Test 2

Question 1

After closing entries have been journalized and posted, all temporary accounts in ledger should have zero balances
(T or F)

Answer 1

true

Question 2

The dividends account is a permanent account whose balance is carried forward to the next accounting period
(T or F)

Answer 2

false

Question 3

Closing entries are journalized after adjusting entries have been journalized
(T or F)

Answer 3

true

Question 4

Retailers and wholeslers are both considered merchandisers

T or F

Answer 4

true

Question 5

Sales minus operating expenses equals gross profit

T or F

Answer 5

False

Question 6

under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs
(T or F)

Answer 6

true

Question 7

Freight terms of FOB destination means the seller pays (T or F)

Answer 7

true

Question 8

Freight costs incurred by the seller on an outgoing merchandise are an operating expense to the seller
(T or F)

Answer 8

true

Question 9

The “sales returned and allowances” account and the “sales discount” account are both classified as expense accounts
(T or F)

Answer 9

False

Question 10

The revenue recognition principle applies to merchandise by recognizing sales revenue when it is earned
(T or F)

Answer 10

true

Question 11

Freight-in is an account that is subtracted from the purchases account to arrive at cost of goods purchased
(T or F)

Answer 11

False

Question 12

Retained earnings is a part of stockholders equity

T or F

Answer 12

true

Question 13

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)

Answer 13

False

Question 14

Closing entries are necessary for…

Answer 14

temporary accounts only

Question 15

Net income from operations is gross profit less…

Answer 15

operating expenses

Question 16

The primary source of revenue for a whole seller is

Answer 16

sale of merchandise

Question 17

Cost of goods sold is determined only at the end of the accounting period in…

Answer 17

period inventory system

Question 18

which of the following expressions is correct

Answer 18

GP-OE=NI

Question 19

In a perpetual inventory system, cost of goods sold is recorded…

Answer 19

with each sale

Question 20

Closing entries are made…

Answer 20

to transfer net income to RE

Question 21

If a company determines costs of goods sold each time a sale occurs it…

Answer 21

uses the perpetual inventory system

Question 22

A buyer would record a payment within the discount period under a perpetual inventory system by crediting

Answer 22

merchandise inventory

Question 23

Hicks company purchased merchandise from buyer company with freight terms of FOB shipping point, this will be paid by….

Answer 23

the buyer

Question 24

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…

Answer 24

Accounts payable 5000
Inventory 5000
decreases accounts payable and comes off inventory

Question 25

Which of the following is usually prepared only at the end of a company annual accounting period?

Answer 25

journalizing and posting entries

Question 26

The step in the accounting cycle that is performed on a periodic basis is…

Answer 26

journalizing and posting adjusting entries

Question 27

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?

Answer 27

$1,666

Question 28

The income summary account is an

Answer 28

temporary account

Question 29

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…

Answer 29

credit retained earnings

Question 30

In preparing closing entries…

Answer 30

each expense account is credited

Question 31

Which of the following is an optional step in the accounting cycle of a business enterprise?

Answer 31

prepare a worksheet

Question 32

The final step in an accounting cycle is to prepare…

Answer 32

post-closing trail balance

Question 33

Name the four set journal entries

Answer 33

(revenue - Income summary)
(Income summary - expenses)
(Income summary - Retained earnings)
(Retained earnings - Dividends)

Question 34

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?

Answer 34

$19,700