The last two columns generally found on the right side of the worksheet are the income statement columns

True

False

Question

2 of25

The term "freight out" refers to

transportation costs on purchases.

cost of inventory purchased.

costs that are not actually paid in cash.

transportation costs on sales.

Question

3 of25

Liabilities are economic resources that are expected to benefit the business in the future

True

False

Question

4 of25

Inventory turnover measures

the days' sales in inventory ratio.

how rapidly merchandise inventory is purchased.

how rapidly merchandise inventory is sold.

the time period for inventory become obsolete (worthless).

Question

5 of25

In cash basis accounting, revenue is recognized when cash is received, and expenses are recognized when they are paid

True

False

Question

6 of25

When does a company account for earned revenue if it follows cash basis accounting?

When services are rendered, even though cash may be received at a later date

When cash is received after the service is completely rendered

When the services are being rendered

When cash is received, either prior to the services being rendered or at a time after the services are rendered

Question

7 of25

A wholesaler is a merchandiser who buys merchandise from a manufacturer and sells the same to a retailer

True

False

Question

8 of25

Corporate ownership is a very popular type of ownership in the United States. Which of the following is a major reason that corporate ownership is popular?

Stockholders have limited liability for the debts of the corporation.

Most corporations are small or medium-sized.

The life of a corporation is limited by the death of the owner.

A corporation is usually managed by the owners.

Question

9 of25

Accounting is referred to as the language of business because it is the method of communicating business information to stakeholders

True

False

Question

10 of25

Which of the following users would rely on management accounting information for decision-making purposes?

Potential investors

Creditors

Customers

Company managers

Question

11 of25

Hitech Inc., a small, local grocer without optical scanning cash registers and computer systems wants to introduce an inventory system to track its inventory. The perpetual inventory system is the most suitable for its operations

True

False

Question

12 of25

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

Owner's Name, Withdrawals

Sales Revenue

Cost of Goods Sold

Owner's Name, Capital

Question

13 of25

In a period of rising costs, the first-in, first-out (FIFO) method results in lower cost of goods sold and higher gross profit than the last-in, first-out (LIFO) method

True

False

Question

14 of25

On January 21, 2014, Bessant merchandisers, received merchandise from Mullies Inc. On that date, it found a few of these goods to be damaged. On January 22, it returned the damaged goods to the seller. Such returns will be treated as ________ by Bessant.

purchase returns

sales returns

purchase allowances

sales allowances

Question

15 of25

Given the same purchase and sales data, the three major costing methods for inventory will result in three different amounts for cost of goods sold. Assume the cost of inventory is rising

True

False

Question

16 of25

IFRS is the main U.S. accounting rule book and is currently created and governed by the FASB

True

False

Question

17 of25

What does "2/10" mean with respect to "credit terms of 2/10, n/30"?

A discount of 2% will be allowed if invoice is paid within 10 days from the date of the invoice.

An interest of 2% will be charged if invoice is paid after 10 days from the date of invoice.

A discount of 10% will be allowed if invoice is paid within two days from the date of invoice.

An interest of 10% will be charged if invoice is paid after two days.

Question

18 of25

When a company uses the perpetual inventory system there is no need to conduct a physical count of inventory

True

False

Question

19 of25

In the balance sheet, assets are classified as either current or long-term depending on their liquidity

True

False

Question

20 of25

Which of the following methods of inventory valuation requires the calculation of a new average cost after each purchase?

Specific identification

Weighted-average

Last-in, first-out

First-in, first-out

Question

21 of25

The entry to close Cost of Goods Sold includes a debit to Income summary

True

False

Question

22 of25

A payable involves a future receipt of cash

True

False

Question

23 of25

Under which of the following categories would bonds held as investment for more than a year appear?

Long-term assets

Current assets

Long-term liabilities

Current liabilities

Question

24 of25

Under which of the following categories would bonds held as investment for more than a year appear?

Current assets

Long-term liabilities

Long-term assets

Current liabilities

Question

25 of25

Under the perpetual inventory system, when a wholesaler returns the goods purchased on an account, the ________ account is credited.

Accounts Receivable

Merchandise Inventory

Cost of Goods Sold

Accounts Payable