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Devry ACCT 301 Week 2 Quiz Latest
Quiz 2
1.
If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:
Cost of goods sold.
Gross profit.
Net sales.
Current assets.
Net income.
2.
Days’ sales in inventory:
Is also called days’ stock on hand.
Focuses on average inventory rather than ending inventory.
Is used to measure solvency.
Is calculated by dividing cost of goods sold by ending inventory.
Is a substitute for the acid-test ratio.
3.
When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?
FIFO.
LIFO.
Weighted average.
Specific identification.
Gross margin.
4.
Goods in transit are included in a purchaser’s inventory:
At any time during transit.
When the purchaser is responsible for paying freight charges.
When the supplier is responsible for freight charges.
If the goods are shipped FOB destination.
After the half-way point between the buyer and seller.
5.
Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as expenses when incurred. The argument that supports this is called:
The matching principle.
The materiality constraint.
The cost principle.
The conservation constraint principle.
The lower of cost or market principle.
6.
Merchandise inventory includes:
All goods owned by a company and held for sale.
All goods in transit.
All goods on consignment.
Only damaged goods.
Only non-damaged goods.
7.
Management decisions in accounting for inventory cost include all of the following except:
Costing method.
Inventory system (perpetual or periodic).
Customer demand for inventory.
Use of market values or other estimates.
Items included in inventory and their costs.
8.
The full disclosure principle:
Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income.
Requires that companies use the same accounting method for inventory valuation period after period.
Is not subject to the materiality principle.
Is only applied to retailers.
Is also called the consistency principle.
9.
Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except:
Prenumbered inventory tickets.
A manager does not confirm that all inventories are ticketed once, and only once.
Counters must confirm the validity of inventory existence, amounts, and quality.
Second counts by a different counter.
Counters of inventory should not be those who are responsible for the inventory.
10.
The inventory valuation method that results in the lowest taxable income in a period of inflation is:
LIFO method.
FIFO method.
Weighted-average cost method.
Specific identification method.
Gross profit method.
11.
Which of the following accounts would be closed with a debit?
Sales Discounts.
Sales Returns and Allowances.
Cost of Goods Sold.
Operating Expenses.
Sales.
12.
When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for Merchandise Inventory is:
The ending inventory amount.
The beginning inventory amount.
Equal to the cost of goods sold.
Equal to the cost of goods purchased.
Equal to the gross profit.
13.
The current period’s ending inventory is:
The next period’s beginning inventory.
The current period’s cost of goods sold.
The prior period’s beginning inventory.
The current period’s net purchases.
The current period’s beginning inventory.
14.
The acid-test ratio differs from the current ratio in that:
Liabilities are divided by current assets.
Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.
The acid-test ratio measures profitability and the current ratio does not.
The acid-test ratio excludes short-term investments from the calculation.
The acid-test ratio is a measure of liquidity but the current ratio is not.
15.
A trade discount is:
A term used by a purchaser to describe a cash discount given to customers for prompt payment.
A reduction in price below the list price.
A term used by a seller to describe a cash discount granted to customers for prompt payment.
A reduction in price for prompt payment.
Also called a rebate.
16.
A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
Reflects an increase in amount due from a customer.
Recognizes that a customer returned merchandise and/or received an allowance.
Requires a debit memorandum to recognize the customer’s return.
Is recorded when a customer takes a discount.
Reflects a decrease in amount due a supplier.
17.
Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:
Cost of goods sold.
Selling expenses.
Purchasing expenses.
General and administrative expenses.
Non-operating activities.
18.
The following statements regarding merchandise inventory are true except:
Merchandise inventory is reported on the balance sheet as a current asset.
Merchandise inventory refers to products a company owns and intends to sell.
Merchandise inventory can include the cost of shipping the goods to the store and making them ready for sale.
Merchandise inventory does not appear on the balance sheet of a service company.
Merchandise inventory purchases are not considered part of the operating cycle for a business.
19.
Beginning inventory plus net purchases is:
Cost of goods sold.
Merchandise available for sale.
Ending inventory.
Sales.
Shown on the balance sheet.
20.
A merchandising company:
Earns net income by buying and selling merchandise.
Receives fees only in exchange for services.
Earns profit from commissions only.
Earns profit from fares only.
Buys products from consumers.
21.
All of the following statements regarding the Income Statement columns on the worksheet are true except:
The balances in the Income Statement credit column are revenues.
The balances in the Income Statement credit column are unearned revenues.
The balances in the Income Statement debit column are expenses.
The difference between the totals of the Income Statement columns is net income or net loss.
The net income or net loss from the Income Statement columns is entered in the Balance Sheet & Statement of Owner’s Equity columns.
22.
Which of the following statements regarding reporting under GAAP and IFRS is not true:
Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets.
The definition of an asset under GAAP and IFRS involves three basic criteria.
Both GAAP and IFRS define the initial asset value as replacement value.
The definition of a liability under GAAP and IFRS involves three basic criteria.
After acquisition, one of two asset measurement systems is applied.
23.
A post-closing trial balance reports:
All ledger accounts with balances, none of which can be temporary accounts.
All ledger accounts with balances, none of which can be permanent accounts.
All ledger accounts with balances, which include some temporary and some permanent accounts.
Only revenue and expense accounts.
Only asset accounts.
24.
In the process of completing a work sheet, you determine that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to
the Adjustments debit column and the Adjustments credit column.
the Unadjusted Trial Balance debit column and the Adjustments credit column.
it is not practical to enter Net Income (or Net Loss) on the work sheet.
the Balance Sheet & Statement of Owner’s Equity debit column and the Income Statement credit column.
the Income Statement debit column and the Balance Sheet & Statement of Owner’s Equity credit column.
25.
Which of the following errors would cause the Balance Sheet and Statement of Owner’s Equity columns of a work sheet to be out of balance?
Entering an asset amount in the Income Statement Debit column.
Entering a liability amount in the Income Statement Credit column.
Entering an expense amount in the Balance Sheet and Statement of Owner’s Equity Debit column.
Entering a revenue amount in the Balance Sheet and Statement of Owner’s Equity Debit column.
Entering a liability amount in the Balance Sheet and Statement of Owner’s Equity Credit column.
26.
Closing the temporary accounts at the end of each accounting period does all of the following except:
Serves to transfer the effects of these accounts to the owner’s capital account on the balance sheet.
Prepares the withdrawals account for use in the next period.
Gives the revenue and expense accounts zero balances.
Has no effect on the owner’s capital account.
Causes owner’s capital to reflect increases from revenues and decreases from expenses and withdrawals.
27.
Permanent accounts include all of the following except:
Accumulated Depreciation – Equipment.
Prepaid Rent.
Unearned Consulting Revenue.
Accounts Payable.
Depreciation Expense – Equipment.
28.
Which of the following statements is incorrect?
Working papers are useful aids in the accounting process.
On the work sheet, the effects of the accounting adjustments are shown on the account balances.
After the work sheet is completed, it can be used to help prepare the financial statements.
On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.
A worksheet is not a substitute for financial statements.
29.
Another name for temporary accounts is:
Real accounts.
Contra accounts.
Accrued accounts.
Balance column accounts.
Nominal accounts.
30.
The closing process is necessary in order to:
calculate net income or net loss for an accounting period.
ensure that all permanent accounts are closed to zero at the end of each accounting period.
ensure that the company complies with state laws.
ensure that net income or net loss and owner withdrawals for the period are closed into the owner’s capital account.
ensure that management is aware of how well the company is operating.
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