Merchandise inventory accounting systems can be broadly categorized into two types. they are

QUESTION 1

1. Which of the following statements is FALSE?

In a perpetual inventory system, the "cash register" at the store is a computer terminal that records sales and updates inventory records.

Even in a perpetual inventory system, a business must count inventory at least one a year.

Restaurants and small retail stores often use the periodic inventory system.

In a periodic inventory system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

5 points

QUESTION 2

1. Which of the following is true of freight in?

It is an administrative expense.

It is a selling expense.

It is the transportation cost on purchases.

It is the transportation cost on sales.

5 points

QUESTION 3

1. Merchandise inventory accounting systems can be broadly categorized into two types. They are __________.

FIFO and LIFO

perpetual and periodic

wholesale and retail

manufacturer and producer

5 points

QUESTION 4

1. Which of the following is subtracted from net sales revenue to arrive at gross profit on a multi-step income statement?

Cost of goods available for sale

Cost of goods sold

Sales discounts and sales returns and allowances

Operating expenses

5 points

QUESTION 5

1. A company that uses the perpetual inventory system purchases inventory for $61,000 on account, with terms of 3/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?

A debit to Accounts Payable for $61,000, a credit to Cash for $59,170, and a debit to Merchandise Inventory for $1,830

A debit to Accounts Payable for $61,000, a credit to Merchandise Inventory for $1,830, and a credit to Cash for $59,170

A debit to Merchandise Inventory for $1,830, a debit to Accounts Payable for $61,000, and a credit to Cash for $62,830

A debit to Accounts Payable for $59,170, a debit to Merchandise Inventory for $1,830, and a credit to Cash for $61,000

5 points

QUESTION 6

1. What does "2/10" mean, with respect to "credit terms of 2/10, n/30"?

A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.

Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice.

A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date.

Interest of 10 percent will be charged if invoice is paid after two days.

5 points

QUESTION 7

1. The term "freight out" refers to __________.

transportation costs on purchases

cost of inventory purchased

costs that are not actually paid in cash

transportation costs on sales

5 points

QUESTION 8

1. If goods are sold on terms free on board (FOB) shipping point, the __________.

seller normally pays the transportation costs

buyer normally pays the transportation costs

buyer and the seller split the transportation costs

shipping company bears the transportation cost

5 points

QUESTION 9

1. Changing from the LIFO (Last-In, First-Out) to the specific identification method of valuing inventory ignores the principle of __________.

conservatism

consistency

disclosure

materiality

5 points

QUESTION 10

1. A company decides to ignore a very small error in its inventory balance. This is an example of the application of the __________.

conservatism

materiality concept

disclosure principle

consistency principle

5 points

QUESTION 11

1. A company purchased 400 units for $20 each on January 31. It purchased 520 units for $26 each on February 28. It sold a total of 560 units for $40 each from March 1 through December 31. What is the amount of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.)

$9,360

$4,960

$7,200

$2,240

5 points

QUESTION 12

1. Which of the following is the correct formula to calculate weighted-average unit cost for merchandise inventory?

Weighted-average unit cost = Cost of goods available for sale + Number of units available

Weighted-average unit cost = Cost of goods available for sale × Number of units available

Weighted-average unit cost = Cost of goods available for sale - Number of units available

Weighted-average unit cost = Cost of goods available for sale / Number of units available

5 points

QUESTION 13

1. Blanchard, Inc. provided the following for 2017:

Cost of Goods Sold (Cost of sales)

$1,200,000

Beginning Merchandise Inventory

325,000

Ending Merchandise Inventory

625,000

Calculate the company's inventory turnover ratio for the year. (Round your answer to two decimal places.)

3.69 times per year

2.53 times per year

1.92 times per year

1.26 times per year

5 points

QUESTION 14

1. Under the weighted-average method for inventory costing, the cost per unit is determined by __________.

dividing the cost of goods available for sale by the number of units available

dividing the cost of goods available for sale by the number of units in beginning inventory

multiplying the number of units purchased with the weighted-average cost

multiplying the cost of goods available for sale by the ending weighted-average cost of the previous accounting period

5 points

QUESTION 15

1. A company purchased 100 units for $30 each on January 31. It purchased 400 units for $20 each on February 28. It sold a total of 470 units for $110 each from March 1 through December 31. If the company uses the last-in, first-out inventory costing method, calculate the amount of ending inventory on December 31. (Assume that the company uses a perpetual inventory system.)

$600

$2,400

$900

$30

5 points

QUESTION 16

1. Misty, Inc. had 24,000 units of ending inventory that were recorded at the cost of $8.00 per unit using the FIFO method. The current replacement cost is $4.50 per unit. Which of the following amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?

$192,000

$300,000

$216,000

$108,000

5 points

QUESTION 17

1. Which of the following is the correct formula to calculate inventory turnover?

Inventory turnover = Cost of goods sold / Average merchandise inventory

Inventory turnover = Cost of goods sold × Average merchandise inventory

Inventory turnover = Cost of goods sold + Average merchandise inventory

Inventory turnover = Cost of goods sold - Average merchandise inventory

5 points

QUESTION 18

1. The ending merchandise inventory for the current year is overstated by $25,000. What effect will this error have on the following year's net income?

The net income will be overstated by $50,000.

The net income will be overstated by $25,000.

The net income will be understated by $25,000.

The net income will be understated by $50,000.

5 points

QUESTION 19

1. A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $10,000 and paid $750 for the freight-in. The company sold the whole lot to a supermarket chain for $14,000 on account. The company uses the specific-identification method of inventory costing. Which of the following entries correctly records the cost of goods sold?

Cost of Goods Sold

10,750

Merchandise Inventory

10,750

Merchandise Inventory

10,750

Cost of Goods Sold

10,750

Cost of Goods Sold

10,000

Sales Revenue

10,000

Cost of Goods Sold

10,000

Merchandise Inventory

10,000

5 points

QUESTION 20

1. A company that uses the perpetual inventory system sold goods for $2,500 to a customer on account. The company had purchased the inventory for $500. Which of the following journal entries correctly records the cost of goods sold?

Cost of Goods Sold

500

Sales Revenue

500

Merchandise Inventory

500

Cost of Goods Sold

500

Cost of Goods Sold

500

Merchandise Inventory

500

Accounts Receivable

500

Sales Revenue

500