Test 2 Flashcards
After closing entries have been journalized and posted, all temporary accounts in ledger should have zero balances
(T or F)
true
The dividends account is a permanent account whose balance is carried forward to the next accounting period
(T or F)
false
Closing entries are journalized after adjusting entries have been journalized
(T or F)
true
Retailers and wholeslers are both considered merchandisers
T or F
true
Sales minus operating expenses equals gross profit
T or F
False
under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs
(T or F)
true
Freight terms of FOB destination means the seller pays (T or F)
true
Freight costs incurred by the seller on an outgoing merchandise are an operating expense to the seller
(T or F)
true
The “sales returned and allowances” account and the “sales discount” account are both classified as expense accounts
(T or F)
False
The revenue recognition principle applies to merchandise by recognizing sales revenue when it is earned
(T or F)
true
Freight-in is an account that is subtracted from the purchases account to arrive at cost of goods purchased
(T or F)
False
Retained earnings is a part of stockholders equity
T or F
true
The terms 2/10, n/30 state that 2% discount is available if the invoice is paid within the first 10 days of next month
(T or F)
False
Closing entries are necessary for…
temporary accounts only
Net income from operations is gross profit less…
operating expenses
The primary source of revenue for a whole seller is
sale of merchandise
Cost of goods sold is determined only at the end of the accounting period in…
period inventory system
which of the following expressions is correct
GP-OE=NI
In a perpetual inventory system, cost of goods sold is recorded…
with each sale
Closing entries are made…
to transfer net income to RE
If a company determines costs of goods sold each time a sale occurs it…
uses the perpetual inventory system
A buyer would record a payment within the discount period under a perpetual inventory system by crediting
merchandise inventory
Hicks company purchased merchandise from buyer company with freight terms of FOB shipping point, this will be paid by….
the buyer
Rasher Co. returned defective goods costing $5000 to Markets Co on April 19th for credit. The goods were purchased on April 10th on credit terms 3/10, n/30. The entry by Rasher Co. on April 19th in receiving full credit is…
Accounts payable 5000
Inventory 5000
decreases accounts payable and comes off inventory
Which of the following is usually prepared only at the end of a company annual accounting period?
journalizing and posting entries
The step in the accounting cycle that is performed on a periodic basis is…
journalizing and posting adjusting entries
A credit sale of $1800 is made on July 15, terms 2/10, n/30 on which a return of $100 is granted on July 18. What amount is recieved as payment in full on July 24?
$1,666
The income summary account is an
temporary account
If the income summary has a credit balance after revenues and expenses have been closed into it, the closing entry for the income summary will include a…
credit retained earnings
In preparing closing entries…
each expense account is credited
Which of the following is an optional step in the accounting cycle of a business enterprise?
prepare a worksheet
The final step in an accounting cycle is to prepare…
post-closing trail balance
Name the four set journal entries
(revenue - Income summary)
(Income summary - expenses)
(Income summary - Retained earnings)
(Retained earnings - Dividends)
Stan’s market recorded the following: received $20,000 in items 2/10, n/30; returned $400 of shipment for credit; paid $100 freight on shipment; paid invoice within discount period; as a result…the company’s merchandise inventory is what?
$19,700
