Q: A company uses the periodic inventory system. At the end of the period, the formula to calculate Cost of Goods Sold (COGS) is:

$$\text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory}$$

Question 1

Which of the following best describes the primary purpose of financial accounting in a business?

Accepted Answer

To communicate financial information to external users such as investors, creditors, and regulators.

Question 2

A merchandising business differs from a service business primarily because it:

Accepted Answer

Buys and sells physical goods to earn revenue.

Question 3

Which of the following is NOT a step in the accounting cycle for a sole proprietorship?

Accepted Answer

Calculating income tax refunds

Question 4

A company uses the periodic inventory system. At the end of the period, the formula to calculate Cost of Goods Sold (COGS) is:

Accepted Answer

$$	ext{COGS} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory}$$

Question 5

Which internal control procedure is most effective in preventing cash theft in a business?

Accepted Answer

Depositing all cash receipts daily and reconciling bank statements regularly.

Question 6

If a company’s accounts receivable turnover ratio decreases significantly, what does this most likely indicate?

Accepted Answer

The company is taking longer to collect its receivables.

Question 7

Which of the following is an example of a plant asset?

Accepted Answer

Office Building

Question 8

A company purchased equipment for $50,000 with an estimated useful life of 10 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?

Accepted Answer

$$\5$$,000$

Question 9

Which method of accounting for uncollectible accounts recognizes bad debt expense only when an account is determined to be uncollectible?

Accepted Answer

Direct Write-Off Method

Question 10

A company’s trial balance shows a debit balance in the Cash account. Which of the following could explain this balance?

Accepted Answer

The company has more cash receipts than cash payments.

Question 11

Which of the following best describes the matching principle in accounting?

Accepted Answer

Expenses are matched with the revenues they help to generate in the same period.

Question 12

A business has the following balances: Beginning Inventory $$10,000, Purchases 25$$,000, Ending Inventory $8,000. What is the Cost of Goods Sold?

Accepted Answer

$$\27$$,000 = \$$10,000 + \25$$,000 - \$$8,000$$

Question 13

Which of the following is NOT considered a component of internal control over cash?

Accepted Answer

Allowing one person to handle all cash and recordkeeping

Question 14

Which of the following statements about intangible assets is TRUE?

Accepted Answer

They include patents, copyrights, and trademarks.

Question 15

A company’s bank reconciliation shows outstanding checks of $$2,000 and deposits in transit of 1$$,500. If the bank statement balance is $10,000, what is the adjusted cash balance?

Accepted Answer

$$\9$$,500 = \$$10,000 - \2$$,000 + \$$1,500$$

Question 16

Which of the following is a real-world example of the application of the allowance method for doubtful accounts?

Accepted Answer

A retail store estimates that 2% of its credit sales will not be collected and records bad debt expense at the end of each period.

Question 17

Which of the following best describes the purpose of inventory control in a merchandising business?

Accepted Answer

To prevent theft, loss, and errors in inventory records.

Question 18

A company’s income statement shows Sales Revenue of $$100,000, Cost of Goods Sold of 60$$,000, and Operating Expenses of $25,000. What is the company’s Net Income?

Accepted Answer

$$\15$$,000$

Question 19

Which of the following is a key reason why regular attendance is emphasized in the college’s attendance policy?

Accepted Answer

To establish a pattern of dependability and punctuality required in the workplace.

Question 20

Which of the following is a consequence of academic dishonesty as described in the syllabus?

Accepted Answer

A student may be subject to disciplinary procedures including dismissal or expulsion.

Financial Accounting I & II: Course Syllabus and Academic Policies

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