Question 1

Smith Company has a low number of days in inventory.This indicates that:

Accepted Answer

A) their inventory sales are producing low profits. 
B) their inventory is turning over rapidly. 
C) the cost of inventory is very high. 
D) the firm has a low Gross profit percentage. 
A) their inventory sales are producing low profits. 
B) their inventory is turning over rapidly. 
C) the cost of inventory is very high. 
D) the firm has a low Gross profit percentage. B

Question 2

When a firm uses the perpetual inventory method,the inventory account should be constantly updated.

Accepted Answer

A) True 
 B)False  True

Question 3

The periodic inventory system is normally used for relatively inexpensive goods.

Accepted Answer

A) True 
 B)False  True

Question 4

When a firm ships goods to a customer and pays for freight out,how is that cost recorded?

Accepted Answer

A) As an addition to cost of sales 
B) As an operating expense 
C) As a reduction of sales revenue 
D) As an addition to the cost of inventory 
A) As an addition to cost of sales 
B) As an operating expense 
C) As a reduction of sales revenue 
D) As an addition to the cost of inventory

Question 5

ABC Ltd has made credit sales of $2 200,including GST.ABC Ltd will credit sales revenue with:

Accepted Answer

A) $1 800 
B) $2 200 
C) $2 420 
D) $2 000 
A) $1 800 
B) $2 200 
C) $2 420 
D) $2 000

Question 6

Where do Inventory and Cost of sales appear?

Accepted Answer

A) On the balance sheet and income statement,respectively 
B) On the income statement and cash flow statement,respectively 
C) On the balance sheet and statement of changes in equity,respectively 
D) On the statement of changes in equity and income statement,respectively 
A) On the balance sheet and income statement,respectively 
B) On the income statement and cash flow statement,respectively 
C) On the balance sheet and statement of changes in equity,respectively 
D) On the statement of changes in equity and income statement,respectively

Question 7

Cost of sales appears on both a descriptive format income statement and a functional format income statement.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following assets does a retailer-but NOT a service business-need?

Accepted Answer

A) Accounts receivable 
B) Equipment 
C) Inventory 
D) Prepaid insurance 
A) Accounts receivable 
B) Equipment 
C) Inventory 
D) Prepaid insurance

Question 9

The Income summary account has a $25 000 credit balance after the revenue and expense accounts have been closed.To which account is this balance closed?

Accepted Answer

A) Cost of sales 
B) Capital 
C) Sales revenue 
D) Drawings 
A) Cost of sales 
B) Capital 
C) Sales revenue 
D) Drawings

Question 10

Which of the following is subtracted from Gross profit to arrive at Net profit?

Accepted Answer

A) Cost of goods available for sale 
B) Operating expenses 
C) Cost of sales 
D) Sales discounts and Sales returns and allowances 
A) Cost of goods available for sale 
B) Operating expenses 
C) Cost of sales 
D) Sales discounts and Sales returns and allowances

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Inventory is the:

Accepted Answer

A) equipment that was purchased. 
B) goods held by a firm to be sold to customers. 
C) goods purchased to run the daily operations of a business. 
D) expenses of a firm that were incurred. 
A) equipment that was purchased. 
B) goods held by a firm to be sold to customers. 
C) goods purchased to run the daily operations of a business. 
D) expenses of a firm that were incurred.

Question 13

Refer to the following trial balance. $\begin{array}{|l|l|l|} 
\hline& \text { Debit }&\text { Credit } \
\hline \text { Cash } & \$ 18,000 \
\hline \text { Accounts receivable } & 40,000 \
\hline \text { Inventory } & 63,000 \
\hline \text { Supplies } & 15,000 \
\hline \text { Land } & 300,000 \\hline \text { Accounts payable } & & \$ 5000 \
\hline \text { Loan payable } & & 21,000 \
\hline \text { Smith, capital } & & 325,000 \
\hline \text { Drawings } & 4000 & \\hline \text { Sales revenue } & & 460,000 \
\hline \text { Sales returns and allowances } & 7000 & \\hline \text { Sales discounts } & 9000 \
\hline \text { Cost of sales } & 210,000 \
\hline \text { Salaries expense } & 16,000 \
\hline \text { Electricity and gas expense } & 68,000 \
\hline \text { Rent expense } & 56,000 \
\hline \text { Interest expense } & 5000 \\hline \text { Totals } & \$ 811,000 & \$ 811,000 \
\hline
\end{array}$ How much is the net sales revenue?

Accepted Answer

A) $462,000 
B) $110,000 
C) $444,000 
D) $105,000 
A) $462,000 
B) $110,000 
C) $444,000 
D) $105,000

Question 14

Smith Company tries to manage their inventory levels so that they will have just enough to meet customer demand,without keeping an excess of funds tied up in inventory.Given this situation,Smith Company hopes to have a high number of days in inventory.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following correctly describes the gross profit percentage?

Accepted Answer

A) The gross profit percentage is one of the most carefully watched measures of profitability. 
B) Retailing companies strive to increase the gross profit percentage. 
C) For most companies,the gross profit percentage changes little from year to year. 
D) All of the above are true. 
A) The gross profit percentage is one of the most carefully watched measures of profitability. 
B) Retailing companies strive to increase the gross profit percentage. 
C) For most companies,the gross profit percentage changes little from year to year. 
D) All of the above are true.

Question 16

HiLo Running Store is not registered for GST.Which of the following statements is INCORRECT?

Accepted Answer

A) The firm will charge a flat rate of GST on all goods sold. 
B) The firm will not be able to claim a refund from the ATO on GST paid to suppliers. 
C) Journal entries for sales and purchases will not include a GST Clearing account. 
D) Purchases of inventory will be recorded at the 'gross' amount,that is,the amount including GST. 
A) The firm will charge a flat rate of GST on all goods sold. 
B) The firm will not be able to claim a refund from the ATO on GST paid to suppliers. 
C) Journal entries for sales and purchases will not include a GST Clearing account. 
D) Purchases of inventory will be recorded at the 'gross' amount,that is,the amount including GST.

Question 17

A firm uses the periodic inventory method.Which of the following entries would be made to record a purchase of inventory on credit?

Accepted Answer

A) The accounting entry would be a debit to Accounts payable,a credit to Inventory and a credit to GST clearing. 
B) The accounting entry would be a debit to Inventory,a debit to GST clearing and a credit to Accounts payable. 
C) The accounting entry would be a debit to Accounts payable,a credit to Purchases and a credit to GST clearing. 
D) The accounting entry would be a debit to Purchases,a debit to GST clearing and a credit to Accounts payable. 
A) The accounting entry would be a debit to Accounts payable,a credit to Inventory and a credit to GST clearing. 
B) The accounting entry would be a debit to Inventory,a debit to GST clearing and a credit to Accounts payable. 
C) The accounting entry would be a debit to Accounts payable,a credit to Purchases and a credit to GST clearing. 
D) The accounting entry would be a debit to Purchases,a debit to GST clearing and a credit to Accounts payable.

Question 18

Which of the following is GENERALLY the major cost of inventory?

Accepted Answer

A) Salary expense 
B) Advertising 
C) Buildings 
D) Cost of sales 
A) Salary expense 
B) Advertising 
C) Buildings 
D) Cost of sales

Question 19

Under a perpetual inventory system,which of the following would NOT be required?

Accepted Answer

A) A weekly count of the inventory 
B) Updating the inventory balance with each sale 
C) Detailed inventory records 
D) Recording cost of sales with each sale 
A) A weekly count of the inventory 
B) Updating the inventory balance with each sale 
C) Detailed inventory records 
D) Recording cost of sales with each sale

Question 20

The perpetual inventory system keeps a running record of inventory and cost of sales.

Accepted Answer

A) True 
 B)False

Smith Company has a low number of days in inventory.This indicates that:

When a firm uses the perpetual inventory method,the inventory account should be constantly updated.

The periodic inventory system is normally used for relatively inexpensive goods.

When a firm ships goods to a customer and pays for freight out,how is that cost recorded?

ABC Ltd has made credit sales of $2 200,including GST.ABC Ltd will credit sales revenue with:

Where do Inventory and Cost of sales appear?

Cost of sales appears on both a descriptive format income statement and a functional format income statement.

Which of the following assets does a retailer-but NOT a service business-need?

The Income summary account has a $25 000 credit balance after the revenue and expense accounts have been closed.To which account is this balance closed?

Which of the following is subtracted from Gross profit to arrive at Net profit?

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

Inventory is the:

Smith Company tries to manage their inventory levels so that they will have just enough to meet customer demand,without keeping an excess of funds tied up in inventory.Given this situation,Smith Company hopes to have a high number of days in inventory.

Which of the following correctly describes the gross profit percentage?

HiLo Running Store is not registered for GST.Which of the following statements is INCORRECT?

A firm uses the periodic inventory method.Which of the following entries would be made to record a purchase of inventory on credit?

Which of the following is GENERALLY the major cost of inventory?

Under a perpetual inventory system,which of the following would NOT be required?

The perpetual inventory system keeps a running record of inventory and cost of sales.

The Role of Accounting in Decision Making

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Formation and Shareholders Equity

Companies: Capital Management and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

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Exam 5: Retailing Operations

Smith Company has a low number of days in inventory.This indicates that:

When a firm uses the perpetual inventory method,the inventory account should be constantly updated.

The periodic inventory system is normally used for relatively inexpensive goods.

When a firm ships goods to a customer and pays for freight out,how is that cost recorded?

ABC Ltd has made credit sales of $2 200,including GST.ABC Ltd will credit sales revenue with:

Where do Inventory and Cost of sales appear?

Cost of sales appears on both a descriptive format income statement and a functional format income statement.

Which of the following assets does a retailer-but NOT a service business-need?

The Income summary account has a $25 000 credit balance after the revenue and expense accounts have been closed.To which account is this balance closed?

Which of the following is subtracted from Gross profit to arrive at Net profit?

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

Inventory is the:

Smith Company tries to manage their inventory levels so that they will have just enough to meet customer demand,without keeping an excess of funds tied up in inventory.Given this situation,Smith Company hopes to have a high number of days in inventory.

Which of the following correctly describes the gross profit percentage?

HiLo Running Store is not registered for GST.Which of the following statements is INCORRECT?

A firm uses the periodic inventory method.Which of the following entries would be made to record a purchase of inventory on credit?

Which of the following is GENERALLY the major cost of inventory?

Under a perpetual inventory system,which of the following would NOT be required?

The perpetual inventory system keeps a running record of inventory and cost of sales.

The Role of Accounting in Decision Making

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Formation and Shareholders Equity

Companies: Capital Management and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Filters