Question

Inventory is classified on the balance sheet as a

a.current liability

b.long-term asset

c.current asset

d.long-term liability

What is the term applied to the excess of sales over the cost of goods sold?

a.net income

b.gross profit

c.operations

d.gross sales

The inventory system employing accounting records that continuously disclose the amount of inventory is called

a.periodic

b.retail

c.perpetual

d.physical

Calculate the gross profit for Jefferson Company based on the following:

Sales	$764,000
Selling expenses	42,500
Cost of goods sold	538,000

a.$183,500

b.$721,500

c.$495,500

d.$226,000

Calculate income from operations for Jonas Company based on the following data:

Sales	$764,000
Selling expenses	42,500
Cost of goods sold	538,000

a.$226,000

b.$711,500

c.$485,500

d.$173,500

The primary difference between the periodic and perpetual inventory systems is that a

a.periodic system keeps a record showing the inventory on hand at all times

b.periodic system determines the inventory on hand only at the end of the accounting period

c.periodic system records the cost of the sale on the date the sale is made

d.periodic system provides an easy means to determine inventory shrinkage

In credit terms of 3/15, n/45, the "3" represents the

a.percent of the cash discount

b.full amount of the invoice

c.number of days when the entire amount is due

d.number of days in the discount period

Which of the following accounts has a normal credit balance?

a.Inventory

b.Accounts Receivable

c.Sales

d.Delivery Expense

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

a.debit to Inventory

b.debit to Accounts Payable

c.credit to Sales

d.credit to Inventory

Which of the following accounts usually has a debit balance?

a.Sales

b.Inventory

c.Accounts Payable

d.Sales Tax Payable

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a.n/30

b.consigned

c.FOB shipping point

d.FOB destination

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

a.does not take a discount

b.journalizes a reduction for the cost of the merchandise

c.makes no journal entry for the freight

d.journalizes a reimbursement to the seller

When the perpetual inventory system is used, the inventory sold is debited to

a.Supplies Expense

b.Cost of Goods Sold

c.Sales

d.Inventory

Generally, the revenue account for a merchandising business is entitled

a.Gross Sales

b.Sales

c.Gross Profit

d.Fees Earned

Answer 1

Ans. 1	Option C    Currrent assets
	Explanations: Inventory is a current asset, so it is classified in the current assets section
	on the balance sheet.
Ans. 2	Option B   Gross profit
	Explanations: If sales is higher than cost of goods sold then the difference is known as
	gross profit.
Ans. 3	Option C    Perpetual
	Explanations: In a perpetual inventory method, the cost of goods sold and balance inventory
	are recorded on a continual basis.
Ans. 4	Option D    $226,000
	Calculations:
	Sales	$764,000
	Less: Cost of goods sold	-$538,000
	Gross profit	$226,000