Which statements are correct when a perpetual inventory system is used?

a.Purchases in inventory are debited to the Purchases account.

b.Merchandise inventory is updated after each purchase or sale.

c.When inventory is returned to suppliers, Purchase Returns and Allowances is credited.

d.No year-end physical counts are needed.

e.The cost of shipping inventory to customers is added to inventory.

Which permanent account is affected by the closing entries?

a.Income Summary

b.Owner's Capital

c.Prepaid insurance

d.Owner's Drawings

e.Unearned Revenue

A legal firm requires that his clients pay him before legal services are provided. In June, the firm collected $12,000 in advance fees and completed 80% of the work related to these fees by the end of the month. What year-end adjusting entry would be prepared by the real estate firm on June 30?

a.debit Legal Fee Revenue, $12,000; credit Unearned Legal Fee Revenue, $12,000

b.debit Legal Fee Revenue, $9,600; credit Unearned Legal Fee Revenue, $9,600

c.debit Legal Fee Revenue, $2,400; credit Unearned Legal Fee Revenue, $2,400

d.debit Unearned Legal Fee Revenue, $9,600; credit Legal Fee Revenue, $9,600

e.debit Unearned Legal Fee Revenue, $2,400; credit Legal Fee Revenue, $2,400

A bookkeeper incorrectly journalized $16,400 in cash collected on a customer account as a debit to accounts receivable for $16,400 and a credit to cash for $16,400. What is the impact of this error on the trial balance, the cash account, and the accounts receivable account? (Hint: draw the relevant T-accounts!)

a.The credit side of the trial balance would be $32,800 higher than the debit side of the trial balance, cash would be correctly stated, and accounts receivable would be correctly stated.

b.The trial balance would be in balance, cash would be overstated by $32,800, and accounts receivable would be understated by $32,800.

c.The trial balance would be in balance, cash would be understated by $32,800, and accounts receivable would be overstated by $32,800.

d.The debit side of the trial balance would be $32,800 higher than the credit side of the trial balance, cash would be correctly stated, and accounts receivable would be correctly stated.

A bakery purchased $6,500 worth of baking supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the baking supplies indicated only $3,000 on hand. The adjusting entry that should be made by the company on June 30 is

a.debit Baking Supplies Expense, $3,500; credit Baking Supplies, $3,500.

b.debit Baking Supplies Expense, $3,000; credit Baking Supplies, $3,000.

c.debit Baking Supplies, $3,500; credit Baking Supplies Expense, $3,500.

d.debit Baking Supplies Expense, $3,500; credit Baking Supplies, $3,000.

A business has the following general ledger balances: Sales, $ 950,000; Sales returns and allowances, $50,000, Cost of goods sold, $600,000, Operating Expenses, $150,000; and Profit, $150,000. What are the gross profit and profit margins of the business?

a.gross profit, 32.6%%, and profit margin, 16.1%

b.gross profit, 35.5%, and profit margin, 19.5%

c.gross profit, 31.6%, and profit margin, 15.8%

d.gross profit, 33.3%, and profit margin, 16.7%

e.gross profit, 36.8%, and profit margin, 20.9%

A business uses a perpetual inventory system. At year end, the accounting records shows an inventory balance of $95,000 and the physical count shows an inventory balance of $89,000. Cost of goods sold is $320,000. After you prepare the adjusting entry required when accounting records don't agree with the physical count, which statement is correct?

a.Merchandise Inventory is $95,000 and Cost of Goods Sold is $314,000.

b.Merchandise Inventory is $95,000 and Cost of Goods Sold is $326,000.

c.Merchandise Inventory is $89,000 and Cost of Goods Sold is $320,000.

d.Merchandise Inventory is $89,000 and Cost of Goods Sold is $326,000.

e.Merchandise Inventory is $89,000 and Cost of Goods Sold is $314,000.

On April 1, a retailer lent $30,000 to a customer who signed a 7%, 9-month promissory note. Principal and accrued interest are due on January 1. If the retailer's year end is September 30, the year end adjusting entry to record interest would be:

a.debit Interest Expense, $2,100; credit Interest Payable, $2,100.

b.debit Interest Expense, $875; credit Interest Payable, $875.

c.debit Interest Receivable, $1,225; credit Interest revenue, $1,225.

d.debit Interest Receivable, $1,050; credit Interest Revenue, $1,050.

e.debit Interest Expense, $1,575; credit Interest Payable, $1,575.