Term
| ____ 1. The inventory account a manufacturer uses to record the cost of products completed and available for sale is called |
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Definition
| c.Finished goods inventory. |
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Term
| ____ 3. Which one of the following accounts most likely would appear on the income statement of a merchandise company, but not on the income statement of a service company? |
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Definition
a.Cost of Goods Sold
c.Administrative Expenses
b.Selling Expenses
d.Income Tax Expense |
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Term
| 4. Vegas Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true? |
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Definition
| b.The customer should pay $1,000 if the invoice is paid on July 9 |
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Term
| ____ 5. Cost of goods sold is equal to |
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Definition
| c.the cost of merchandise purchased plus transportation-in costs plus beginning inventory minus purchase returns and allowances and purchase discounts minus ending inventory. |
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Term
| ____ 6. The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the |
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Definition
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Term
| ____ 7. In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for |
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Definition
| c.Both the periodic and perpetual inventory systems |
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Term
____ 8. Shadow Band, Inc. purchased merchandise from Drum Music Company on June 5, 2012. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Shadow received the merchandise on June 10, 2012. Shadow paid the amount due on June 13, 2012.
Shadow uses a perpetual inventory system. When will the cost of merchandise sold be recorded as an expense? |
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Definition
| b.The date the merchandise is sold. |
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Term
____ 9. Quick Inc. uses the periodic inventory system.
If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Quick���s cost of goods sold for June under the specific identification method would be |
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Definition
a.$2,263.00
c.$2,945.00
b.$2.373.00
d.$3,626.50 |
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Term
| ____ 11. Federal income tax rules allow businesses to use different inventory costing methods for tax reporting and financial reporting with one exception. Which of the following situations is not allowed by federal income tax rules? |
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Definition
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Term
| If a company overstates it's ending inventory for the current year, what are the effects on cost of goods sold and net income for the current year? |
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Definition
| A. Understated overstated |
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Term
| ____ 14. Which one of the following statements regarding the application of the lower of cost or market method is true? |
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Definition
| d.The lower of cost or market method is an exception to the historical cost principle. |
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Term
| ____ 15. Marion, Inc. has an inventory turnover rate of 8 times. If its cost of goods sold is $150,000, then |
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Definition
a.The company will report sales of $1,200,000.
b.The gross margin will be $1,200,000.
c.The company's average inventory is $18,750.
d.It sells its inventory 1,200 times per year. |
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Term
____ 16. The following information was taken from the operating activity section of the 2012 statement of cash flows for Adderly Corp:
Based on the information provided, which one of the following conclusions is correct? |
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Definition
a.Accounts payable decreased $2,000 in 2012.
b.Inventories increased $8,000 in 2012.
c.The direct method was used to prepare the operating section of the cash flow statement.
d.Cash payments of merchandise exceeded cost of goods sold by $2,000. |
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Term
| ____ 17. Payment for the acquisition of inventories is shown on the statement of cash flows as |
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Definition
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Term
| ____ 18. Lettermen Inc. uses a perpetual inventory system. |
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Definition
If Lettermen uses the FIFO method, how much is ending inventory on January 31?
a.$ 8
c.$ 16
b.$ 12
d.$ 40 |
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Term
| ____ 20. A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause: |
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Definition
a.an overstatement of inventory on the year-end balance sheet.
b.an understatement of gross profit in the following year.
c.an overstatement of retained earnings at the end of the year.
d.an overstatement of cost of goods sold for the current year. |
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Term
| ____ 20. A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause: |
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Definition
| d.an overstatement of cost of goods sold for the current year. |
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Term
| 21. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to |
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Definition
a.$12,670
b.$9,070
c.$8,420
d.$17,230 |
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Term
| ____ 22. Using the following information, what is the amount of cost of goods sold? |
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Definition
a.$26,900
b.$20,530
c.$28,130
d.$30,210 |
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Term
| ____ 23. All of the following statements are true except: |
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Definition
| d.Write-downs of inventory can be reversed in later periods under U.S. GAAP. |
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Term
| ____ 24. Stone Company purchased a building on a tract of land and allocated the entire cost of the purchase to building. Normally it depreciates buildings over 20 years using the straight-line method with zero residual value and does not depreciate land. Because of its accounting treatment of the purchase, Stone���s income before taxes for the next 20 years will be |
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Definition
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Term
Angel, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2011 and was used 2,700 hours in 2011 and 2,600 hours in 2012.
Angel, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.
What amount will Angel, Inc. report as depreciation expense over the 8-year life of the equipment? |
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Definition
a.$60,000
c.$75,000
b.$72,000
d.$80,000 |
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Term
| ____ 26. The income statement of Bob���s Fruit Market, Inc. reported a gain from the sale of land. How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category? |
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Definition
a. The entire proceeds from the sale of the land are reported as an investing activity.
b.The gain on the sale of land is reported in the Financing Activities category as a cash flow from the sale of land.
c.The entire proceeds from the sale of the land are reported as an operating activity.
d.The cash received from the sale of land is reported in the financing activity category as a cash flow from the sale of land. |
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Term
| ____ 27. How are the cash flow effects from the purchase and sale of intangible assets reported on a statement of cash flows? |
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Definition
| a. As operating activities b.As investing activities c.As financing activities d.They are not reported on a statement of cash flows |
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Term
____ 31. Homeland Resort incurred the following costs to acquire and prepare land during 2011 for a new parking lot: purchase price for land, $800,000; cost to clear the land, $30,000; cost of paving, $40,000; and lighting for the parking lot, $20,000.
How much should Homeland record in the Land Improvements account? |
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Definition
a.l$30,000
c.$60,000
b.$40,000
d.$90,000 |
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Term
| ____ 28. Dallas, Inc. determined that it had incorrectly estimated both the useful life and the estimated residual value of equipment which it purchased 2 years ago. When accounting for the change in its accounting estimates, Dallas must |
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Definition
A. correct the financial statements of prior years affected by the errors in the estimates.
b.determine the book value at the point of change and depreciate that amount over the remaining useful life.
c.add the amount of the error to the amount of the current year���s depreciation expense.
d.determine the effect of the error and report it as a loss on the income statement in Other Revenues and Expenses. |
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Term
Dana���s Decorating Co.
Dana���s Decorating Co. purchased a new delivery truck at the beginning of 2011. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2011. The truck was driven 20,000 miles during 2011 and 24,000 miles during 2012. The number of expected miles over five years is 100,000.
____ 29. Refer to information for Dana���s Decorating Co.
By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the truck? |
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Definition
a.The salvage value of $7,000.
b.Cost less total depreciation.
c.Cost plus total depreciation.
d.Total depreciation expenses under double-declining-balance and straight-line depreciation are equal. |
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Term
Dana���s Decorating Co.
Dana���s Decorating Co. purchased a new delivery truck at the beginning of 2011. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2011. The truck was driven 20,000 miles during 2011 and 24,000 miles during 2012. The number of expected miles over five years is 100,000.
____ 30. Refer to information about Dana���s Decorating Co.
Dana���s Decorating Co. wants to use the depreciation method that will result in the highest depreciation expense for 2011. Which method should be used? |
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Definition
a.straight-line
b.units-of-production
c.double-declining-balance
d.all methods create the same income in 2011 |
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Term
| ____ 32. Depreciation is a process by which |
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Definition
a.replacement funds are accumulated for plant and equipment.
b.the decline in market value of plant and equipment is determined and recorded.
c.the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.
d.the difference between current market value and historical cost of plant and equipment. |
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Term
| ____ 33. Recently, companies have been ordered by governmental agencies to clean up environmental damages caused by business operations. How should costs incurred in these situations be treated? |
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Definition
a.If a legal obligation exists, the cost of restoring the property must be added to the asset account.
b.As an expense entirely in one accounting period.
c.As an amortized expense in the period the cost is incurred.
d. Added to the asset, and then depreciated over 15 years. |
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Term
| In order to evaluates a companies gross profit ratio |
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Definition
| D. The ratio should be compared with those of both prior years and competitors |
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Term
| "Direct materials, also called raw materials, are |
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Definition
the ingredients used in making a product.
The costs of direct materials used in making a pair of shoes include the costs of fabric, plastic, and rubber." |
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Term
| "Direct labor consists of t |
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Definition
| he amounts paid to workers to manufacture the product. The hourly wage paid to an assembly line worker is a primary ingredient in the cost to make the shoes." |
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Term
| What are the three forms of manufacturing cost |
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Definition
Direct Labor
Direct Materials
Manufacturing Overhead |
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Term
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Definition
| The account wholesalers and retailers use the report inventory held for resale |
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