Michelin Jewelers completed the following transactions. Michelin Jewelers uses the
perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a
customer on account with terms of 3/15, n/30.
...
Michelin Jewelers completed the following transactions. Michelin Jewelers uses the
perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a
customer on account with terms of 3/15, n/30. Michelin’s cost of the merchandise sold
was $5,500. On April 4, the customer reported damaged goods and Michelin granted a
$1,000 sales allowance. On April 10, Michelin received payment from the customer. If
this were the only transaction for the period, what amount would be shown on the
income statement for Gross profit?
A. $2,260
B. $3,500
C. $3,260
D. $3,230
Question 2 of 40 Score: 0 (of possible 2.5 points)
A company that uses the perpetual inventory method purchased inventory for $2,000
from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company
paid the shipper $100 cash for freight in. The company then returned $200 of damaged
goods and got an allowance from the vendor. The company paid the vendor 8 days after
the sale. Assuming this was the only transaction affecting inventory, and that there was
no beginning balance, what would the cost basis of the inventory be?
A. $1,764
B. $1,864
C. $2,100
D. $1,900
Question 3 of 40 Score: 2.5 (of possible 2.5 points)One hundred units of inventory on hand at the end of the year are recorded at their cost
of $10 each using LIFO. Current replacement cost is $8.00. What amount would be
reported as Inventory on the balance sheet?
A. $1,000.00
B. $10.00
C. $800.00
D. $8.00
Question 4 of 40 Score: 0 (of possible 2.5 points)
Prepaid rent in the worksheet's trial balance column is $4,000. Prepaid rent in the
balance sheet column is $2,000. Which of the following entries
would have caused this difference?
A. A $2,000 debit entry to Prepaid rent in the worksheet's adjustments column
B. A $2,000 credit entry to Rent expense in the worksheet's adjustments column
C. A $2,000 credit entry to Prepaid rent in the worksheet's adjustments column
D. A $2,000 debit entry to Cash in the worksheet’s adjustments column
Question 5 of 40 Score: 0 (of possible 2.5 points)
Williams Company had the following balances and transactions during 2013.
What would the company's inventory amount be on the December 31, 2013 balance
sheet if the perpetual average-costing method is used? (Answers are rounded to the
nearest dollar.) Please note replacement cost is the same as market value and must be
used in this problem if applicable.A. $1,200
B. $1,150
C. $1,050
D. $ 900
Question 6 of 40 Score: 0 (of possible 2.5 points)
A company purchased 100 units for $20 each on January 31. It purchased 100 units for
$30 on February 28. It sold 150 units for $45 each from March 1 through December 31.
If the company uses the Last-In, First-Out inventory costing method, what is the amount
of ending inventory on December 31?
A. $1,500
B. $1,250
C. $1,000
D. $2,250
Question 7 of 40 Score: 0 (of possible 2.5 points)
The following is the adjusted trial balance for Tuttle Photography.
After the closing entries, what will the final balance in Capital be?
A. $207,200
B. $184,200C. $416,380
D. $171,200
Question 8 of 40 Score: 2.5 (of possible 2.5 points)
Michelin Jewelers completed the following transactions. Michelin Jewelers uses the
perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a
customer on account with terms of 3/15, n/30. Michelin’s cost of the merchandise sold
was $5,500. Which of the following journal entries correctly records the Cost of goods
sold?
A. Cost of goods sold 5,500
Accounts receivable 5,500
B. Sales revenue 5,500
Cost of goods sold 5,500
C. Cost of goods sold 5,500
Inventory 5,500
D.
Inventory 5,500
Cost of goods sold 5,500
Question 9 of 40 Score: 2.5 (of possible 2.5 points)
Which of the following statements is an accurate interpretation of the current ratio?A. A current ratio of 1.5 or higher is considered a high risk ratio.
B. A current ratio below 1.00 is considered a good, safe ratio.
C. A current ratio of 2.0 indicates very strong ability to pay current liabilities.
D. A current ratio of 0.60 or lower is a good, safe ratio.
Question 10 of 40 Score: 2.5 (of possible 2.5 points)
A company that uses the perpetual inventory system sold $1,000 of goods to a customer
on account. Which of the following journal entries correctly records the Sales revenue?
A. Cost of goods sold 1,000
Sales revenue 1,000
B.
Inventory 1,000
Cost of goods sold 1,000
C. Accounts receivable 1,000
Cash 1,000
D. Accounts receivable 1,000
Sales revenue 1,000
Question 11 of 40 Score: 2.5 (of possible 2.5 points)A company’s net sales revenue is $20,000,000. Its cost of goods sold is $15,000,000. Its
beginning inventory is $100,000, and its ending inventory is $200,000. Which of the
following is its rate of inventory turnover?
A. 01
B. 0.1
C. 10
D. 100
Question 12 of 40 Score: 2.5 (of possible 2.5 points)
Please refer to the following information and compute the debt ratio:
A. 1.83
B. 2.37
C. 0.40
D. 0.42
Question 13 of 40 Score: 2.5 (of possible 2.5 points)
Please refer to the following data:
Using the “rule of thumb” guidelines, what conclusion could you draw?A. This business faces a liquidity problem, and may have trouble paying off its current liabilities
with its current assets.
B. This business has does not have enough total assets to meet its total obligations.
C. This business has a very good current ratio, but the debt ratio indicates long-term liquidity
problems.
D. This business should have no difficulties paying off its liabilities.
Question 14 of 40 Score: 2.5 (of possible 2.5 points)
Referring to the following table, what is Gross profit?
A. $ 90,000
B. $125,000
C. $140,000
D. $160,000
Question 15 of 40 Score: 2.5 (of possible 2.5 points)
A company’s cost of goods sold is $1,000,000. Its average inventory is $100,000. Which
of the following is its rate of inventory turnover?
A. 0.01
B. 0.1
C. 10
D. 100
Question 16 of 40 Score: 2.5 (of possible 2.5 points)
The general ledger shows a balance of $65,300 in the Inventory account at the end of the
period. A physical inventory shows a count of $67,900. The adjusting entry would be a:
A. debit to Cost of goods sold and a credit to Inventory.
B. debit to Cost of goods sold and a credit to Cash.
C. debit to Inventory and a credit to Cost of goods sold.
D. debit to Inventory and a credit to Cash.
Question 17 of 40 Score: 2.5 (of possible 2.5 points)
A company decides to ignore a very small error in their inventory balance. This is an
example of which of the following principles?
A. Accounting conservatism
B. Materiality concept
C. Disclosure principle
D. Consistency principle
Question 18 of 40 Score: 2.5 (of possible 2.5 points)
Using the perpetual inventory system, discounts taken on an invoice, such as 3/10, n/30,
would be:
A. debited to Inventory.
B. credited to Inventory.
C. debited to Cost of goods sold.
D. credited to Cost of goods sold.
Question 19 of 40 Score: 0 (of possible 2.5 points)
What is the difference between a sales return and a sales allowance?
A. A sales return reduces the amount receivable from the customer, but an allowance does not.
B. A sales return involves an adjustment to Inventory, but a sales allowance does not.
C. A sales return requires a debit to Sales returns and allowances, but a sales allowance does
not.
D. A sales allowance is deducted from Sales revenue to calculate net sales, but a sales return is
not.
Question 20 of 40 Score: 0 (of possible 2.5 points)
Metro Computer Company had the following balances and transactions during 2014.
Beginning inventory 100 units at $75
March 10 Sold 50 units
June 10 Purchased 200 units at $80
October 30 Sold 150 units
What would the company's Inventory amount be on the December 31, 2014 balance
sheet if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to
the nearest dollar.)
A. $7,500
B. $8,000
C. $7,750
D. $7,300
Question 21 of 40 Score: 0 (of possible 2.5 points)
Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased
for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per
unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and
applies the average-costing method. How much is Cost of goods sold for the month?
(When calculating average cost, please round to the nearest cent. When calculating Cost
of goods sold and Ending inventory, please round to the nearest whole dollar.)
A. $162
B. $170
C. $158
D. $168
Question 22 of 40 Score: 2.5 (of possible 2.5 points)
An adjusted trial balance for Southside Video Productions is presented below.
Compute the debt ratio.
A. 0.48
B. 0.52
C. 0.37
D. 2.07
Question 23 of 40 Score: 2.5 (of possible 2.5 points)
Ending inventory for the current year is overstated by $20,000. What effect will this error
have on the following year's Net income?
A. The inventory overstatement will not affect Net income.
B. Net income will be overstated by $20,000.
C. Net income will be understated by $20,000.
D. Net income will be understated by $40,000.
Question 24 of 40 Score: 0 (of possible 2.5 points)
Which of the following accounts does NOT close at the end of the period?
A. Accumulated depreciation
B. Depreciation expense
C. Withdrawals
D. Sales revenues
Question 25 of 40 Score: 2.5 (of possible 2.5 points)
Samson Company had the following balances and transactions during 2013.
Beginning inventory 10 units at $70
March 10 Sold 8 units
June 10 Purchased 20 units at $80
October 30 Sold 15 units
What would the company's Inventory amount be on the December 31, 2013 balance
sheet if the perpetual average-costing method is used? (Answers are rounded to the
nearest dollar.)A. $537
B. $554
C. $490
D. $560
Question 26 of 40 Score: 2.5 (of possible 2.5 points)
Which of the following accounts will be closed by debiting the Income summary account?
A. Withdrawals
B. Service revenue
C. Accounts receivable
D. Salary expense
Question 27 of 40 Score: 2.5 (of possible 2.5 points)
A company uses perpetual inventory in connection with the specific-identification
method. The company purchased 30 industrial diamonds for $500 per unit. Later in the
month, they purchased another 20 diamonds from another supplier for $480 per unit. On
the last day of the month, they sold 18 diamonds to a customer at a price of $800 per
unit. Of the 18 diamonds, 3 came from the first batch and the remainder came from the
second batch. Which of the following journal entries correctly records the Cost of goods
sold?
A.
Inventory 14,400
Cost of goods sold 14,400
B. Sales revenue 14,400
Inventory 14,400C. Cost of goods sold 8,700
Sales revenue 8,700
D. Cost of goods sold 8,700
Inventory 8,700
Question 28 of 40 Score: 2.5 (of possible 2.5 points)
On a merchandising balance sheet, Merchandise inventory is listed as a(n):
A. current asset.
B. current liability.
C. expense.
D. revenue.
Question 29 of 40 Score: 2.5 (of possible 2.5 points)
Net income for the year is $25,000. Withdrawals of $36,000 per were taken at the end
of the year. Which of the following occurs?
A. The Capital account decreases by $22,000.
B. The Capital account decreases by $11,000.
C. The Capital account increases by $11,000.
D. The Capital account increases by $22,000.
Question 30 of 40 Score: 2.5 (of possible 2.5 points)
Please refer to the following balance sheet:
How much is the debt ratio? (Round to two decimal places.)
A. 0.35
B. 2.89
C. 0.23
D. 4.40
Question 31 of 40 Score: 2.5 (of possible 2.5 points)
The following is the balance sheet for Green Landscaping.
Greene Landscaping
Balance Sheet
December 31, 2012
Assets Liabilities
Cash $15,000 Accounts payable $ 22,000
Accounts receivable 30,000 Salaries payable 12,000
Supplies 4,000 Unearned service
revenue 25,000
Prepaid insurance 8,000 Total liabilities 59,000
Equipment $85,000
Less: Accumulated
depreciation 10,000 75,000 Owner’s Equity
1. Green, capital 73,000
Total liabilities and
owner’s equity
$132,000
Total assets $132,000 Total liabilities and owner’s
equity
$132,000Which of the following is the debt ratio? (Round to two decimal places.)
A. .39
B. .45
C. 1.04
D. .79
Question 32 of 40 Score: 2.5 (of possible 2.5 points)
A company that uses the perpetual inventory method purchases inventory for $2,000
from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company
paid the shipper $100 cash for freight in. Which of the following entries would be made to
record payment to the vendor if the payment is made within 10 days?
A. $1,960 debit to Accounts payable and a $1,960 credit to Cash
B. $2,000 debit to Accounts payable, a $100 debit to Inventory and a $1,960 credit to Cash
C. $2,000 debit to Accounts payable, a $40 credit to Inventory and a $1,960 credit to Cash
D. $1,960 debit to Accounts payable, a $40 debit to Inventory and a $2,000 credit to Cash
Question 33 of 40 Score: 2.5 (of possible 2.5 points)
One hundred units of inventory on hand at the end of the year are recorded at their cost
of $10 each using LIFO. Current replacement cost is $8.00. How would the Gross profit
be affected by the adjusting entry needed under lower-of-cost-or-market?
A. Gross profit would not be affected.
B. Gross profit would go down by $80.
C. Gross profit would go up by $200.D. Gross profit would go down by $200.
Question 34 of 40 Score: 2.5 (of possible 2.5 points)
A company’s net sales revenue is $540,000. Its cost of goods sold is $360,000. Its gross
profit percentage is:
A. 33.33%.
B. 66.67%.
C. 100%.
D. 300%.
Question 35 of 40 Score: 0 (of possible 2.5 points)
Which of the following statements is an accurate interpretation of a debt ratio of .60?
A. The company has $.60 of current liabilities for every $1.00 of current assets.
B. The company has $.60 of assets for every $1.00 of liabilities.
C. The company has $.60 of current assets for every $1.00 of current liabilities.
D. The company has $.60 of liabilities for every $1.00 of assets.
Question 36 of 40 Score: 2.5 (of possible 2.5 points)
A new average cost is calculated after each purchase when a business is using which of
the following methods?
A. Specific-unit-cost
B. Average-cost
C. Last-In, First-OutD. First-In, First-Out
Question 37 of 40 Score: 2.5 (of possible 2.5 points)
Please refer to the following information and compute the current ratio:
Debit Credit
Cash $4,500
Accounts receivable 1,200
Prepaid rent 700
Land 20,000
Equipment 4,000
Accumulated depreciation $800
Accounts payable 2,900
Salary payable 600
Notes payable–long term 9,000
A. 1.83
B. 0.55
C. 0.51
D. 0.42
Question 38 of 40 Score: 2.5 (of possible 2.5 points)
An adjusted trial balance is shown below.
What will the final balance in Capital be after the closing entries?A. $37,800
B. $12,700
C. C$24,000
D. $36,800
Question 39 of 40 Score: 2.5 (of possible 2.5 points)
Which of the following states that the business should use the same accounting methods
from period to period?
A. Materiality concept
B. Consistency principle
C. Accounting conservatism
D. Disclosure principle
Question 40 of 40 Score: 0 (of possible 2.5 points)
Ending inventory for the current period is understated. What effect will this error have on
equity?
A. Equity will be overstated at the end of the current period, but is will be correct at the end of
the next period.
B. Equity will be overstated at the end of the current period and understated at the end of the
next period.
C. Equity will be understated at the end of the current period, but it will be correct at the end of
the next period.
D. Equity will be overstated at the end of the current period and overstated at the end of the next
period.
