Accounting A

Question 1

Gross Profit Formula

Answer 1

Revenue - Cost of goods Sold

Question 2

Revenue

Answer 2

Include the sale of products and services to customers

Question 3

Service Revenue

Answer 3

Providing a service is recorded as

Question 4

Inventory sales

Answer 4

Commonly referred to as sales revenue

Question 5

Net Sales

Answer 5

The net amount of revenue is commonly referred to as

Question 6

Cost of goods sold

Answer 6

Is the cost of inventory sold during the year including shipping/distribution

Question 7

Operating income

Answer 7

Gross Profit - Operating Expences

Question 8

In operating income after gross profit what is recorded

Answer 8

Operating expenses

Question 9

After operating income what does a company report

Answer 9

Nonoperating revenues and expenses.

Question 10

Income before income taxes

Answer 10

Operating income+no operating income

Question 11

Net income

Answer 11

Total - income tax expense = net income

Question 12

Inventory cost methods

Answer 12

1. Specific identification
2. First in first out
3. Last in first out
4. Weighted Average Cost

Question 13

Specific identification

Answer 13

• used primarily by companies with expensive unique products with low sales volume
• fine jewelery and prices of art

Question 14

Inventory definition

Answer 14

• items held for resale
  -materials used currently in the production of goods to be sold
  -items currently in production for future sale

Question 15

Determining inventory related amounts is very important because for some companies cost of goods sold represents the largest expense in the income statement

Answer 15

True

Question 16

Manufacturer or sells goods must take account for

Answer 16

Inventory

Question 17

The inventory cost flow assumption must match the physical flow of inventory units

Answer 17

False

Question 18

Margot inc which uses a perpetual inventory system purchases 500 units of inventory to be held for resale. Margot should debit the purchase to :

Answer 18

Inventory

Question 19

LIFO inventory assumes that the units sold are

Answer 19

The most recent units purchased

Question 20

The purchase discount term 2/10 n/30 means that the purchaser

Answer 20

Has 10 days from the purchase date in which to pay and receive 2% discount

Question 21

The weighted average cost method assumes that the cost of goods sold consists of

Answer 21

A mixture of all the goods available for sale

Question 22

FIFO

Answer 22

Most closely approximates the actual physical flow of inventory

Question 23

LIFO

Answer 23

provides better matching of current revenues with current inventory cost

Question 24

Recording a write down of inventory from cost to its lower net realizable value includes:

Answer 24

Debit: cost of goods sold
Credit: inventory

Question 25

The lower of cost and net realizable value method causes losses in the value of inventory to be recognized in the period when

Answer 25

the value declines below cost