Glendale Community College » Accounting » Accounting 101 - Financial Accounting » Spring 2021

Accounting 101 - Financial Accounting » Spring 2021 » Chapter 6 Quiz

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Question #1

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

A. Inventory.

B. Purchases.

C. Accounts Payable.

D. Cost of Goods Sold.

Question #2

Operating income is defined as:

A. All revenues minus all expenses.

B. Income before Income Tax Expense.

C. Sales Revenue minus Cost of Goods Sold.

D. Gross Profit minus Operating Expenses.

Question #3

Which of the following represents the balance of Cost of Goods Sold at the end of the year?

A. The cost of inventory at the beginning of the year.

B. The cost of inventory purchased during the year.

C. The cost of inventory not yet sold by the end of the year.

D. The cost of inventory sold during the year.

Question #4

A company’s gross profit ratio measures:

A. The amount by which the sale of inventory exceeds its cost per dollar of sales.

B. The number of days the average inventory is held.

C. The average amount of sales revenue per unit of inventory sold during the year

D. The number of times the company sells its average inventory balance during the year.

Question #5

Under a perpetual inventory system:

A. Cost of goods sold is recorded with each sale.

B. Inventory purchases are recorded only at the end of the period.

C. Purchase discounts are not recorded.

D. Cost of good sold is recorded with a period-end adjusting entry.

Question #6

The entry to write down inventory from cost to net realizable value at the end of the year includes a:

A. Credit to Sales Revenue.

B. Debit to Cost of Goods Sold.

C. Debit to Inventory.

D. Credit to Accounts Payable.

Question #7

Net income is defined as:

A. All revenues minus all expenses.

B. Gross Profit minus Operating Expenses.

C. Income before Income Tax Expense.

D. Sales Revenue minus Cost of Goods Sold.

Question #8

Which of the following levels of profitability in a multiple-step income statement represents all revenues less all expenses?

A. Income before income taxes.

B. Operating income.

C. Net income.

D. Gross profit.

Question #9

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

A. Weighted-average.

B. Income will be the same under each assumption.

C. LIFO.

D. FIFO.

Question #10

Gross profit is defined as:

A. All revenues minus all expenses.

B. Income before Income Tax Expense.

C. Sales Revenue minus Operating Expenses.

D. Sales Revenue minus Cost of Goods Sold.

Question #11

A multiple-step income statement provides the advantage of:

A. Placing all revenues after all expenses.

B. Placing all revenues before all expenses.

C. Separating revenues and expenses based on their different types of activities.

D. Excluding the effects of income taxes in the calculation of net income.

Question #12

Fan Company sells inventory on account. The entry or entries to record this sale using a perpetual inventory system would include a:

A. Debit to Cost of Goods Sold.

B. Credit to Sales Revenue

C. Debit to Accounts Receivable.

D. Credit to Sales Revenue, Debit to Cost of Goods Sold and Debit to Accounts Receivable.

Question #13

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy’s gross profit ratio?

A. 20%

B. 30%

C. 10%

D. 25%

Question #14

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?

A. Weighted-average.

B. FIFO.

C. Any assumption can be used regardless of the tax reporting.

D. LIFO.

Question #15

Which of following best describes a merchandising company?

A. A company whose revenues exceed expenses.

B. A company that produces products from raw materials, labor, and overhead.

C. A company that provides services to its customers.

D. A company that purchases products that are primarily in finished form for resale to customers.

Question #16

Inventory is defined as:

A. The cost of goods sold to customers during the year.

B. Any assets of the company that can be sold.

C. The amount of cash received from the sale of goods to customers during the year.

D. Items a company intends for sale to customers.

Question #17

Fan Company sells inventory on account. The entry to record this sale using a periodic inventory system would include a:

A. Credit to Sales Revenue.

B. Credit to Inventory, Debit to Cost of Goods Sold and Credit to Sales Revenue.

C. Debit to Cost of Goods Sold.

D. Credit to Inventory.

Question #18

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold?

A. $20,000

B. $8,200

C. $17,800

D. $22,200

Question #19

At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjustment to write down inventory to net realizable value?

A. Increase in cost of ending inventory.

B. Increase in net income.

C. Decrease in net income.

E. No effect on net income or ending inventory.

Question #20

If a company understates its ending inventory in the current period, what effect will this have on the balance of Retained Earnings at the end of the following period?

A. Have no effect on retained earnings.

B. Not possible to determine with information given.

C. Overstate retained earnings.

D. Understate retained earnings.

Question #21

If a company understates its ending inventory in the current period, what effect will this have on cost of goods sold in the following period?

A. Understate cost of goods sold.

B. Not possible to determine with information given.

C. Have no effect on cost of goods sold.

D. Overstate cost of goods sold.

Question #22

Which inventory cost flow assumption generally results in the lowest reported amount for inventory when inventory costs are rising?

A. Last-in, first-out (LIFO).

B. First-in, first-out (FIFO).

C. Specific identification.

D. Average cost.

Question #23

A company’s inventory turnover ratio measures:

A. The quantity of inventory remaining at the end of the year.

B. The number of times the company sells its average inventory balance during the year.

C. The profitability on sales of inventory during the year.

D. The average cost at which inventory was purchased during the year.

Question #24

Fan Company purchases inventory on account. The entry to record this purchase using a periodic inventory system would include a debit to:

A. Purchases.

B. Accounts Payable.

C. Inventory.

D. Cost of Goods Sold.

Question #25

At the end of a reporting period, Gaston Corporation determines that its ending inventory has a cost of $6,500 and a net realizable value of $5,800. The adjustment to write down inventory to net realizable value would include:

A. A credit to inventory for $700.

B. A credit to cost of goods sold for $700.

C. A debit to inventory for $5,800.

D. A debit to cost of goods sold for $5,800.

Question #26

Using a periodic inventory system, recording the sale of inventory on account would include:

A. Debit Sales Revenue; credit Accounts Receivable.

B. Debit Accounts Receivable; credit Sales Revenue.

C. Debit Inventory; credit Accounts Receivable.

D. Debit Inventory; credit Sales Revenue.

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