WorksheetsAccounting Exam 2
Total questions: 60
Worksheet time: 5hrs 0mins
What is NOT correct regarding the perpetual
inventory system?
It’s a computerized program that keeps up
with items purchased, items sold and items in
ending inventory.
It requires a weekly physical count to
determine inventory on hand.
It requires a yearly physical count as a check
on the perpetual inventory system.
he merchandise inventory account is used
to track the goods purchased for resale.
Cost of Goods Sold (COGS) account is
used by a Merchandiser to report what
amount and on what financial statement?
Asset of Cost of Goods purchased for
resale on the Balance Sheet
Expense reporting Cost of Merchandise
Inventory that was sold on the Inc Stmt
Liability to record amounts due for Goods
purchased to resale on the Balance Sheet
Revenue to record cost of goods sold on
the Income Stmt
Merchandise Inventory account is what?
Asset account to record Cost of Goods sold.
Asset account to record Merchandise for
resale, plus Office supplies and Equipment.
Asset account to only record the Merchandise
Inventory for resale.
Asset account to track amount due on
Merchandise inventory purchased for resale.
Gross Profit is the term used to report
what?
Cost of Goods sold plus Net Sales
Revenue
mount of Merchandise Inventory on
hand available for resale
Sales Revenue less the discount offered
customers.
Net Sales Revenue less Cost of Goods
Sold.
BG, Inc purchased $20,000 of inventory on
account on July12 with terms 2/10, n/30. BG Inc
paid $250 for freight bill on July 15. They
returned $2000 of inventory on July 17. They
paid amount owed on July 21. What is the net
cost of inventory purchased?
$18,000
$17,890
$18,610
$17,640
BG, Inc purchased $20,000 of inventory on
account on July12 with terms 2/10, n/30. BG Inc
paid $250 for freight bill on July 15. They
returned $2000 of inventory on July 17. They
paid amount owed on July 21. What is included
in the JE to record the return?
DR Accts Payable; CR Merch Inventory
CR Acct Payable; DR Merch Inventory
DR Accts Payable; CR Cash
DR Cash; CR Merchandise Inventory
BG, Inc purchased $20,000 of inventory on
account on July12 with terms 2/10, n/30. BG Inc
paid $250 for freight bill on July 15. They
returned $2000 of inventory on July 17. They
paid amount owed on July 21. What is included
in the JE to record the payment of the freight bill?
DR Freight Expense; CR Accts Payable
DR Freight Expense; CR Merch Inventory
DR Merch Inventory; CR Cash
DR Merch Inventory; CR Freight Expense
BG, Inc purchased $20,000 of inventory on
account on July12 with terms 2/10, n/30. BG Inc
paid $250 for freight bill on July 15. They
returned $2000 of inventory on July 17. They
paid amount owed on July 21. What is included
in the JE to record the payment on July 21st?
DR A/P 20,000; CR Cash 20,000
DR A/P 18,000; CR Cash 18,000
DR Cash 18,000; CR Merch Inv 18,000
DR A/P 18,000; CR Merch Inv 360; CR
Cash 17,640
BG, Inc purchased $20,000 of inventory on
account on July12 with terms 2/10, n/30. BG Inc
paid $250 for freight bill on July 15. They
returned $2000 of inventory on July 17. They
paid amount owed on July 31. What is included
in the JE to record the payment on July 31st?
DR A/P $20,000; CR Cash $20,000
DR A/P $20,250; CR Cash $20,250
DR A/P $18,000; CR Merch Inv $360; CR
Cash $17,640
DR A/P $18,000; CR Cash $18,000
On June 1, Mike’s Boats sold $42,000 of
merchandise on account to a client with terms
3/15, n/30. The merchandise cost $20,000.
Mike’s paid $150 freight to deliver product to the
client. The client paid the amount due on June 26.
What is included in the JE to record the sale on
June 1?
DR A/R 42,000; CR COGS 20,000
DR A/R 42,000; CR Revenue 42,000
DR A/R 40,740; CR Cash 40,740
DR A/R 40,740; CR Revenue 40,740
On June 1, Mike’s Boats sold $42,000 of
merchandise on account to a client with terms
3/15, n/30. The merchandise cost $20,000. What
is included in the JE to record the sale?
DR A/R 20,000; CR COGS 20,000
DR COGS 20,000; CR Merch Inv 20,000
DR COGS 20,000; CR Cash 20,000
DR COGS 19,400; CR Merch Inv 19,400
Bob’s Boats has a balance of $54,000 for
Merch Inventory on its unadjusted trial balance at
the end of the year. A physical count of inventory
shows actual inventory is $50,400. Provide the
adjusting Journal Entry needed.
A)
B)
C)
D)
DR Merch Inv 3600; CR COGS 3600
DR COGS 3600; CR Merch Inv 3600
DR Revenue 3600; CR A/R 3600
DR COGS 3600; CR Cash 3600
If BG Inc has Net Sales Revenue of
$150,000, COGS of $80,000 and Operating
income of $5000. What is BG’s Gross Profit %?
53.3 %
3.3 %
46.7%
6.3 %
The shipping term FOB Destination Point
typically means that who pays for the freight?
A)
B)
C)
D)
Purchaser pays
Seller pays
End customer pays
Freight is free on board so nobody pays
What is the correct order of the following
amounts highlighted on the multi-step income
statement?
A)
B)
C)
D)
Operating income, Net Income, Gross Profit
Gross Profit, Operating Income, Net income
Operating Income, Gross Profit, Net income
Net Income, Operating Income, Gross Profit
Which of the following is not an example of
the Conservatism Principle being practiced?
You always try to overstate Revenue.
You record Sales net of the discount offered.
You need to estimate and record Sales
Returns and Allowances.
You record Merchandise Inventory at the
Lower of Cost or Market.
When the same accounting procedures and methods are used from accounting period to period, what principle is being practiced?
Materiality
Conservatism
Consistency
Disclosure
When financial reports provide enough information so that outside users can make informed decisions, what accounting principle is being practiced?
Materiality
Disclosure
Consistency
Conservatism
Which of the following is not an example of practices needed to maintain good inventory controls?
Upon delivery, inventory should be counted and examined for damage
Sales are recorded to prevent a stockout.
Purchases require proper authorization and are made from approved vendors.
Returns are disregarded and not recorded.
If Barbie Inc had 1000 units in ending inventory that had been recorded at unit cost of $18 using FIFO. The current replacement cost per unit is $15. The selling price per unit is $30. To apply lower of cost or market rule, what following JE would be needed?
$3000 CR to COGS; $3000 DR to Merch Inv
No Journal entry is needed.
$3000 CR to Merch Inv; $3000 DR to COGS
$15,000 DR to Merch Inv; $15,000 CR to COGS
If Barbie Inc had 1000 units in ending inventory that had been recorded at unit cost of $18 using LIFO. The current replacement cost per unit is $20. The selling price per unit is $30. To apply lower of cost or market rule, what following JE would be needed?
$2000 DR to COGS; $2000 CR to Merch Inv
No Journal entry needed
$2000 DR to Merch Inv; $2000 CR to COGS
$10,000 DR to COGS; $10,000 CR to Merch Inventory
If BK Inc had beginning inventory on June 1 of 90 units at $15 unit cost; purchased 60 units for $18 each on June 8; Sold 100 units for $36 each on June 10; If the company uses perpetual inventory system and FIFO inventory costing method, what is the COGS for the June 10th sale?
$1350
$3600
$1530
$2070
If BK Inc had beginning inventory on June 1 of 90 units at $12 unit cost; purchased 60 units for $15 each on June 8; Sold 100 units for $25 each on June 10; If the company uses perpetual inventory system and FIFO inventory costing method, what is the $ amount of Ending Inventory following the June 10th sale?
$600
$750
$1250
$900
If BK Inc had beginning inventory on June 1 of 90 units at $15 unit cost; purchased 60 units for $18 each on June 8; Sold 120 units for $36 each on June 10; If the company uses perpetual inventory system and FIFO inventory costing method, what is the GP% for the June 10th sale?
52.5%
56.25%
60.0%
43.75%
If BK Inc had beginning inventory on June 1 of 90 units at $15 unit cost; purchased 60 units for $18 each on June 8; Sold 100 units for $36 each on June 10; If the company uses perpetual inventory system and LIFO inventory costing method, what is the COGS for the June 10th sale?
$1530
$1080
$600
$1680
If BK Inc had beginning inventory on June 1 of 90 units at $10 unit cost; purchased 60 units for $12 each on June 8; Sold 100 units for $25 each on June 10; If the company uses perpetual inventory system and LIFO inventory costing method, what is the $ amount of Ending Merch Inventory following the June 10th sale?
A)
B)
C)
D)
$600
$750
$550
$500
If BK Inc had beginning inventory on June 1 of 90 units at $15 unit cost; purchased 60 units for $18 each on June 8; Sold 110 units for $36 each on June 10; If the company uses perpetual inventory system and LIFO inventory costing method, what is the $ amount of Gross profit for the June 10th sale?
$1080
$2130
$3960
$1830
Which of the following is not one of the inventory costing methods discussed in Ch 6?
A)
B)
C)
D)
Conservatism
Specific Identification
Weighted Average
LIFO
All of the following statements reflect the accounting principle of Conservatism except for which one?
When given options, report assets at the lower amount.
When given options, reports revenue at the lower amount.
When given options, record an expense rather than an asset.
When given options, record liabilities at the lowest amount possible.
To maintain good controls over inventory a company should do all of the following except?
For expediency allow all employees to purchase inventory needed.
All purchases should be examined and damaged goods deducted from Merch Inventory.
All sales should be properly recorded so that Merchandise Inventory account is decreased.
A physical count of inventory should be conducted once a year and Merch Inv account adjusted as needed.
What statement is not true of Internal Control procedures?
Audits are performed by internal and external auditors.
Electronic devices are used to deter theft.
Internal controls are necessary for both publicly traded companies and private business.
Internal control procedures are not concerned with the operational efficiency of a business.
Which statement is not true when discussing the purposes of Internal control?
Accounting records and internal controls are solely the responsibility of the auditors.
One primary purpose is to safeguard the assets of the business.
One primary purpose is to promote operational efficiency.
Internal controls include encouraging employees to follow company policies.
All of the following are examples of the control procedure known as separation of duties except which one?
Separate the accountant from custody of assets, such as cash.
Separate the sales personnel from reporting revenue.
Separate the cashier from recording sales revenue.
Separate the management team from sales team.
Controls regarding cash receipts include which of the following?
The cash drawer can be opened by any employee.
The cash receipt totals are not necessary when counting the cash in a register drawer.
The cash is deposited in a timely manner to avoid holding excess cash overnight.
Receipts to customers are not typically provided
Controls regarding bank accounts typically include all of the following except which one?
Reconciliation of bank statements
Deposit tickets
Remittance advices
Signature cards
Payments by check offer several layers of control including all of the following except which one?
A business does not receive copies of cleared or cancelled checks with the bank statement.
Checks are only signed by authorized signers.
Authorized signers review source documents prior to signing checks.
The bank has a list of all authorized signers.
Supporting documents to be reviewed prior to signing checks include what?
Balance sheet, Purchase order, receiving report
Cash Flow Stmt, Invoice, Purchase Order
Purchase Order, Invoice, Receiving Report
Bank Statement; Invoice, Receiving Report
What is the type of the petty cash fund where the amount of cash in the cash box plus the amount of petty cash tickets will always equal the total amount of the fund?
Impressive
Imprest
Inclusive
Environmental
Which of the following is always adjusted on the bank side of a bank reconciliation?
NSF checks
Bank Service Charges
Deposits in Transit
Interest Revenue
Which of the following is not always an adjustment to the Book Side when preparing a bank reconciliation?
Interest Revenue
Outstanding checks
Service charges
NSF Checks
The purpose of a Bank Reconciliation is to explain the difference between the bank statement balance and what?
The beginning of the month General Ledger balance of the Cash account.
The end of the month General Ledger balance of the Cash account.
The end of the Month General Ledger balance of Merchandise inventory.
The end of the month General Ledger balance of Accounts Receivable.
12. The following data is provided for J&J Inc.
for the current month. What is the adjusted bank
balance on the bank reconciliation?
Book balance on GL at end of month $2800
Bank stmt balance at end of month 2425
Outstanding checks 450
Deposits in Transit 900
Service Charge 25
Interest Revenue 100
$3250
$2500
$2875
The following data is provided for J&J Inc.
for the current month. What is the adjusted book
balance on the bank reconciliation?
Book balance on GL at end of month $2900
Bank stmt balance at end of month 3428
Outstanding checks 628
Deposits in Transit 200
Service Charge 25
Interest Revenue 125
$3278
$3000
$2247
Which payment method of receiving deposits
from a third party Credit Card processor is a
company using if the Credit Card processing fee
is deducted monthly?
Net
Gross
Operating
Debit
Good internal control procedures would
include all of the following except which one?
Documents provide transaction details
Purchase orders and sales invoices are pre-
numbered.
New hires aren’t subjected to a background
check.
Employees have clearly defined
responsibilities.
A company that uses perpetual inventory system has a year end Merchandise Inventory account balance of $52,000. A physical count of inventory at year end reveals that the amount of actual inventory is $46,000. Which of the following would be included in the adjusting entry?
a $52,000 debit to Cost of Goods Sold
$6,000 credit to Cost of Goods Sold
$46,000 credit to Merchandise Inventory
$6,000 credit to Merchandise Inventory
A company that uses the perpetual inventory system purchases inventory for $62,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?
a debit to Accounts Payable for $62,000, a credit to Merchandise Inventory for $1,240, and a credit to Cash for $60,760
a debit to Accounts Payable for $62,000, a credit to Cash for $1,240, and a credit to Merchandise Inventory for $60,760
a debit to Accounts Payable for $60,760, a debit to Merchandise Inventory for $1,240, and a credit to Cash for $62,000
a debit to Merchandise Inventory for $1,240, a debit to Accounts Payable for $62,000, and a credit to Cash for $63,240
On May 3, TX Manufacturing purchased merchandise inventory for $2000 on account with terms 2/10, n/30, FOB shipping point. They paid a $100 freight bill. On May 6, they returned $250 of the goods to the seller. On May 10, they paid the amount due for inventory. What is TX Manufacturing's net cost of inventory as a result of these transactions?
$1715
$1960
$1850
$1815
When discussing accounting for merchandisers, which of the following statements is not correct?
Merchandise Inventory is an asset account that tracks the cost of the Merchandise purchased for resale.
Cost of Goods sold account is an expense account reporting the Cost of Merchandise Sold on the Income Statement
Cost of Goods sold account is an asset account reporting the Cost of Merchandise Sold on the Balance Sheet
Gross profit equals Revenue less Cost of Goods Sold
Marathon Sports Gear had net sales revenue of $552,000, Cost of Goods Sold of $292,000 and Operating Expenses of $200,000. How much gross profit did Marathon Sports Gear report?
$260,000
$552,000
$292,000
$60,000
What would be included in the Journal entries for a merchandiser that uses the perpetual inventory system to record the following sale on Jan 8th?
On January 8, inventory was sold for $7,000 on account. Credit terms were 2/15, n/30. Cost of Goods sold was $4,500. The customer paid for the purchase on Jan 30.
$7000 debit to Accounts Receivable
$7000 credit to Sales Revenue
$6860 credit to Sales Revenue
$7000 debit to Cash
In a perpetual inventory system, which statement is not true when discussing the physical count of inventory?
physical count is not necessary because the system is perpetual
serves as a check of the perpetual records
establishes the correct amount of ending inventory for the financial statements
captures inventory shrinkage not recorded by the electronic system
Assume Easy Electronics had Net Sales Revenue of $125,000 and Cost of Goods Sold of $75,000. Average merchandise inventory was $35,000. What is the gross profit percentage for Easy Electronics for this period?
40%
25%
75%
60%
Which of the following states that the business should use the same accounting methods from period to period?
consistency principle
materiality concept
conservatism
disclosure principle
Baldwin, Inc. had the following balances and transactions during 2019:
January 1 Beginning Merchandise Inventory 125 units at $81
March 10 Purchase 225 units at $86
June 10 Sale 175 units at $160
October 30 Sale 75 units at $160
What would be amount of Merchandise inventory on hand and available for sale on June 11, following the June 10 sale, if the perpetual inventory system and the first-in, first-out (FIFO) inventory costing method are used?
$14,425
$15,000
$28,000
$15,050
Based on the lower of cost or market rule, which of the following amounts would be reported as Merchandise Inventory on the balance sheet of a company if the cost of an item is $110 and the current replacement cost is $70?
the average of $70 and $110
$110
$180
$70
Baldwin, Inc. had the following balances and transactions during 2019:
January 1 Beginning Merchandise Inventory 125 units at $81
March 10 Purchase 225 units at $86
June 10 Sale 175 units at $160
October 30 Sale 75 units at $160
What would be reported as Cost of Goods Sold on the income statement for the June 10 sale if the perpetual inventory system and the first in, first out (FIFO) inventory costing method are used?
$14,175
$10,125
$15,050
$14,425
Baldwin, Inc. had the following balances and transactions during 2019:
January 1 Beginning Merchandise Inventory 125 units at $81
March 10 Purchase 225 units at $86
June 10 Sale 175 units at $160
October 30 Sale 75 units at $160
What would be reported as Cost of Goods Sold on the income statement for the June 10 sale if the perpetual inventory system and the last in, first out (LIFO) inventory costing method are used?
$28,000
$14,000
$15,050
$14.425
Baldwin, Inc. had the following balances and transactions during 2019:
January 1 Beginning Merchandise Inventory 125 units at $81
March 10 Purchase 225 units at $86
June 10 Sale 175 units at $160
October 30 Sale 75 units at $160
What would be amount of Gross Profit on the June 10 sale if the perpetual inventory system and the first-in, first-out (FIFO) inventory costing method are used?
$28,000
$13,575
$14,000
$12,950
Which of the following inventory costing methods should be used for unique traceable items?
weighted-average
specific identification
last-in, first-out
first-in, first-out
