20 MINUTE QUIZ

Circle the correct answer. True/False 1. An important purpose of closing entries is to set permanent account balances to zero in order to begin the next period. True 2. False

The preparation of reversing entries is a required step in the accounting cycle. True False

3.

A worksheet can be used as a basis for posting the adjustments to the ledger. True False

4.

The content of the owners equity section of a proprietorship is the same as the content of the owners equity section of a corporation. True False

5.

Adjustments are journalized and posted only at the end of an accounting period, whereas correcting entries are journalized and posted whenever an error is discovered. True False

6.

Current assets are resources that can be converted into cash, but are not expected to be converted within one year. True False

7.

Long-term liabilities such as bank notes payable, mortgages payable, and bonds payable are expected to be paid from existing current assets. True False

8.

The balance of Accumulated Depreciation will appear in the credit side of the worksheets Balance Sheet column. True 9. True False The relationship between current assets and current liabilities is important in evaluating a companys liquidity. False

10.

Intangible assets are not listed on the balance sheet because they do not have physical substance. True False

Multiple Choice 1. The worksheet is a type of a . financial statement. b. permanent accounting record. c . working paper. d. journal. In preparing closing entries, which of the following columns of the worksheet are the most helpful? a . The Adjustments column b. The Adjusted Trial Balance columns c . The Income Statement columns d. The Balance Sheet columns The proper sequence for the accounting cycle is a . analyze, journalize, post, adjust, prepare statements, close. b. post, journalize, analyze, prepare statements, close, adjust. c . prepare statements, journalize, post, adjust, close, analyze. d. journalize, post, close, prepare statements, adjust, analyze. After all the closing entries have been posted, the balance of the income summary will be a . a debit if a net income has occurred. b. a debit if a net loss has occurred. c . a credit if a net loss has occurred. d. zero. The post-closing trial balance will a . be prepared before closing entries are posted to the ledger. b. contain both income statement and balance sheet accounts. c . contain only balance sheet accounts. d. contain only income statement accounts.

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20 MINUTE QUIZ
Circle the correct answer. True/False 1. Measuring net income for a merchandising company is conceptually the same as for a service company. True False

2. The cost of goods sold is determined only at the end of the accounting period under a perpetual inventory system. True False

3. Under the perpetual inventory system, the purchase of merchandise is recorded with a debit to the Purchases account. True False

4. Sales Discounts is a contra revenue account and has a debit balance. True False

5. A customer may receive a sales discount for goods that are damaged or defective. True False

6. In a single-step income statement, gross profit and operating income are shown on the income statement. True False

7. In the balance sheet, merchandise inventory is reported as a current asset immediately below accounts receivable. True False

8. Income from operations is determined by subtracting administrative expenses from gross profit. True False

9. Administrative expenses relate to general operating activities such as personnel management. True False

*10. In preparing a worksheet for a merchandising firm, all income statement column debits represent expenses. True False

Multiple Choice 1. Sales Discounts a. is a contra revenue account. b. has a normal debit balance. c. appears on the income statement. d. all of the above. 2. When a company uses the perpetual method of accounting for inventories the a. Merchandise Inventory account does not change until the end of the year. b. Merchandise Inventory account is debited when inventory is purchased and Cost of Goods Sold is debited when inventory is sold. c. sale of inventory requires a credit to Cost of Goods Sold. d. acquisition of merchandise requires a debit to Purchases. 3. The recording of a sale requires a a. credit to a sales account and a debit to an asset account. b. debit to Cash and a credit to Capital X. c. debit to a sales account and credit to an asset account. d. credit to Sales and a debit to Sales Discounts. 4. Which of the following would not be considered an operating expense? a. Cost of goods sold. b. Rent expense. c. Freight-out. d. Office expense. 5. Which of the following is reported on both a multiple-step and a single-step income statement? a. Gross profit. b. Income from operations. c. Other revenues and gains. d. Net sales.

20 MINUTE QUIZ
Circle the correct answer. True/False 1. When prices are rising, FIFO results in a higher ending inventory than LIFO. True 2. False

We can use the LIFO inventory method only if we know that the newest units are always sold first. True False

3.

Goods in transit would be included in the ending inventory of the buyer and the seller. True False

4.

Under the LCM basis, market is defined as current replacement cost, not selling price. True False

5.

When beginning inventory is understated, net income will be understated. True False

6.

Cost of goods sold purchased less the ending inventory equals cost of goods sold. True False

7.

The LIFO method assumes that the earliest goods purchased are the first to be sold. True False

8.

The inventory turnover ratio is computed by dividing the cost of goods sold by the ending inventory. True False

*9.

The gross profit method estimates the cost of ending inventory by applying a gross profit rate to net sales. True False

*10.

The retail inventory method and the gross profit method are both methods of inventory estimation. True False

Multiple Choice 1. The cost flow method that results in the lowest income taxes when prices are rising is a. average cost. b. FIFO. c. LIFO. d. specific identification. The data below are for Parrett Enterprises: Beginning inventory 150 units at $2.00 PurchaseAugust 375 units at $1.50 PurchaseOctober 150 units at $3.00 A periodic inventory system is used; ending inventory is 330 units. What is the ending inventory under FIFO? a. $570 b. $743 c. $593 d. $720 3. Double-counting an inventory item at year end will result in a. understated tax liability. b. overstated cost of goods sold. c. overstated net income. d. understated beginning inventory for the next period. A retail company has goods available for sale of $300,000 at retail and $210,000 at cost, and ending inventory of $80,000 at retail. What is the estimated cost of goods sold? a. $220,000 b. $154,000 c. $210,000 d. $56,000 Which method might be used to estimate inventory costs when physical inventories are not taken? a. First-in, first-out b. Last-in, first-out c. Average cost method d. Gross profit method

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