A worksheet can be helpful in showing the effects of proposed or what if transactions, as well as being useful in helping to prepare end-of-period financial statements.
2. Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals account to owners capital.
3. Cost of goods sold:
a. Is another term for revenue.
b. Is a term only used by service firms.
c. Is another term for merchandise sales.
d. Is also called gross margin.
e. Is the term used for the cost of buying and preparing merchandise for sale.
4. A perpetual inventory system continually updates accounting records for inventory transactions.
5. The credit terms 2/10, n/30 are interpreted as:
a. 2% discount if paid within 30 days.
b. 30% discount if paid within 10 days.
c. 30% discount if paid within 2 days.
d. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.
e. 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.
6. A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The freight charge was $500. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:
7. Sales returns:
a. Are not recorded under the perpetual inventory system until the end of each accounting period.
b. Refer to reductions in the selling price of merchandise sold to customers.
c. Represent trade discounts.
d. Refer to merchandise that customers return to the seller after the sale.
e. Represent cash discounts.
8. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
a. Recognizes that a customer returned merchandise and/or received an allowance.
b. Is recorded when a customer takes a discount.
c. Reflects a decrease in amount due to a supplier.
d. Reflects an increase in amount due from a customer.
e. Requires a debit memorandum to recognize the customers return.
9. Brig Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Net income equals:
10. A companys net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals (Round your answer to 1 decimal place):
11. Goods in transit are included in a purchasers inventory:
a. When the purchaser is responsible for paying freight charges.
b. After the half-way point between the buyer and seller.
c. If the goods are shipped FOB destination.
d. When the supplier is responsible for freight charges.
e. At any time during transit.
12. If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.
13. Physical counts of inventory:
a. Must be taken at least once a month.
b. Are not necessary under the cost-to benefit constraint.
c. Requires the use of hand-held portable computers.
d. Are necessary to adjust the Inventory account to the actual inventory available.
e. Are not necessary under the perpetual system.
14. Generally accepted accounting principles require that the inventory of a company be reported at:
a. Historical cost.
b. Replacement cost.
c. Lower of cost or market.
d. Market value.
e. Retail value.
15. Days sales in inventory is calculated as:
a. Ending inventory divided by cost of goods sold.
b. Ending inventory times cost of goods sold.
c. Cost of goods sold divided by ending inventory.
d. Ending inventory divided by cost of goods sold times 365.
e. Cost of goods sold divided by ending inventory times 365.
16. An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
17. Internal control systems are:
a. Required only if a company plans to engage in interstate commerce.
b. Developed by the Internal Revenue Service for all U.S. companies.
c. Developed by the Securities and Exchange Commission for public companies.
d. Developed by the Small Business Administration for non-public companies.
e. Required by Sarbanes-Oxley (SOX) to be documented and certified if the companys stock is traded on an exchange.
18. Internal control policies and procedures have limitations including:
a. Human error.
b. Human fraud.
c. Cost-benefit principle.
e. All of these.
19. The principles of internal control include:
a. Use only computerized systems.
b. Establish responsibilities.
c. Require automated sales systems.
d. Maintain minimal records.
e. Bond all employees.
20. Internal control procedures for cash receipts require that:
a. Custody over cash is kept separate from its recordkeeping.
b. Cash sales should be recorded on a cash register at the time of each sale.
c. Clerks having access to cash in a cash register should not have access to the register tape or file.
d. An employee (with no access to cash receipts) should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.
e. All of these.
21. Internal control devices for banking activities include signature cards, deposit tickets, checks, and bank statements.
22. A check involves three parties:
a. The maker, the manager, and the payee.
b. The signer, the cashier, and the company.
c. The maker, the payee, and the bank.
d. The writer, the cashier, and the bank.
e. The bookkeeper, the payee, and the bank.
23. The payee is the person who signs a check, authorizing its payment.
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