7. When the company pays a supplier for merchandise and receives a discount for prompt payment, which of the following accounts is credited to record the discount under the perpetual inventory system?

a.Merchandise Inventory

b.Accounts Payable

c.Purchases Discounts

d.Purchases Returns and Allowances

8. If ending inventory is overstated by $23,000, what effect will this have on cost of goods sold and net income?

a.Cost of goods sold is understated by $23,000, and net income is overstated by $23,000.

b.Cost of goods sold is understated by $23,000, and net income is understated by $23,000.

c.Cost of goods sold is overstated by $23,000, and net income is overstated by $23,000.

d.Cost of goods sold is overstated by $23,000, and net income is understated by $23,000.

9. The company had beginning inventory of $11,800 and net purchases of $24,200. At the end of the year, the company took a physical inventory count and determined that ending inventory is $7,595. The cost of goods sold for the year would be

a.$28,405.

b.$16,605.

c.$36,000.

d.$43,595.

10.If ending inventory for the current fiscal year is understated, how does that impact net income for the current fiscal year?

a.Net income will be understated.

b.Net income will be overstated.

c.There will be no impact on net income.

d.Net income will not be affected until the following year, and it would be understated.

11. Which of the following is not a step in the gross profit method process?

a.Compute the cost-to-retail ratio.

b.Estimate cost of goods sold by deducting the normal gross profit from net sales.

c.Compute the cost of goods available for sale.

d.Estimate the ending inventory by deducting cost of goods sold from the cost of goods available for sale.

12. Which of the following is not a step in the retail inventory method process?

a.Compute the cost of goods available for sale.

b.Compute the cost-to-retail ratio.

c.Estimate the cost of the ending inventory by multiplying the ending inventory at retail by the cost-to-retail ratio.

d.Compute the ending inventory at retail by subtracting sales at retail from goods available for sale at retail.