1. Net income is gross profit less a. financing expenses. b. operating expenses. c. other expenses and losses. d. other expenses.

2. Which of the following would not be considered a merchandising company? a. Retailer b. Wholesaler c. Service firm d. All of these are considered a merchandising company.

3. The primary source of revenue for a wholesaler is a. investment income. b. service fees. c. the sale of merchandise. d. the sale of fixed assets the company owns.

4. Inventory is a. reported under the classification of Property, Plant, and Equipment on the balance sheet. b. often reported as a miscellaneous expense on the income statement. c. reported as a current asset on the balance sheet. d. generally valued at the price for which the goods can be sold.

5. In a manufacturing business, inventory that is ready for sale is called a. raw materials inventory. b. work in process inventory. c. finished goods inventory. d. store supplies inventory.

6. If goods in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods until they are delivered. c. the transportation company has legal title to the goods while the goods are in transit. d. no one has legal title to the goods until they are delivered.

7. Internal controls are concerned with a. only manual systems of accounting. b. the extent of government regulations. c. safeguarding assets. d. preparing income tax returns.

8. Internal control is defined, in part, as a plan that safeguards a. all balance sheet accounts. b. assets. c. liabilities. d. capital stock.

9. Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of a. inadequate internal control. b. duplication of effort. c. external verification. d. segregation of duties.

10. Interest is usually associated with a. accounts receivable. b. notes receivable. c. doubtful accounts. d. bad debts.

11. Which of the following receivables would not be classified as an "other receivable"? a. Advance to an employee b. Refundable income tax c. Notes receivable d. Interest receivable

12. A cash discount is usually granted to all of the following except a. retail customers. b. retailers. c. wholesalers. d. All of these answers are correct.

13. Which one of the following is not a primary problem associated with accounts receivable? a. Depreciating accounts receivable b. Recognizing accounts receivable c. Valuing accounts receivable d. Disposing of accounts receivable

14. Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment b. Furnishings c. Land d. Fixtures

15. The four subdivisions for plant assets are a. land, land improvements, buildings, and equipment. b. intangibles, land, buildings, and equipment. c. furnishings and fixtures, land, buildings, and equipment. d. property, plant, equipment, and land.

16. Gagner Clinic purchases land for $175,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Gagner Clinic record as the cost for the land? a. $157,200 b. $175,000 c. $179,700 d. $157,500

17. A current liability is a debt that can reasonably be expected to be paid a. within one year or the operating cycle, whichever is longer. b. between 6 months and 18 months. c. out of currently recognized revenues. d. out of cash currently on hand.

18. From a liquidity standpoint, it is more desirable for a company to have current a. assets equal current liabilities. b. liabilities exceed current assets. c. assets exceed current liabilities. d. liabilities exceed long-term liabilities.

19. With an interest-bearing note, the amount of assets received upon issuance of the note is generally a. equal to the note's face value. b. greater than the note's face value. c. less than the note's face value. d. equal to the note's maturity value.

20. The net amount expected to be received in cash from receivables is termed the a. cash realizable value. b. cash-good value. c. gross cash value. d. cash-equivalent value.