Multiple Choice

1. Two categories of expenses for merchandising companies are

a.cost of goods sold and financing expenses.

b.operating expenses and financing expenses.

c.cost of goods sold and operating expenses.

d.sales and cost of goods sold.

2. Sales revenue less cost of goods sold is called

a.gross profit.

b.net profit.

c.net income.

d.marginal income.

3. Cost of goods sold is determined only at the end of the accounting period in

a.a perpetual inventory system.

b.a periodic inventory system.

c.both a perpetual and a periodic inventory system.

d.neither a perpetual nor a periodic inventory system.

4. Which of the following expressions isincorrect?

a.Gross profit - operating expenses = net income

b.Sales - cost of goods sold - operating expenses = net income

c.Net income + operating expenses = gross profit

d.Operating expenses - cost of goods sold = gross profit

5. Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

a.Inventory account.

b.Purchases account.

c.Supplies account.

d.Cost of Goods Sold account.

6. The purchase and sale ofinventories affects

a.only the statement of financial position.

b.only the income statement.

c.both the statement of financial position and the income statement.

d.neither the statement of financial position nor the income statement.

7. 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.

8. Which of the following should be included in the physical inventory of a company?

a.Goods held on consignment from another company.

b.Goods in transit to another company shipped FOB shipping point.

c.Goods in transit from another company shipped FOB shipping point.

d.Both goods in transit to and from another company shipped FOB shipping point.

9. Chang Company took a physical inventory at December 31, 2019 and determined that3,990,000 of goods were on hand. Included in the count was inventory of700,000 on consignment from Keiko Company. On December 30, Chang sold and shipped f.o.b. destination820,000 worth of inventory. These goods arrived at the buyer's place of business on January 2, 2020. What amount should Chang report for inventory on its December 31, 2019 statement of financial position?

a.3,990,000.

b.4,110,000.

c.3,410,000.

d.4,810,000.

10. Brocken Co. has the following data related to an item of inventory:

Inventory, May 13,000 units @ 4.20

Purchase, May 710,500 units @ 4.40

Purchase, May 162,100 units @ 4.50

Inventory, May 313,900 units

The value assigned to cost of goods sold if Brocken uses FIFO is

a.50,700.

b.50,880.

c.51,207.

d.51,246