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1. A merchandiser will have income from operations of exactly $0 when Select one: a. sales equals cost of goods sold. b. cost of goods

1. A merchandiser will have income from operations of exactly $0 when

Select one:

a. sales equals cost of goods sold.

b. cost of goods sold equals gross profit.

c. gross profit equals operating expenses.

d. operating expenses equal sales.

e. Impossible to determine without seeing the actual Income Statement

2.Deferred revenue is classified as a(n)

Select one:

a. liability account.

b. equity account.

c. revenue account.

d. contra account.

e. asset account.

3. The preparation of adjusting entries

Select one:

a. is optional if the company uses ASPE

b. is optional when financial statements are prepared.

c. is only required for accounts that do not have a normal balance.

d. is straight-forward because the accounts that need adjustment will be out of balance.

e. requires an understanding of the companys operations and the inter-relationship of accounts.

4. What is the impact on cost of goods sold, gross profit, net income before taxes and retained earnings, respectively, if inventory is understated?

Select one:

a. overstated; overstated; understated; understated.

b. overstated; understated; understated; understated.

c. understated; overstated; understated; overstated.

d. overstated; understated; overstated; overstated.

e. understated; overstated; overstated; overstated.

5. If goods in transit are shipped FOB destination,

Select one:

a. the seller has legal title to the goods until they are delivered.

b. the transportation company has legal title to the goods while the goods are in transit.

c. the buyer has legal title to the goods during transit.

d. no one has legal title to the goods until they are delivered.

e. it depends on whether or not the seller is using ASPE or IFRS.

6.

To calculate Days in Inventory, you must know . . .

Select one:

a. Whether it is a Leap Year or Not

b. The Cost of Rotational Capital

c. Earnings per Share

d. Whether the company is using IFRS or ASPE

e. Inventory Turnover

7.

The physical inventory count is used to determine . . .

Select one:

a. cost of inventory sold during the period.

b. the cost of goods available for sale.

c. Debt/Equity turnover ratio

d. the cost of inventory on hand.

e. cost of inventory purchased during the period.

8.

The factor that determines whether or not goods should be included in a physical count of inventory is

Select one:

a. FIFO

b. whether or not the purchase price has been paid.

c. management's judgement.

d. ownership.

e. physical possession.

9.

If a purchaser using a perpetual inventory system pays freight costs, then the . . .

Select one:

a. Freight In account is increased.

b. Freight Out account is increased.

c. Company must be a public company using ASPE

d. Inventory account is increased.

e. Inventory account is not affected.

10.

Sales less cost of goods sold is called

Select one:

a. Net income from operations

b. gross profit.

c. turnover ratio

d. income before income taxes

e. Net goods sold.

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