Gross profit is calculated as the difference between net sales revenue and ________. A) purchases B) cost
Question:
Gross profit is calculated as the difference between net sales revenue and ________.
A) purchases
B) cost of goods sold
C) cost of merchandise inventory
D) selling and administrative expenses
| A |
| C |
| D |
| B |
Flag this QuestionQuestion 22pts
Best Value, Inc. started its operations on January 1, 2017. It engages in buying and selling different types of electronic gadgets. The first step in its operating cycle would be to ________.
A) collect cash from customers
B) sell goods to customers
C) purchase inventory from vendors
D) record the sales in accounts
| A |
| B |
| C |
| D |
Flag this QuestionQuestion 32pts
A company that uses the perpetual inventory system purchases inventory for $63,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?
A) a debit to Accounts Payable for $63,000, a credit to Cash for $61,740, and a debit to Merchandise Inventory for $1,260
B) a debit to Accounts Payable for $63,000, a credit to Merchandise Inventory for $1,260, and a credit to Cash for $61,740
C) a debit to Merchandise Inventory for $1,260, a debit to Accounts Payable for $63,000, and a credit to Cash for $64,260
D) a debit to Accounts Payable for $61,740, a debit to Merchandise Inventory for $1,260, and a credit to Cash for $63,000
| A |
| B |
| D |
| C |
Flag this QuestionQuestion 42pts
A company using the perpetual inventory system purchased inventory worth $20,000 on account with terms of 2/10, n/30. Defective inventory of $3,000 was returned two days later, and the accounts were appropriately adjusted. If the invoice is paid within 10 days, the amount of the purchase discount that would be available to the company is ________.
A) $340
B) $460
C) $400
D) $390
| B |
| A |
| D |
| C |
Flag this QuestionQuestion 52pts
A company purchased inventory for $4,000 from a vendor on account, FOB shipping point, with terms of 3/15, n/30. The company paid $100 cash for freight in. The entry to record payment of invoice within 3 days by the purchaser would include ________. (Assume a perpetual inventory system.)
A) a debit to Accounts Payable for $3,880 and a credit to Cash for $3,880
B) a debit to Accounts Payable for $4,000, a debit to Merchandise Inventory for $100, and a credit to Cash for $3,900
C) a debit to Accounts Payable for $4,000, a credit to Merchandise Inventory for $120, and a credit to Cash for $3,880
D) a debit to Accounts Payable for $3,880, a debit to Merchandise Inventory for $120, and a credit to Cash for $4,000
| B |
| D |
| A |
| C |
Flag this QuestionQuestion 62pts
A company purchased inventory for $73,000 from a vendor on account, FOB shipping point, with terms of 4/10, n/30. The company paid the shipper $1,500 cash for freight in. The company paid the vendor nine days after the sale. If there was no beginning inventory, the cost of inventory would be ________. (Assume a perpetual inventory system.)
A) $71,580
B) $74,500
C) $68,580
D) $71,500
| D |
| A |
| B |
| C |
Flag this QuestionQuestion 72pts
A company purchased inventory for $3,000 from a vendor on account, FOB shipping point, with terms of 3/10, n/30. The company paid the shipper $300 cash for freight in. The company then returned damaged goods worth $300. The invoice was then paid eight days after the purchase. Assuming that there was no beginning inventory balance, the cost of inventory would be ________. (Assume a perpetual inventory system.)
A) $2,619
B) $2,919
C) $2,700
D) $2,910
| C |
| A |
| D |
| B |
Flag this QuestionQuestion 82pts
A company sold merchandise for $23,000 on account with terms of 3/15, n/30. The company uses a perpetual inventory system. After two days, it received defective merchandise worth $2,000. The journal entry to record the cash receipt for the sale if the payment is received within 10 days of the invoice date would include ________.
A) a debit to Cash for $21,000, a credit to Merchandise Inventory for $630, and a credit to Sales Revenue for $21,000
B) a debit to Cash for $20,370, a debit to Sales Discount for $630, and a credit to Accounts Receivable for $21,000
C) a debit to Cash for $21,000, a debit to Merchandise Inventory for $2,000, and a credit to Accounts Receivable for $23,000
D) a debit to Sales Revenue for $23,000, a credit to Accounts Receivable for $21,000, and a credit to Sales Discounts for $2,000
| B |
| C |
| A |
| D |
Flag this QuestionQuestion 92pts
Fashion Jewelers uses the perpetual inventory system. On April 2, Fashion sold goods with a cost of $5,000 for $10,000 with terms of 4/15, n/30. On April 4, the customer reported damaged goods and Fashion granted a $2,000 sales allowance. On April 10, Fashion received the payment for the sale. Give the journal entry that will be recorded on April 10 by Fashion.
A)
| Cash | 7,680 | |
| Sales Discount | 320 | |
| Accounts Receivable | 8,000 |
B)
| Cash | 8,000 | |
| Accounts Receivable | 8,000 |
C)
| Accounts Receivable | 8,000 | |
| Sales | 8,000 |
D)
| Cash | 8,000 | |
| Sales Discount | 320 | |
| Accounts Receivable | 7,680 |
| A |
| C |
| D |
| B |
Flag this QuestionQuestion 102pts
On November 1, 2017, Lotz, Inc. sold merchandise for $10,000, FOB destination, with payment terms of 2/10, n/40. Customer returns on this sale amounted to $5,000. The company received payment for the balance on November 10, 2017. The cost of goods sold was $3,600. Calculate the amount of gross profit from these transactions.
A) $6,400
B) $1,300
C) $1,400
D) $4,900
| B |
| D |
| A |
| C |
Flag this QuestionQuestion 112pts A merchandiser had sales returns and allowances of $400, sales discounts of $700, cost of goods sold of $14,000, and all other expenses of $4,400. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include ________.
A) a debit to Income Summary for $19,500
B) a credit to Income Summary for $18,400
C) a debit to Income Summary for $4,400
D) a debit to Income Summary for $18,400
| A |
| B |
| D |
| C |
Flag this QuestionQuestion 122pts
Refer to the following trial balance.
Debit Credit Cash $16,000 Accounts Receivable 42,000 Merchandise Inventory 62,000 Supplies15,000 Land 330,000 Accounts Payable $2,000 Notes Payable 25,000 Common Stock 296,000 Retained Earnings 24,000 Dividends 6,000 Sales Revenue 480,000 Sales Returns and Allowances 9,000 Sales Discounts 8,000 Cost of Goods Sold 200,000 Salaries Expense 17,000 Utilities Expense 65,000 Rent Expense 53,000 Interest Expense 4,000 Totals $827,000 $827,000
How much is the net sales revenue? A) $463,000 B) $479,000 C) $145,000 D) $141,000
| B |
| C |
| A |
| D |
Flag this QuestionQuestion 132pts A merchandiser returned inventory worth $2,000 that was purchased on account. Under the periodic inventory system, the journal entry to record the return would include ________.
A) a debit to Purchase Returns and Allowances for $2,000 and a credit to Accounts Payable for $2,000
B) a debit to Accounts Payable for $2,000 and a $2,000 credit to Purchase Returns and Allowances
C) a debit to Purchases for $2,000 and a credit to Accounts Payable for $2,000
D) a debit to Accounts Payable for $2,000 and a credit to Purchases for $2,000
| A |
| D |
| B |
| C |
Flag this QuestionQuestion 142pts
Gilbert, Inc. generated sales revenues of $1,400,000 in 2017. Its cost of goods sold amounted to $560,000.
Calculate Gilbert's gross profit percentage. A) 40% B) 60% C) 167% D) 250%
| B |
| A |
| C |
| D |
Flag this QuestionQuestion 152pts Which of the following is an application of conservatism?
A) reporting inventory at the lower of cost or market
B) reporting only material amounts in the financial statements
C) reporting all relevant information in the financial statements
D) using the same depreciation method from period to period
| B |
| D |
| A |
| C |
Flag this QuestionQuestion 162pts
A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $12,000 and paid $770 for the freight-in. The company sold the whole lot to a supermarket chain for $13,000 on account. The company uses the specific-identification method of inventory costing. Which of the following entries correctly records the cost of goods sold?
A) Cost of Goods Sold 12,770 Merchandise Inventory 12,770
B) Merchandise Inventory 12,770 Cost of Goods Sold 12,770
C) Cost of Goods Sold 12,000 Sales Revenue 12,000
D) Cost of Goods Sold 12,000 Merchandise Inventory 12,000
| C |
| A |
| D |
| B |
Flag this QuestionQuestion 172pts Which of the following inventory costing methods uses the cost of the oldest purchases to calculate the cost of goods sold?
A) specific identification
B) weighted-average
C) last-in, first-out
D) first-in, first-out
| A |
| D |
| B |
| C |
Flag this QuestionQuestion 182pts A company purchased 300 units for $30 each on January 31. It purchased 360 units for $36 each on February 28. It sold a total of 460 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.)
A) $7,200
B) $5,360
C) $6,000
D) $640
| D |
| A |
| B |
| C |
Flag this QuestionQuestion 192pts A company purchased 100 units for $30 each on January 31. It purchased 170 units for $25 each on February 28. It sold 170 units for $70 each from March 1 through December 31. If the company uses the first-in, first-out inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.)
A) $3,000
B) $4,250
C) $4,750
D) $7,250
| D |
| B |
| A |
| C |
Flag this QuestionQuestion 202pts A company purchased 300 units for $60 each on January 31. It purchased 150 units for $25 each on February 28. It sold a total of 250 units for $70 each from March 1 through December 31. If the company uses the weighted-average inventory costing method, calculate the amount of ending inventory on December 31. (Assume that the company uses a perpetual inventory system. Round any intermediate calculations two decimal places, and your final answer to the nearest dollar.)
A) $21,750
B) $9,666
C) $12,084
D) $8,500
| A |
| C |
| D |
| B |
Flag this QuestionQuestion 212pts When inventory costs are declining, which of the following inventory costing method will result in the lowest ending merchandise inventory?
A) first-in, first-out
B) last-in, first-out
C) weighted-average
D) specific identification
| B |
| A |
| D |
| C |
Flag this QuestionQuestion 222pts Misty, Inc. had 24,000 units of ending inventory that were recorded at the cost of $6.00 per unit using the FIFO method. The current replacement cost is $4.75 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?
A) $144,000
B) $258,000
C) $168,000
D) $114,000
| C |
| A |
| B |
| D |
Flag this QuestionQuestion 232pts
Murphy, Inc. had the following balances and transactions during 2017.
Beginning Inventory 10 units at $73 June 10 Purchased 20 units at $82 December 30 Sold 20 units December 31 Replacement cost $63
The company maintains its records of inventory on a perpetual basis using the last-in, first-out inventory costing method. Calculate the amount of ending Merchandise Inventory at December 31, 2017 using the lower-of-cost-or-market rule. A) $820 B) $1,260 C) $630 D) $1,890
| D |
| A |
| B |
| C |
Flag this QuestionQuestion 242pts The ending merchandise inventory for the current year is overstated by $28,000. What effect will this error have on the following year's net income?
A) The net income will be overstated by $56,000.
B) The net income will be overstated by $28,000.
C) The net income will be understated by $28,000.
D) The net income will be understated by $56,000.
| A |
| B |
| C |
| D |
Flag this QuestionQuestion 252pts
Blanchard, Inc. provided the following for 2017:
| Cost of Goods Sold (Cost of sales) | $1,300,000 |
| Beginning Merchandise Inventory | 330,000 |
| Ending Merchandise Inventory | 350,000 |
Calculate the company's inventory turnover ratio for the year. (Round your answer to two decimal places.)
A) 3.94 times per year
B) 3.82 times per year
C) 3.71 times per year
D) 1.91 times per year
| B |
| D |
| C |
| A |
Flag this QuestionQuestion 262pts
Which of the following statements is true of the Sarbanes-Oxley Act?
A) Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients.
B) Those who commit securities fraud must be sentenced to 10 years in prison.
C) All private and foreign companies must issue an internal control report evaluated by an outside auditor.
D) The Public Company Accounting Oversight Board oversees the work of auditors of public companies.
| D |
| A |
| B |
| C |
Flag this QuestionQuestion 272pts
A pharmaceutical company testing drugs to determine possible side effects is a part of ________.
A) monitoring controls
B) information systems
C) control procedures
D) risk assessment
| D |
| B |
| A |
| C |
Flag this QuestionQuestion 282pts
Before any internal control procedure is initiated, which of the following questions must be primarily addressed by a company?
A) Will this put an end to theft?
B) Is this the best security money can buy?
C) How much benefit will be derived from the cost of the procedure?
D) Will this prevent accounting errors?
| A |
| B |
| C |
| D |
Flag this QuestionQuestion 292pts
Which of the following is used by companies to separate cash duties and establish stronger control over cash receipts?
A) an encryption system
B) an imprest system
C) a lock-box system
D) a firewall system
| A |
| C |
| D |
| B |
Flag this QuestionQuestion 302pts
In a good internal control system, which of the following sets of documents is required for proper approval of a payment to a supplier?
A) a journal entry, a supplier invoice, and a description of the goods being purchased
B) a receiving report, an invoice, and a purchase order
C) a purchase order, a journal entry, and a price catalog
D) a supplier invoice, a bill of lading, and the supplier's financial statements
| D |
| B |
| A |
| C |
Flag this QuestionQuestion 312pts
A company has a petty cash fund amount of $300. When replenished, it has petty cash receipts of $33 for gas expense, $31 for postage expense, $11 for supplies expense, and $12 for miscellaneous expenses. Assume the cash balance is not over or short. In the journal entry, Cash would be credited for ________.
A) $87
B) $76
C) $64
D) $75
| D |
| C |
| B |
| A |
Flag this QuestionQuestion 322pts
A check payment for $658 was incorrectly entered in the Cash account as $856. Which of the following adjustments needs to be made?
A) decrease the book balance
B) decrease the bank statement balance
C) increase the book balance
D) increase the bank statement balance
| A |
| C |
| B |
| D |
Flag this QuestionQuestion 332pts
The following information is available for Jack's, Inc. for the current month.
| Book balance end of month | $7,000 |
| Outstanding checks | 675 |
| Deposits in transit | 4,000 |
| Service charges | 80 |
| Interest revenue | 40 |
What is the adjusted book balance on the bank reconciliation?
A) $10,205
B) $7,635
C) $6,880
D) $6,960
| C |
| D |
| B |
| A |
Flag this QuestionQuestion 342pts
A company's Cash account shows an ending balance of $4,600. Reconciling items included a bookkeeper error of $105 (a $525 check recorded as $630), two outstanding checks totaling $830, a service charge of $20, a deposit in transit of $260, and interest revenue of $33. What is the adjusted book balance?
A) $4,482
B) $4,030
C) $4,718
D) $5,170
| D |
| A |
| C |
| B |
Flag this QuestionQuestion 352pts
The bookkeeper of Fire Steel, Inc. recorded a $1,503 check as $15,030 in payment of the current month's rent. Which of the following journal entries is needed to adjust for this error in the books of the company?
A)
| Cash | 13,527 | |
| Sales Revenue | 13,527 |
B)
| Rent Expense | 15,030 | |
| Cash | 15,030 |
C)
| Cash | 13,527 | |
| Rent Expense | 13,527 |
D)
| Booking Error | 1,503 | |
| Cash | 1,503 |
| B |
| C |
| D |
| A |
Flag this QuestionQuestion 362pts
Fingertips, Inc. had the following financial data for the year ended December 31, 2017.
| Cash | $44,000 |
| Cash equivalents | 77,000 |
| Long term investments | 58,000 |
| Total current liabilities | 149,000 |
What is the cash ratio as of December 31, 2017, for Fingertips, Inc.? (Round your answer to two decimals.)
A) 0.30
B) 0.39
C) 0.48
D) 0.81
| D |
| B |
| C |
| A |
Flag this QuestionQuestion 372pts
A company has a cash ratio of 2.3. What does this imply?
A) The company has an unnecessarily large amount of cash supply.
B) The company does not have enough cash supply.
C) The company is not in a position to pay off its long-term liabilities.
D) The company is not in a position to pay off its current liabilities.
| C |
| A |
| D |
| B |
Flag this QuestionQuestion 382pts
Which of the following is a weak internal control over cash collections from receivables?
A) The credit department should have no access to cash.
B) A credit department should evaluate customers' credit applications to determine whether they meet the company's approval standards.
C) A company should have written approval standards for processing customers' credit applications.
D) In order to avoid losing sales, all customers' credit applications should be approved.
| C |
| D |
| B |
| A |
Flag this QuestionQuestion 392pts
Markus Company maintains a separate accounts receivable account for each customer. On June 18, Markus sells $6,400 services on account to customer Anthony and $1,000 services on account to customer Walker. How will these two transactions affect the control and subsidiary accounts?
A) The control account, Accounts Receivable, will be increased with a debit of $7,400.
B) The individual customer accounts in the subsidiary ledger will be increased with credits.
C) After posting this sales transaction, the sum of the balances in subsidiary accounts receivable will not equal the control account balance.
D) The control account will have a debit balance and the subsidiary accounts will have a credit balance. This keeps the accounting equation in balance.
| D |
| A |
| C |
| B |
Flag this QuestionQuestion 402pts
A business maintains subsidiary accounts for each of its customers. On May 15, the business sells services on account: $2,100 to customer J. Simmons; $4,000 to customer A. Jones; and $1,500 to customer J. Williams. Which journal entry is needed to record this sales transaction?
A)
| May 15 | Accounts Receivable | 7,600 | |
| Service Revenue | 7,600 |
B)
| May 15 | Accounts Receivable - J. Simmons | 2,100 | |
| Accounts Receivable - A. Jones | 4,000 | ||
| Accounts Receivable - J. Williams | 1,500 | ||
| Service Revenue | 7,600 |
C)
| May 15 | Service Revenue | 7,600 | |
| Accounts Receivable | 7,600 |
D)
| May 15 | Accounts Receivable Control | 7,600 | |
| Sales Revenue | 7,600 | ||
| May 15 | Accounts Receivable - J. Simmons | 2,100 | |
| Accounts Receivable - A. Jones | 4,000 | ||
| Accounts Receivable - J. Williams | 1,500 | ||
| Accounts Receivable - Control | 7,600 |
| D |
| C |
| A |
| B |
Flag this QuestionQuestion 412pts
Accounts Receivable has a balance of $32,000, and the Allowance for Bad Debts has a credit balance of $3,500. The allowance method is used. What is the net realizable value of Accounts Receivable before and after a $2,100 account receivable is written off?
A) $28,500; $28,500
B) $26,400; $26,400
C) $28,500; $26,400
D) $26,400; $30,600
| A |
| D |
| C |
| B |
Flag this QuestionQuestion 422pts
The following information is from the records of Pangolin Camera Shop:
| Accounts Receivable, December 31, 2017 | $24,000 (debit) |
| Allowance for Bad Debts, December 31, 2017 prior to adjustment | 500 (debit) |
| Net credit sales for 2017 | 93,000 |
| Accounts written off as uncollectible during 2017 | 350 |
Bad expense is estimated by the aging-of-receivables method. Management estimates that $3,050 of accounts receivable will be uncollectible. Calculate the amount of net accounts receivable after the adjustment for bad debts.
A) $21,450
B) $20,950
C) $20,450
D) $20,100
| B |
| A |
| C |
| D |
Flag this QuestionQuestion 432pts
The Allowance for Bad Debts account has a credit balance of $4,000 before the adjusting entry for bad debts expense. The company's management estimates that 4% of net credit sales will be uncollectible for the year 2017. Net credit sales for the year amounted to $250,000. What will be the balance of Allowance for Bad Debts on the December 31, 2017 balance sheet?
A) $10,000
B) $4,000
C) $14,000
D) $9,840
| C |
| B |
| D |
| A |
Flag this QuestionQuestion 442pts
The Allowance for Bad Debts has a credit balance of $8,000 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of- receivables method, the company's management estimates that uncollectible accounts will be $17,000. What will be the amount of Bad Debts Expense reported on the income statement?
A) $25,000
B) $9,000
C) $17,000
D) $8,000
| B |
| A |
| C |
| D |
Flag this QuestionQuestion 452pts
The Allowance for Bad Debts account has a credit balance of $8,700 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for Bad Debts reported on the balance sheet?
A) $15,000
B) $6,300
C) $23,700
D) $13,500
| D |
| C |
| A |
| B |
Flag this QuestionQuestion 462pts
The following information is from the 2017 records of Robin Antique Shop:
| Accounts receivable, December 31, 2017 | $44,000 (debit) |
| Allowance for Bad Debts, December 31, 2017 prior to adjustment | 1,100 (debit) |
| Net credit sales for 2017 | 176,000 |
| Accounts written off as uncollectible during 2017 | 11,000 |
| Cash sales during 2017 | 27,000 |
Bad debts expense is estimated by the percent-of-sales method. Management estimates that 5% of net credit sales will be uncollectible. The ending balance of the Allowance for Bad Debts account after adjustment will be ________.
A) $9,900
B) $9,050
C) $11,250
D) $7,700
| B |
| A |
| C |
| D |
Flag this QuestionQuestion 472pts
What is the maturity value of a 3-month, 14% note for $50,000? (Round your answer to the nearest dollar.)
A) $52,000
B) $57,000
C) $51,750
D) $50,000
| B |
| A |
| D |
| C |
Flag this QuestionQuestion 482pts
Use the following to calculate the acid-test ratio. (Round your answer to two decimal places.)
| Cash | $100,000 |
| Short-term investments | 17,000 |
| Net current receivables | 250,000 |
| Inventory | 330,000 |
| Total current liabilities | 760,000 |
A) 0.79
B) 5.88
C) 0.92
D) 0.48
| C |
| B |
| D |
| A |
Flag this QuestionQuestion 492pts
A company has net credit sales of $91,000, beginning net accounts receivable of $24,000 and ending net accounts receivable of $16,000. Calculate the days' sales in receivables. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole day.)
A) 61 days
B) 50 days
C) 91 days
D) 80 days
| C |
| D |
| A |
| B |
Flag this QuestionQuestion 502pts
On October 1, 2017, Ealys Jewelers accepted a 4-month, 11% note for $6,000 in settlement of an overdue account receivable. The accounting period ends on December 31. Calculate the accrued interest on the note at December 31, 2017. (Round your answer to the nearest dollar.)
A) $165
B) $220
C) $660
D) $330
| C |
| A |
| D |
| B |
Expert Answer:
