Question

*1. Which of the following items would be an example of liability?
A. cash investments made by owners
B. cash received from a bank loan
C. cash received from customers for services provided
D. all of these

___________________________________________________________

2. Which of the following items appears in the operating activities section of the statement

    of cash flows?

A. Cash inflow from interest revenue.

B. Cash outflow for the purchase of a computer.
C. Cash inflow from the issuance of common stock.
D. Cash outflow for the payment of dividends.

___________________________________________________________

3. Which of the following financial statements provides information about a company’s success or failure for a particular length of time?

A. Statement of changes in equity
B. Income statement
C. Statement of cash flows
D. Balance sheet

___________________________________________________________

4. Grant Company purchased a computer for cash. The cash flow from this event should be shown on the    
    statement of cash flows as

A. an operating activity that increases cash.
B. a financing activity that decreases cash.

C. an investing activity that decreases cash.

D. an operating activity that decreases cash.

___________________________________________________________

5. Varghese Company paid cash to a building. As a result of this accounting event

A. total assets decreased.
B. total assets were unaffected.
C. total equity decreased.
D. none of these.

___________________________________________________________

*6. What is the relationship between gross margin and net income?

A. Gross Margin - Merchandise Inventory at the end of the period = Net Income
B. Gross Margin - Selling and Administrative Expenses = Net Income
C. Gross Margin + Selling and Administrative Expenses = Net income
D. Sales Revenue x Gross Margin Percentage = Net Income

___________________________________________________________

*7. The term "FOB destination" means

A. the seller of the merchandise is responsible for transportation costs.
B. the seller relinquishes ownership at the shipping point.
C. the buyer of the merchandise pays the shipping cost.
D. the buyer assumes responsibility at the shipping point.

___________________________________________________________

8. Cost of Goods Sold is reported

A. as an asset on the balance sheet.

B. as an expense on the income statement.

C. as a direct reduction of equity on the statement of changes in stockholders' equity.
D. as an addition to Sales Revenue on the income statement.

___________________________________________________________

9. Gruver Company maintains perpetual inventory records. The company's inventory account had a $5,500
      balance as of December 31, 2014. On that date, a physical count of inventory showed only $5,300 of
      merchandise in stock. The write-down to recognize the missing inventory will

A. decrease assets.
B. increase expense.
C. decrease equity.
D. all of these.

___________________________________________________________

10. A discount given to encourage prompt payment on a credit purchase of merchandise is called:

A. a cash discount.
B. a sales discount by the seller.
C. a purchase discount by the buyer.
D. all of these are correct.

___________________________________________________________

11. What costs should be included in the Merchandise Inventory account of a merchandising firm?

A. all costs necessary to acquire inventory and prepare it for sale
B. the purchase price of merchandise only
C. an allocated portion of period costs

D. the purchase price of the inventory + selling expenses

___________________________________________________________

Answer 1

1. Answer is Option D -All of these.

2. Answer is Option A - Cash inflow from interest revenue is a operating activity.

3. Answer is Option B - Income Statement

4. Answer is  Option C - An investing activity that decreases cash

5. Answer is Option B - Total assets were unaffected

6. Answer is Option B - Gross Margin - Selling & Administrative expenses = Net Income

7. Answer is Option A- The seller of the merchandise is responsible for transportation cost.

8. Answer is Option B- COGS is reported as an expense on the Income Statement

9. Answer is Option A- Decrease Assets

10. Answer is Option D- All of these are correct.

11. Answer is Option A- All costs necessary to acquire inventory and prepare it for sale.