Q: Which equation correctly represents the calculation of Cost of Goods Sold (COGS) in a periodic inventory system?

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

Q: Which formula is used to calculate gross profit?

$$\text{Gross Profit} = \text{Net Sales} - \text{Cost of Goods Sold}$$

Question 1

Which of the following best describes the purpose of closing entries in the accounting cycle?

Accepted Answer

To transfer the balances of temporary accounts to retained earnings.

Question 2

A company purchased merchandise with terms FOB Shipping Point. Which account should the freight cost be recorded in?

Accepted Answer

Inventory

Question 3

Which equation correctly represents the calculation of Cost of Goods Sold (COGS) in a periodic inventory system?

Accepted Answer

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

Question 4

A company uses the perpetual inventory system and sells merchandise. Which of the following journal entries is required at the time of sale?

Accepted Answer

Debit Accounts Receivable; Credit Sales Revenue AND Debit Cost of Goods Sold; Credit Inventory

Question 5

Which inventory costing method results in the highest net income during periods of rising prices?

Accepted Answer

FIFO (First-In, First-Out)

Question 6

A company purchased $$\10$$,000$$ of merchandise and received a 2$$\%$ purchase discount for early payment. What is the amount paid?

Accepted Answer

$$\9$$,800$

Question 7

Which of the following is NOT a component of a classified balance sheet?

Accepted Answer

Sales Discounts

Question 8

A company records a sales return. Which accounts are affected?

Accepted Answer

Debit Sales Returns and Allowances; Credit Accounts Receivable

Question 9

Which principle requires inventory to be reported at the lower of cost or market?

Accepted Answer

Conservatism Principle

Question 10

A company has the following inventory data: Beginning Inventory $$\5$$,000$$, Purchases $$\$$20,000$$, Ending Inventory $$\7$$,000$. What is the Cost of Goods Sold?

Accepted Answer

$$\18$$,000$

Question 11

Which of the following statements about perpetual and periodic inventory systems is correct?

Accepted Answer

Perpetual systems record inventory transactions in real time.

Question 12

A company sells merchandise for $$\1$$,000$$ with terms 2/10$, n/30$. If the customer pays within 10 days, what amount does the company receive?

Accepted Answer

$$\980$

Question 13

Which of the following is true regarding the multi-step income statement?

Accepted Answer

It separates operating and non-operating activities.

Question 14

If a company uses FIFO and prices are falling, which statement is true?

Accepted Answer

FIFO will result in lower net income than LIFO.

Question 15

After closing entries are posted, which accounts will have zero balances?

Accepted Answer

Temporary accounts

Question 16

A company records a purchase return. Which journal entry is correct?

Accepted Answer

Debit Accounts Payable; Credit Inventory

Question 17

Which of the following is a result of using LIFO during periods of inflation?

Accepted Answer

Lower ending inventory

Question 18

A company’s post-closing trial balance will include which of the following?

Accepted Answer

Only permanent accounts

Question 19

Which formula is used to calculate gross profit?

Accepted Answer

$$	ext{Gross Profit} = 	ext{Net Sales} - 	ext{Cost of Goods Sold}$$

Question 20

A company has net sales of $$\50$$,000$$ and cost of goods sold of $$\$$30,000. $$What is the gross profit?

Accepted Answer

$$\20$$,000$

Principles of Accounting: Financial Statements, Merchandising Operations, and Inventory

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