MONTGOMERY COLLEGE TP/SS Campus (Hodge) FA 18 ACCT 221 Principles of AccountingI Chapters 5, 6, 7 & 8 Name: (1.5 points each) 1. The freight cost incurred by the seller a. b. c. d. reduces gross profit is used in the calculation of net sales. is an operating expense. is part of inventory Paden Company sold merchandise to Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the 2. a. buyer. b. seller. c. transportation company. d. buyer and the seller Company X sells $800 of merchandise on account to Company Y with credit terms of 1/10, n/30. If Company Y remits a check taking advantage of the discount offered, what is the amount of Company Y's check? 3. a. $800 b. $792 c. $740 d. $788 4. A primary difference between a periodic and perpetual inventory system is that a periodic system a. records the cost of goods sold after each sale transaction b. provides better control over inventories. c. determines the inventory on hand only at the end of the accounting period. d. keeps a record showing the merchandise inventory on hand at all times 5. If a company has net sales of $800,000 and cost of goods sold of $600,000, the gross profit percentage is a. b. . d. 25%. 30%. 70%. 80%. In a period of increasing prices, which inventory flow assumption will result in the highest amount o income tax expense? 6. a. FIFO b. LIFO c. Average Cost d. Income tax expense for the period will be the same under all assumptions