Accounting IA Quiz Chapter. 5 1. T F A periodic inventory system does not continually modify inventory amounts, but instead adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand, 2. T F When the terms on an invoice state 3/10,n30, it means that a company gets a 10% discount if the invoice is paid within 30 days. 3. T F Under the perpetual inventory system, cost of goods soid is recorded at the time inventory is sold. 4. T F Generally, a lower gross profit ratio reflects positively on a company's ability to manage its inventory 5. T F For inventory that is shipped FOB shipping point, title transfers from the seller to the buyer once the inventory begins shipment. 6. The largest expense on a retaller's income statement is typically: 1. Salaries and Wages 2. Cost of Goods Sold 3. Income tax expense 4. Depreciation expense 7. The revenue recognition principle requires that sales revenues be recognized: a. When cash is received b. When the merchandise is ordered c. When the goods are transferred from the seller to the buyer d. When the buyer looks at the goods online. 8. The income statement of a merchandising company includes which of the following? a. Sales revenue, work in process, and operating expenses b. Sales reveue, work in process and gross profit c. Sales revenue, finished goods and net income d. Sales revenue, cost of goods sold, and gross profit 9. Baker Fine Foods has beginning inventory for the year of $12,000. During the year Baker purchases inventory for $150,000 and ends the year with $20,000 of inventory. What is Baker's COGS? 10. Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of merchandise costing $629 for $960 on account? Make the journal entry(s) 11. 12. Pasadena Sterling makes a credit sale of $1,000 on Septomber 1,2016 , terms 2/1030. They accept a retum or $250 on September 5th. Make the journal entry to record the payment received on September Bth. 13. If sales revenues are $500,000, cost of goods sold is $230,000 and operating expenses are $120,000. what is the gross profit? 14. The following information was taken from the June accounting records of The Art Center Group: Beginning inventory was $10,000. There were purchases of $20,000 made during the month, with $2,300 being returned. There were also $700 in discounts allowed. Freight in was $1,050. When a physical count of the inventory was made at the end of the month, the counted balance was $7,000. a. What was the total amount of Goods Available for sale during the month? b. What was the Cost of Goods sold for the month c. If Net Sales were $50,000 for the month, what was the gross profit? 15. Which of the following will affect the gross profit rate? a. An increase in salary expense. b. A decrease in income taxes c. A decrease in insurance expense d. An increase in cost of goods sold. 16. Which of the following would be considered an "Other comprehensive income" item? a. Gain on disposal of discontinued operations b. Unrealized loss on avaliable-for-sale securities c. Operating expenses d. Net income 17. The multi-step income statement for a merchandising company shows each of these features except: a. Gross profit b. Cost of goods sold c. A sales section d. an investing activities