Question #5: (5 points): Multiple choice questions: 1. If merchandise inventory is being valued cost and the price level is steadily rising, the method of costing that will yield the highest net income is? a) Periodic b) FIFO c) LIFO d) Average cost 2. The number of days' sales in inventory a) Measures the length of time it takes to acquire, sell, and replace the inventory. b) is computed by dividing the cost of merchandise sold by 365. c) Measures the length of time it takes to sell the merchandise on credit and collect the account receivable. d) is about the same for all industries. 3. Under which method of cost flows is the inventory assumed to be composed of the most recent costs? a) average cost b) first-in, first-out c) last-in, first-out d) weighted average 4. The discount period for credit terms of 1/10, n/30 is: a) 1 day b) 10 days c) 20 days d) 30 days 5. Freight costs incurred by the seller are recorded in the a) Sales account b) Cost of merchandise sold account c) Transportation In account d) Transportation Out account 6. Assume that sales are $450,000, sales discounts are $10,000, net income is $35,000, and cost of merchandise sold is $320,000. Gross profit and operating expenses are, respectively a) $130,000 and $95,000 b) $120,000 and $95,000 c) $130,000 and $85,000 d) $120,000 and $85,000 7. The primary difference between deferred and accrued expenses is that deferred expenses have: a) Been recorded and accrued expenses have not been incurred b) Been incurred and accrued expenses have not c) Not been incurred and accrued expenses have been incurred d) Not been recorded and accrued expenses have been incurred 8. If cash is received in advance from a customer, then a) Assets will decrease. b) Retained earnings will increase. c) Liabilities will increase. d) Stockholders' equity will decrease. 9. In which of the following types of accounts are increases recorded by credits? a) Liability, Revenue b) Dividends, Asset c) Expense, Liability d) Revenue, Dividends 10. The verification that the sum of the debits and the sum of the credits in the ledger are equal is called: a) A journal b) A ledger c) Posting d) A trial balance 4