1. Which of the following accounts is used with a periodic inventory system?
a. Purchases
b. Purchase Discounts
c. Purchases Returns and Allowances
d. All of the above
2. Which of the following would NOT be used to pay for purchases under the periodic system?
a. Debit to Accounts Payable
b. Credit to Purchase Discounts
c. Credit to Accounts Payable
d. Credit to Cash
3. A customer returned merchandise that he had paid for within a discount period for credit. The entry was recorded with a debit to Sales Returns and Allowances and a credit to Accounts Receivable for the net amount. This error would cause:
a. the period’s end assets to be understated.
b. the period’s end liabilities to be understated.
c. the period’s net income to be understated.
d. None of the above.
4. The freight paid on goods purchased F.O.B. shipping point was debited to the Freight Expense account. This error would cause:
a. the period’s end assets to be understated.
b. the period’s end liabilities to be understated.
c. the period’s net income to be overstated.
d. None of the above.
5. Merchandise paid for within the discount period for a Cash refund was returned. This will be recorded with a:
a. credit to a liability
b. credit to an asset
c. debit to a liability
d. debit to an asset
6. The journal entry to record a customer’s return of an item for a cash refund would:
a. be the same under both the periodic and perpetual system.
b. only include one entry under the perpetual system.
c. include two entries under the perpetual system.
d. None of the above.
7. Under the periodic inventory system, in addition to making the entry to record a sale, a company would:
a. debit Merchandise Inventory and credit Cost of Goods Sold.
b. debit Cost of Goods Sold and credit Merchandise Inventory.
c. debit Cost of Goods Sold and credit Purchases.
d. Make no additional entry.
8. James borrowed $550 from Tracy. James Promised in writing that he would repay the month to Tracy on May 13, 2013. At the time of the loan, Tracy recorded the truncations as a(n):
a. Accounts Receivable
b. Accounts Payable
c. Promissory Note Receivable.
d. Promissory Note Payable
9. The separation of duties among the employees of the accounting department is an example of a(n):
a. internal control system
b. document system
c. voucher system.
d. check-paying system
10. Which situation would NOT result in a separation of duties?
a. the person who approves purchases does not make the payments
b. the person who processes customer payments is the same as the person who makes journal entries
c. the person who makes purchases is different from the one who approves the purchase.
d. the person who distributes paychecks does not make journal entries.
11. Immediately after receiving a note from a customer, Ross discounted it at the bank and received the proceeds. Ross’s entry on his books would be to:
a. debit cash and credit notes payable.
b. debit cash, credit interest income, and credit notes receivable.
c. debit cash, debit interest expense, and credit notes receivable.
d. debit notes receivable, credit cash, and credit interest income.
12. When major endorsed customer Minor’s note to story county bank, Major agreed to pay the note at maturity if minor failed to pay. Major’s liability is a(n):
a. contra-liability.
b. absolute liability.
c. contingent liability
d. regular liability
13. The entry to record the cash received on a note discounted at less than face value is to:
a. debit cash, credit interest income, and credit notes receivable.
b. debit cash, debit interest expense, and credit notes receivable.
c. debit cash and credit interest expense.
d. debit notes receivable and credit cash.
14. Bill’s bikes discounts a 90-day, 8%, $4,000 note at a bank at 12%. The discount period is 50days. It records the proceeds by:
a. debiting cash $4,012; crediting notes receivable $4,000; crediting interest income $12.
b. debiting cash $4,160; crediting notes receivable $4,080; crediting interest income $80.
c. debiting cash $4,068, crediting notes receivable $4000; Crediting interest income $68.
d. debiting cash $4,012; crediting notes receivable $4,000, crediting interest expense $12.
15. An acid test (quick. ratio of 0.75 to 1 would indicate:
a. a ratio that would not allow a company to pay off all current liabilities with quick assets.
b. that for every $1 of short-term debt there are $0.75 of quick assets to meet short-term obligations.
c. that for every $1 of current assets there are $0.75 of short-term debt.
d. Both A & B
16. Selected data for stick’s design are given as of December 31, Year 1 and Year 2 (rounded to the nearest hundredth):
Year 2 Year 1
Net credit sales $25,000 $30,000
Cost of goods sold 16,000 18,000
Net income 2,000 2,800
Cash 5,000 900
Accounts receivable 3,000 2,000
Inventory 2,000 3,600
Current Liabilities 6,000 5,000
What is the acid-test ratio for Stick’s Design?
a. 1.67:1
b. 2:1
c. 1.33:1
d. 1.5:1
17. With a beginning Accounts Receivable balance of $20,000, an ending balance of $26,000, and net credit sales of $408,000, what is the Accounts Receivable turnover ratio?
a. 0.05
b. 20.4
c. 17.7
d. 68
18. With a beginning Accounts Receivable balance of $70,000, an ending balance of $140,000, and net credit sales of $800,000, what is the Accounts Receivable turnover ratio (rounded to the nearest tenth)?
a. 7.6
b. 11.4
c. 5.7
d. 3
19. Carla’s Fashions has an average collection period of 30 days. You could infer that Carla’s fashions:
a. bills its customers monthly
b. bills its customers quarterly
c. has an accounts receivable turnover of approximately 12.
d. both A & C.
20. If the average collection period is 35 days, this means:
a. it is 35 days from the date of purchase to the date of payment.
b. it is 35 days from the date of sale to the date of receipt of payment.
c. it is 35 days from the date of discount to the date of receipt of payment.
d. none of the above
21. In a perpetual inventory system:
a. Merchandise Inventory is debited every time inventory is purchased.
b. Cost of Goods Sold is debited every time inventory is sold.
c. a physical inventory is taken at least annually.
d. all of the above
22. Under the perpetual system, the purchase of merchandise is recorded by a:
a. debit to Merchandise Inventory; credit to Accounts Payable or Cash.
b. debit to Cost of Goods Dold; credit to Accounts Payable.
c. debit to Purchases; credit to Accounts Payable.
d. debit to Accounts Payable; credit to Purchases.
23. Barry’s books uses a periodic inventory system. The business sold 45 copies of Helpful Hints during September. Other data for September include:
Sep. 1 Balance 12 books @ $20
8 Purchased 10 books @ $21
17 Purchased 30 Books @ $22
25 Purchased 15 Books @ $24
Ending inventory under the FIFO method is:
a. $450
b. $514
c. $528
d. $440
24. Lois’s Furniture uses a periodic inventory system. The business sold 60 tables in August. Other data for August includes:
Aug. 1 Balance 8 @ $15
9 Purchased 12 @ 18
18 Purchased 60 @ 20
Ending inventory under the LIFO method is:
a. $1,200
b. $336
c. $1,130
d. $400
25. Shayla’s Design uses a periodic inventory system. The business sold 33 artist kits during January. Other data for January includes:
Jan. 1 Balance 12 kits @ $30
11 Purchased 20 kits @ $33
25 Purchased 26 kits @ $35
Ending inventory under the FIFO method is:
a. $1,141
b. $1,055
c. $875
d. $789
Less kits sold 33
26. Sterling Supply uses a periodic inventory system. The business sold 25 globes during March. Other data for March includes:
Mar. 1 Balance 20 @ $12
11 Purchased 10 @ 11
25 Purchased 10 @ 10
Ending inventory under the weighted-average method is:
a. $281.25
b. $155.00
c. $180.00
d. $168.75
27. Last year’s ending inventory was overstated. This error would cause:
a. this period’s net income to be overstated.
b. this period’s net income to be understated.
c. this period’s end assets to be overstated.
d. none of the above.
28. If the ending inventory is overstated in Period 1,:
a. beginning inventory in Period 2 is overstated.
b. goods available for sale in Period 2 are overstated.
c. Cost of Goods Sold in Period 2 is overstated.
d. All of the above.
29. An overstatement of ending inventory in one period results in:
a. an overstatement of net income for the next period.
b. no effect on net income for the next period.
c. an overstatement of the ending inventory for the next period.
d. an understatement of net income for the next period.
30. As a result of understating ending inventory by $10,000 at the end of Year 1,:
a. net income for Year 2 will be understated.
b. net income for Year 2 will be overstated.
c. ending inventory for Year 2 will be overstated.
d. there will be no effect on net income for Year 2.
31. The journal entry to record a sale of inventory under the perpetual system includes a:
a. debit to Cost of Goods Sold and a credit to Merchandise Inventory.
b. debit to Cost of Goods Sold and a debit to merchandise Inventory.
c. debit to Accounts Receivable or Cash and a credit to Sales.
d. Both A & C
32. The journal entry to record the return of a purchase of inventory under the periodic system includes a:
a. debit to Merchandise Inventory
b. credit to Purchases Returns and Allowances.
c. credit to Merchandise Inventory.
d. credit to Purchases.
33. A credit customer purchased a $450 worth of items. Two days later, she returned $300 with of those items. The entry to record this under the perpetual inventory method would include a:
a. debit to Sales Returns and Allowances of $300 and a credit to Accounts Receivable of $300
b. debit to Merchandise Inventory for our cost.
c. credit to Cost of Goods Sold for our cost.
d. All of the above.
34. the company returned $200 worth of damaged merchandise. The entry to record this under the periodic inventory method is:
a. debit Merchandise Inventory $200; credit Accounts Payable $200.
b. debit Cost of Goods Sold $200; credit Accounts Payable $200.
c. debit Accounts Payable $200; credit Purchases Returns and Allowances $200.
d. debit Accounts Payable $200; credit Merchandise Inventory $200.
