their customers a sales discount?
to increase sales revenues
to reduce unwanted inventory
to encourage them to pay their accounts promptly
to decrease sales returns
In the absence of sales discounts, net sales are calculated by subtracting ____________ from
cost of goods sold; sales revenue.
sales revenue; sales returns and allowances.
sales returns and allowances; sales revenue.
cost of goods sold; sales returns and allowances.
Longmire Corporation provides the following information:
Net Sales: $400,000 Gross Profit: $160,000
Income from Operations: $50,000 Net income: $20,000
What is Cost of Goods Sold?
$350,000.00
$240,000.00
Cannot determine from information given.
$110,000.00
If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, the gross profit is
$340,000.
$400,000.
$30,000.
$90,000.
________ is shown on a multiple-step but not on a single-step income statement.
Gross profit
Net sales
Cost of goods sold
Net income
For Standing Bear Company, sales revenue is $200,000, sales returns and allowances are $5,000, sales discounts are $3,000, and cost of goods sold is $120,000. Gross profit is
$77,000.
$192,000.
$72,000.
$75,000.
Clark Incorporated purchased iron from Garret Industries. The purchase cost $54,730 with freight costs of $680 and a purchase discount of $5,473. If Clark Incorporated uses a periodic system of inventory, which accounts will Clark Incorporated use to account for this purchase?
Inventory and Cost of Goods Sold
Purchases, Freight-In, and Cost of Goods Sold
Inventory and Accounts Payable
Purchases, Freight-In, and Purchase Discounts
Bloom Corp. uses the periodic inventory system. Determine Bloom’s cost of goods sold if its beginning inventory was $124,000, purchases for the year were $265,700, and the ending inventory was $73,220.
$192,480
$389,700
$462,920
$316,480
Under a periodic system, cost of goods available for sale is the sum of beginning inventory plus
purchase returns and allowances.
net cost of purchases.
ending inventory.
cost of goods sold.
During the year, a discount retailer's merchandise inventory decreased by $560,000. If the company's cost of goods sold for the year was $1,500,000, purchases would have been
$1,000,000.
$960,000.
$900,000.
$940,000.
If net sales are $600,000 and gross profit is $412,800, what is the gross profit rate?
68.8%
145.4%
31.2%
66.7%
In April, Green Products received $62,000 in cash for its products and had returns totaling $2,000. Its gross profit rate was 45 percent. For the month of April, it will report net sales revenue and cost of goods sold of
$60,000 and $54,000.
$62,000 and $36,000.
$62,000 and $54,000.
$60,000 and $33,000.
Which of the following would negatively affect the gross profit of a company?
selling products with a lower markup
selling overstocked inventory at sale prices
reducing the costs paid to suppliers for merchandise
lowering sales prices of merchandise to meet increasing competition
What are raw materials?
manufactured items that are completed and ready for sale
materials that are in various stages of production
the portion of manufactured inventory that has begun the production process but is not yet complete
basic goods that will be used in production but have not yet been placed into production
If a company holds ________, these goods should be included in its ending inventory.
an invoice for goods in transit shipped FOB destination
consigned goods
legal title to goods
physical possession of goods
FOB shipping point means that legal title of goods
is transferred to the buyer when the goods are accepted by a carrier.
is transferred to the buyer at the time of the sale.
remains with the seller until the buyer accepts the delivery.
remains with the seller until the goods are delivered to the buyer.
White Incorporated employs a just-in-time (JIT) inventory system. Which inventory issues are mitigated by this inventory system?
Spoilage and Cost of Goods Sold
Obsolescence and Spoilage
Labor Costs and Spoilage
Cost of Goods Sold and Obsolescence
Companies wishing to minimize income taxes should use which inventory cost flow method during times when prices are rising?
FIFO
LIFO
average-cost
perpetual
Sanchez Farm Goods sells hay bales and silage to farmers. They use a LIFO inventory system. For 2022, their inventory was valued at $157,417. On their financial statements, they stated that their inventory valued with the FIFO method would have been $168,592. What is Sanchez’s LIFO reserve?
1.071
– $11,175
$11,175
0.934
Which of the following companies is most likely to have lost sales due to an inventory shortage?
Company 1 has an inventory turnover of 46.3.
Company 2 has an average days in inventory of 18.9 days.
Company 3 has an inventory turnover of 5.4.
Company 4 has an average days in inventory of 32.7.
company 1
company 2
company 3
company 4
The Daily Grind sells coffee makers. Its inventory of coffee makers without timers cost $20,000 and has a net realizable value of $10,000. Its inventory of coffee makers with timers cost $35,000 and has a net realizable value of $35,000. What amount should be reported for Daily Grind's inventory?
$45,000.00
$75,000.00
$55,000.00
$35,000.00
What can cause a decrease in inventory turnover?
increasing sales commissions
increasing the amount of average inventory
increasing cost of goods sold
decreasing the amount of average inventory
The Sarbanes-Oxley Act has assisted in giving ________ more confidence, while holding ________ more accountable for the effectiveness and reliability of internal control.
investors; the Securities and Exchange Commission
boards of directors; management
investors; corporate executives
corporate executives; auditing firms
The information technology department of Biotech International, Inc. frequently checks the online check-in system to ensure employees are being paid for actual time worked. Which component of internal control is being illustrated?
risk assessment
monitoring
control activities
control environment
Eric Hansen is a receiving clerk who has just been denied a raise. He has approached his subordinate, who is the new storeroom clerk, about diverting inventory to sell for personal gain. This example of the ________, which may lead to
rationale; independent internal verification.
collusion; mandatory vacations.
opportunity; segregation of duties.
human element; collusion.
Bellswood Jewelers uses an ID card scanner and six-digit code to allow entry into their jewelry vault. The six-digit code is the same for all employees. However, use of the ID card allows the system to identify who entered the vault. One day, a salesperson sees another salesperson’s ID card lying unattended in the break room, and the employee uses the card to enter the vault and steal jewelry worth $36,840. Which principle of control activities was violated in this scenario?
establishment of responsibility
independent internal verification
human resource controls
segregation of duties
In the absence of sales discounts, net sales are calculated by subtracting ____________ from
cost of goods sold; sales revenue.
sales revenue; sales returns and allowances.
sales returns and allowances; sales revenue.
cost of goods sold; sales returns and allowances.
