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 a permanent equity account at the end of the period.

Question 2

A company using a perpetual inventory system purchases $5,000 of merchandise on account, terms 2/10, n/30. If the company pays within the discount period, what is the journal entry to record the payment?

Accepted Answer

Debit Accounts Payable $$5,000; Credit Inventory 100$$; Credit Cash $4,900

Question 3

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

Accepted Answer

Sales Revenue

Question 4

A company sells merchandise for $$2,000 on account. The cost of the merchandise sold is 1$$,200. Which journal entries are required under a perpetual inventory system?

Accepted Answer

Debit Accounts Receivable $$2,000; Credit Sales Revenue 2$$,000; Debit Cost of Goods Sold $$1,200; Credit Inventory 1$$,200

Question 5

Under the periodic inventory system, which of the following is true regarding the calculation of Cost of Goods Sold (COGS)?

Accepted Answer

COGS is calculated at the end of the period using the formula $$	ext{COGS} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory}.$$

Question 6

A company ships goods FOB Destination. When does the buyer take ownership and record the inventory?

Accepted Answer

When the goods arrive at the buyer's location.

Question 7

Which inventory costing method will result in the highest net income during a period of rising prices?

Accepted Answer

FIFO (First-In, First-Out)

Question 8

A company using the perpetual inventory system records a purchase return of $500. What is the correct journal entry?

Accepted Answer

Debit Accounts Payable $$500; Credit Inventory 500$$

Question 9

Which of the following accounts would NOT appear on a post-closing trial balance?

Accepted Answer

Sales Revenue

Question 10

A company had the following inventory transactions during the month:
- Beginning inventory: 100 units at $$10 each
- Purchased 200 units at 12 $$each
- Sold 150 units
Using the FIFO method, what is the cost of goods sold for the 150 units sold?

Accepted Answer

$1,600

Question 11

Which of the following best describes the difference between a multi-step and a single-step income statement?

Accepted Answer

A multi-step income statement separates operating and non-operating activities, while a single-step income statement does not.

Question 12

If a company records a sale with terms 2/10, n/30 and the customer pays within the discount period, which account is debited for the discount?

Accepted Answer

Sales Discounts

Question 13

Which of the following is true regarding the effect of inventory costing methods on the balance sheet during periods of inflation?

Accepted Answer

FIFO results in higher ending inventory values than LIFO.

Question 14

A company pays $300 in freight costs to have inventory delivered to its warehouse under FOB Shipping Point. How should this be recorded?

Accepted Answer

Debit Inventory $$300; Credit Cash 300$$

Question 15

Which of the following is a correct closing entry for a company with a $10,000 Sales Revenue account at year-end?

Accepted Answer

Debit Sales Revenue $$10,000; Credit Income Summary 10$$,000

Question 16

A company using the perpetual inventory system has the following data:
- Beginning Inventory: $$2,000
- Purchases: 8$$,000
- Ending Inventory: $3,000
What is the Cost of Goods Sold?

Accepted Answer

$7,000

Question 17

Which of the following is true about purchase discounts?

Accepted Answer

They reduce the cost of inventory when taken.

Question 18

A company records a sales return of $$400 for merchandise that originally cost 250. $$What are the correct journal entries under a perpetual inventory system?

Accepted Answer

Debit Sales Returns and Allowances $$400; Credit Accounts Receivable 400$$; Debit Inventory $$250; Credit Cost of Goods Sold 250$$

Question 19

Which of the following statements about the post-closing trial balance is correct?

Accepted Answer

It contains only permanent accounts.

Question 20

A company has the following balances at year-end:
- Sales Revenue: $$100,000
- Sales Returns and Allowances: 5$$,000
- Sales Discounts: $2,000
What is the company's net sales?

Accepted Answer

$93,000

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

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