1. (True or False) The total of beginning inventory, plus purchases, plus ending inventory may collectively be referred to as goods available for sale.
2. (True or False) Under the periodic inventory system, the Inventory account is debited at the time of a merchandise purchase but is not credited at the time of a merchandise sale
3. (True of False) With a periodic inventory system, the beginning inventory is closed in an entry involving a debit to the Income Summary account.
4. In considering how much merchandise inventory to stock, one should consider numerous cost-benefit factors. In general, which of the following statements is true? A) Marketing would tend to want to stock less inventory than finance personnel. B) The amount of inventory to stock would be irrelevant to finance personnel. C) None of these. D) Marketing would tend to want to stock more inventory than finance personnel. E) Marketing would tend to want to stock the same inventory as finance personnel.
5. In a merchandising operation, the Sales account should include: A) only cash sales of merchandise. B) both cash and credit sales of merchandise. C) all merchandise sales and sales of any other assets. D) Sales that are "under the table" E) only credit sales of merchandise.
6. Which of the following statements is false? A) Cash discounts may be offered in conjunction with trade discounts. B) For a seller, cash discount and sales discount are synonymous terms. C) None of these are correct D) Cash discounts are a convenient means of reducing list prices to invoice prices. E) Cash discounts are used to encourage customers to make prompt payments.
7. The expression 3/20, n/60 means: A) None of these answer choices are correct B) if the 3% discount is not taken, the net amount is due within 60 days. C) a 3% discount is available if the invoice is paid within 20 to 60 days. D) the invoice is paid in 3 to 20 days; otherwise interest for 60 days will be charged. E) a 15% discount (3 divided by 20) is available if the invoice is paid within 60 days.
8. Sperry Company had beginning inventory of $80,000, purchased merchandise during the period for $140,000, and had ending inventory of $95,000. How much was goods available for sale? A) $315,000. B) $125,000. C) $155,000. D) None of these answer choices are correct E) $175,000.
9. On April 1, a $5,000 merchandise purchase was recorded under the gross method. The purchase was made on account and subject to credit terms of 2/10, n/30. The journal entry to record payment on April 15 would include: A) a credit to Cash for $5,000. B) a debit to Accounts Payable for $4,900. C) All of the answers are correct (except for "none of these") D) a debit to Purchase Discounts Lost for $100. E) None of these
10. A company uses the periodic system, and has beginning inventory of $30,000, ending inventory of $50,000, and purchases of $100,000. The closing entries at the end of the fiscal year would include: A) None of these B) a credit to Purchases for $100,000. C) a credit to Inventory for $30,000. D) a debit to Inventory for $50,000. E) All of the answers are correct (except for "none of these")
11. Mathew Company provided the following data concerning its income statement: sales, $1,000,000; purchases, $400,000; beginning inventory, $250,000; ending inventory, $275,000; operating expenses, $95,000; freight-in, $5,000; sales discounts, $20,000; purchases discounts, $15,000; sales returns & allowances, $120,000; and purchases returns & allowances, $45,000. The data are complete and provide the basis for preparation of an income statement. How much is cost of goods sold?
12. Given below are account balances for Clayton Company: Gross sales, $100,000 Sales returns and allowances, $8,000 Selling expenses, $12;000 Cost of goods sold, $46,000 Interest expense, $3,000 How much is the gross profit margin? A) 50% B) 29% C) 45% D) 33.75% E) 68%
13. Juniper Company, Inc. uses a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The correct journal entry to record the merchandise return on August 11 is: A) Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500. B) Debit Accounts Payable $1,500; credit Cash $1,500. C) Debit Merchandise Inventory $1,500; credit Sales Returns $1,500. D) Debit Accounts Payable $1,500; credit Purchase Returns $1,500. E) Debit Merchandise Inventory $1,500; credit Cash $1,500.
14. (True or False) Since petty cash is concerned with such small amounts of cash, it is not necessary to document all transactions with a petty cash receipt.
15. (True or False) A journal entry is always required for the amount of the difference between the balance per bank statement and balance per books.
16. Which of the following is not one of the policies and procedures that make up an internal control system? A) Urge adherence to company policies. B) Protect assets C) Ensure reliable accounting D) Promote efficient operations. E) Guarantee a return to investors
17. For an item to be reported in the Cash account on the balance sheet it must be: A) none of these B) acceptable to a bank for deposit. C) free from restrictions for use in satisfying current debts. D) acceptable to a bank for deposit AND free from restrictions for use in satisfying current debts E) recorded in the general ledger
18. Strategies to enhance cash flow include all the following except: A) issuing additional shares of stock. B) utilization of electronic payment and collection technology. C) postponement of payments. D) swaps of low-rate fixed debt for high-rate variable debt. E) None of these.
19. For which of the following items would a bank credit Ace Company's bank account? A) A check which was previously deposited is returned "NSF." B) A purchase on the company's Visa Debit Card C) Bank service charges are posted to Ace's bank account. D) A note receivable from an Ace Company customer is collected by Ace's bank. E) None of these
20. If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation? A) Subtract $45 from the book balance B) Subtract $45 from the bank's balance C) Subtract $45 from the bank's balance and add $45 to the book's balance. D) Add $45 to the book balance E) Add $45 to the bank's balance
21. Trading securities were purchased for $100,000. Initially the investment climbed in value to $125,000. By year's end, it had decreased in value to $90,000. At what amount should the trading securities be reported on the year-end balance sheet? A) $125,000. B) $90,000. C) None of these D) Each of the answers is an acceptable alternative. E) $100,000.
22. Andrews Company established a petty cash fund of $800. What would be the proper journal entry to reflect this event? (Write down journal entry in proper journal entry format - Date is not necessary)
23. Assume that daily cash sales at the snack bar were $460. However, the cash register only includes $440 of cash. What journal entry would be prepared to reflect daily activity? (Write down journal entry in proper journal entry format - Date is not necessary)
24. Norton Company's bank statement indicated an ending cash balance of $2,430. Norton's accountant discovered that outstanding checks amounted to $470 and deposits in transit were $780. Additionally, the bank statement showed service charges of $35. What is the correct adjusted ending cash balance?
25. During 20X6, M acquired 100 shares of L Corporation stock at $20 per share, 200 shares of P Corporation stock at $40 per share, and 100 shares of F Corporation stock at $30 per share. All of these shares were purchased as trading securities. The market price per share of these securities at the end of 20X6 and 20X7, respectively, are: