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Sales Returns and Allowances is a contra-asset account.

A) True
B) False

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At the year end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of


A) The seller
B) The buyer
C) Both the seller and the buyer
D) Neither the seller no the buyer

E) A) and B)
F) None of the above

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During the current period, Audix Corp.sold products to customers for a total of $76,000.Due to defective products, customers were given $2,800 in refunds for products that were returned and another $3,500 in reductions to their account balances.Discounts in the amount of $5,500 were given for early payment of account balances. REQUIRED: Prepare the Net Sales section of Audix's income statement.

Correct Answer

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What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded?


A) Assets and stockholders' equity decrease.
B) Assets and stockholders' equity increase.
C) Assets decrease and liabilities increase.
D) Stockholders' equity decreases and liabilities increase.

E) C) and D)
F) A) and D)

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Which one of the following statements regarding changing inventory methods is true?


A) A change in inventory methods can be justified if the change is made to better match profits with revenue.
B) Changing inventory methods affects consistency.
C) One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity.
D) Tax advantages are valid justification for changing inventory methods.

E) A) and C)
F) B) and D)

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Ending inventory is equal to the cost of items on hand plus


A) merchandise in transit sold to customers FOB shipping point.
B) merchandise in transit sold to customers FOB destination.
C) the cost of all inventory purchased during the period.
D) merchandise purchased in transit with terms FOB destination.

E) C) and D)
F) A) and B)

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If a change in accounts payable was added back to net income on the statement of cash flows prepared using the indirect method, then the amount owed to suppliers during the period had decreased.

A) True
B) False

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Park, Inc.purchased merchandise from Jay Zee Music Company on June 5, 2015.The goods were shipped the same day.The merchandise's selling price was $15,000.The credit terms were 1/10, n/30.The shipping terms were FOB shipping point.Park received the merchandise on June 10, 2015.Park paid the amount due on June 13, 2015. If Park uses the periodic inventory system, the effect of recording the payment on June 13, 2015, will include


A) a decrease to Purchases for $15,000.
B) an increase to Inventory for $14,850.
C) a decrease to Cash for $15,000.
D) a decrease to Accounts Payable for $15,000.

E) None of the above
F) A) and C)

Correct Answer

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Gross margin as a percentage of sales is a common analytical tool for service companies.

A) True
B) False

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Under FIFO, the units in the ending inventory represent the oldest purchases).

A) True
B) False

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Givens Corp. Givens Corp.is a merchandising company that uses the periodic inventory system.Selected account balances are listed below: Givens Corp. Givens Corp.is a merchandising company that uses the periodic inventory system.Selected account balances are listed below: -Refer to information for Givens Corp. Calculate the cost of goods sold for Givens Corp. A) $275,000 B) $259,000 C) $241,000 D) $211,000 -Refer to information for Givens Corp. Calculate the cost of goods sold for Givens Corp.


A) $275,000
B) $259,000
C) $241,000
D) $211,000

E) B) and C)
F) None of the above

Correct Answer

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Which inventory costing method results in the highest inventory balance during a period of rising prices?


A) Weighted average cost
B) FIFO
C) LIFO
D) Both FIFO and LIFO result in the same inventory balance

E) A) and B)
F) B) and C)

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The gross profit ratio is calculated as gross profit divided by net income.

A) True
B) False

Correct Answer

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Accountants should be aware that LIFO liquidations can potentially result in which of the following?


A) If older less costly layers are liquidated, a correspondingly lower cost of goods sold will result.
B) If older less costly layers are liquidated, a correspondingly higher gross profit will result.
C) If older less costly layers are liquidated, the company may be faced with higher taxes for those deferred in previous periods.
D) All of these could result.

E) A) and C)
F) All of the above

Correct Answer

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Summer, Inc.has been in business for 20 years.During that time the company has consistently used the LIFO inventory costing method.Because of inflation, prices for merchandise have increased consistently over the 20 years.The company has maintained the same inventory quantities over the 20-year period.Which one of the following statements is true?


A) Summer, Inc.'s total net income for the past 20 years is greater than it would have reported using another inventory method.
B) Summer, Inc.will have paid more income taxes over the past 20 years than it would have if it had used the FIFO method.
C) Summer will have to continue using the LIFO method indefinitely because of generally accepted accounting principles and federal income tax rules.
D) The ending inventory figure reported on the balance sheet may be significantly lower than its current value.

E) A) and D)
F) All of the above

Correct Answer

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Klein's Shoe Company uses a perpetual inventory system.The beginning balance in its inventory account is $1,500 and the ending balance is $1,000.Cost of goods sold is $6,500.What was the amount of inventory purchased during the year?


A) $ 500
B) $6,000
C) $7,000
D) $7,500

E) A) and C)
F) None of the above

Correct Answer

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Floors, Inc.offers terms of 2/10, n/30 to credit customers.Tile Magic Corp.purchased 100 tile cutters with a list price of $20 each on August 5, 2015, on account. Tile Magic Corp.paid the invoice on August 31, 2015.How much sales discount will Floors recognize?


A) $ -0-
B) $ 40
C) $ 200
D) $ 236

E) A) and D)
F) B) and C)

Correct Answer

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Which of the following terms best describes "Cost of goods available for sale"?


A) Cost of goods available for sale is an expense account.
B) Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period.
C) Cost of goods available for sale is subtracted from net sales to arrive at the gross margin
D) Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year

E) B) and C)
F) A) and C)

Correct Answer

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Based upon the following data, determine the cost of merchandise sold for April. Based upon the following data, determine the cost of merchandise sold for April.

Correct Answer

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If ending inventory is overstated, then net income is overstated as well.

A) True
B) False

Correct Answer

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