QUESTION1:Sanchez Company engaged in the following transactions during 2015: 1) Started the business by issuing $42,000 of common stock for cash. 2) The company paid cash to purchase $26,400 of inventory. 3) The company sold inventory that cost $16,000 for $30,600 cash. 4) Operating expenses incurred and paid during the year, $14,000. Sanchez Company engaged in the following transactions during 2016: 1) The company paid cash to purchase $35,200 of inventory. 2) The company sold inventory that cost $32,800 for $57,000 cash. 3) Operating expenses incurred and paid during the year, $18,000. Note: Sanchez uses the perpetual inventory system. The amount of retained earnings at December 31, 2016 is:

A.$6,200.

B.$26,000.

C.$6,800.

D.$38,800.

QUESTION2:Sanchez Company engaged in the following transactions during 2015: 1) Started the business by issuing $42,000 of common stock for cash. 2) The company paid cash to purchase $26,400 of inventory. 3) The company sold inventory that cost $16,000 for $30,600 cash. 4) Operating expenses incurred and paid during the year, $14,000. Sanchez Company engaged in the following transactions during 2016: 1) The company paid cash to purchase $35,200 of inventory. 2) The company sold inventory that cost $32,800 for $57,000 cash. 3) Operating expenses incurred and paid during the year, $18,000. Note: Sanchez uses the perpetual inventory system. Sanchez's gross margin for the year 2016 is:

A.$6,200.

B.$24,200.

C.$21,800.

D.$32,800.

QUESTION 3:The credit terms, 2/15, n/30, indicate that a:

A.fifteen percent discount can be deducted if the invoice is paid within two days following the date of sale.

B.two percent discount can be deducted for a period up to thirty days following the date of sale.

C.two percent discount can be deducted if the invoice is paid before the fifteenth day following the date of the sale.

D.two percent discount can be deducted if the invoice is paid after the fifteenth day following the sale, but before the thirtieth day.

QUESTION 4:The term "FOB Destination" means

A.The seller pays the shipping cost.

B.The seller records transportation-out expense.

C.The buyer pays the shipping cost.

D.The seller pays the shipping cost and records transportation-out expense.

QUESTION 5:The Wilson Company purchased $44,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,000 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

A.Total debits to the inventory account would be $47,000.

B.Total debits to the inventory account would be $44,000.

C.Transportation-in would be debited for $3,000.

D.Total debits to the inventory account would be $41,000.

QUESTION 6:Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $130 and sold the item to a customer for $200. What effect will the sale have on the company's inventory account?

A.The account will decrease by $200

B.The account will decrease by $130

C.The account will decrease by $70

D.No effect

QUESTION 7:Assume the perpetual inventory method is used. 1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,200 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,800 cash. QUESTION 8:The net cash flow from operating activities as a result of the four transactions is:

A.$5,100.

B.$7,726.

C.$6,550.

D.$11,074.

QUESTION 9:Which of the following statements is true about period costs?

A.Most period costs are expensed in the period the costs are incurred.

B.Period costs are expensed when the products associated with these costs are sold.

C.Period costs are usually recorded as assets.

D.Period costs do not adhere to the matching principle.

QUESTION 10:In 2016, Chavez Company purchased land for $120,000 to use as a future site for its new office building. At the end of 2016, the land was worth $135,000. The company decided not to build the new office and sold the land for $132,000 cash in 2017. How does Chavez Companys sale of land affect its 2017 statement of cash flows?

A.$132,000 cash inflow from operating activities.

B.$132,000 cash inflow from investing activities.

C.$132,000 cash inflow from financing activities.

D.$120,000 cash inflow from investing activities and $12,000 cash inflow from operating activities.

QUESTION 11:Dayton Company maintains perpetual inventory records. Dayton determined through a physical count that it had $20,600 of merchandise inventory on hand at the end of the accounting period. The balance in the Merchandise Inventory account was $21,400. The impact of the adjusting entry on the financial statements is

A.Merchandise inventory increased $800.

B.Gross margin increased $800.

C.Cost of goods sold increased $800.

D.No adjusting entry was necessary.

QUESTION 12:Yowell Company had the following transactions during March 2016:

Purchased merchandise inventory of $12,500 from Rochester Company with freight terms FOB destination.

Freight costs on the Rochester Company purchase were $400.

Purchased merchandise inventory of $21,500 from Trenton Company with freight terms FOB shipping point.

Freight costs on the Trenton Company purchase were $600.

QUESTION 13:What is the total amount Yowell Company recorded to the Merchandise Inventory account as a result of these transactions?

A.$34,000

B.$34,400

C.$34,600

D.$35,000

QUESTION 14: Eller Company sold inventory that cost $22,500 for $48,000 cash. Which of the following is the correct journal entry to record this sale?

	Debit	Credit
Cash	48,000
Merchandise Inventory		22,500
Sales Revenue		25,500

Merchandise Inventory	22,500
Sales Revenue	25,500
Cash		48,000

Sales Revenue	48,000
Cash		48,000
Merchandise Inventory	22,500
Cost of Goods Sold		22,500

Cash	48,000
Sales Revenue		48,000
Cost of Goods Sold	22,500
Merchandise Inventory		22,500

QUESTION 15:Markham Company incurred $200 of freight costs on inventory sold and shipped to customers FOB destination. Which of the following is an effect on Markham Companys financial statements?

A- Gross margin decreased by $200.

B- Sales revenue decreased by $200.

C- Net income decreased by $200.

D- Both a and c are correct statements.

QUESTION 16:In 2016, Merritt Company purchased land for $60,000 to use as a future site for its new office building. At the end of 2016, the land was worth $67,500. The company decided not to build the new office and sold the land for $66,000 cash in 2017. How does Merritt Companys sale of the land affect its 2017 income statement?

A.Decrease in gross margin of $1,500.

B.Increase in gross margin of $6,000.

C.Gain on the sale of land $6,000.

D.Loss on the sale of land $1,500.

QUESTION 17:Which of the following is considered a product cost?

A.Utility expense for the current month.

B.Salaries paid to employees of a retailer.

C.Transportation cost on goods received from suppliers.

D.Transportation cost on goods shipped to customers.