Question 1

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Washington Warehouse is a small retail business that specializes in the sale of top-of-the-line televisions.This year,the store has begun to carry the Flat TV manufactured by Bass Co.Thus far,Washington has recorded the following transactions involving the Flat TV:
 
-If Washington uses a perpetual inventory system,the gross profit on the Flat TVs as of February 12th is:

Accepted Answer

The answer of [The following information applies to the questions...

Question 2

Jayson Products uses a perpetual inventory system.At year-end,the Inventory account had a balance of $280,000,but a complete year-end physical inventory indicated goods on hand costing only $273,000.Jayson should:

Accepted Answer

Under a perpetual inventory system, the Inventory account is continuously updated to reflect inventory on hand. When the physical inventory indicates that the actual inventory on hand ($273,000) is less than the recorded amount ($280,000), the company should adjust the Inventory account to match the physical count. This means reducing the Inventory account by the difference of $7,000, without affecting the cost of goods sold or recording a current liability.

Question 3

Cumberland,Inc.has applied to its bank for a loan.The bank asks Cumberland's controller about the total amount of the company's accounts receivable.Assuming that all accounting records are up-to-date,the controller can best answer this question by referring to:

Accepted Answer

The Accounts Receivable control account in the general ledger summarizes the total amount owed to the company by its customers, providing the most direct and consolidated information about the total accounts receivable.

Question 4

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World of Sound is a small retail business that specializes in the sale of top-of-the-line sound systems.This year,the store has begun to carry the Surround Sound manufactured by Carp Co.Thus far,World of Sound has recorded the following transactions involving the Surround Sound
 
-If World of Sound uses a perpetual inventory system,the journal entry to record the sale on February 12th would include which of the following? (Assume that World of Sound uses FIFO,meaning that the first goods purchased are the first ones to be sold. )

Accepted Answer

Since the company uses FIFO, the first goods purchased are the first ones to be sold. The cost of goods sold will be the value of the oldest inventory sold. Therefore, the journal entry to record the sale on February 12th would include a debit to the Cost of Goods Sold for $45,750.

Question 5

[The following information applies to the questions displayed below.]
Washington Warehouse is a small retail business that specializes in the sale of top-of-the-line televisions.This year,the store has begun to carry the Flat TV manufactured by Bass Co.Thus far,Washington has recorded the following transactions involving the Flat TV:
 
-If Washington uses a perpetual inventory system,the journal entry to record the purchase on January 18th would include which of the following?

Accepted Answer

With a perpetual inventory system, the inventory is constantly updated and tracked. Therefore, when Washington Warehouse purchases the Flat TV from Bass Co., it should debit its Inventory account for the cost of the TVs. Option A is incorrect because Purchases is not affected when using perpetual inventory system. Option B is incorrect because Cost of Goods Sold is only affected when goods are sold. Option C is incorrect because a credit to Inventory decreases its value, whereas the purchase of inventory should increase it.

Question 6

Berg Tooling reports net sales of $325,000,gross profit of $175,000,and net income of $15,000.The company's cost of goods sold is:

Accepted Answer

The cost of goods sold is calculated by subtracting gross profit from net sales: $325,000 - $175,000 = $150,000. Therefore, the correct answer is B.

Question 7

The Cost of Goods Sold account is closed by:

Accepted Answer

The Cost of Goods Sold account is closed by debiting the Income Summary account and crediting the Cost of Goods Sold account. This transfers the expense of goods sold during the period to the Income Summary account, which is then used to determine the net income or loss for the period.

Question 8

Washington maintains a subsidiary ledger account for each type of TV carried in the store.An examination of the account for the Flat TV model at the end of February would show:

Accepted Answer

The question states that Washington maintains a subsidiary ledger account for each type of TV carried in the store. Therefore, we can assume that the account for Flat TV model would show the number of units of that particular TV that Washington has on hand at the end of February and the total value of those units. The question does not provide any information about owing money to Bass, so option D can be eliminated. Option A can also be eliminated as it only accounts for 4 units which seems like a low number for a store that likely sells a variety of TVs. Option C seems like an excessively high amount of units and value for one type of TV. Therefore, option B is the best choice as it provides a reasonable number of units on hand with a total value that is also reasonable for a store selling TVs.

Question 9

VanRoy Supplies reports net sales of $1,750,000,net income of $175,000,and gross profit of $300,000.The company's cost of goods sold is:

Accepted Answer

Gross profit = net sales - cost of goods sold
$300,000 = $1,750,000 - cost of goods sold
So, cost of goods sold = $1,750,000 - $300,000 = $1,450,000. Therefore, the correct choice is D.

Question 10

Parkside Pool reports net sales of $625,000,gross profit of $275,000,and net income of $15,000.The company's cost of goods sold is:

Accepted Answer

Cost of goods sold can be calculated using the following formula:

Cost of Goods Sold = Net Sales - Gross Profit

Thus, Cost of Goods Sold = $625,000 - $275,000 = $350,000.

Therefore, the correct answer is option B.

Question 11

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World of Sound is a small retail business that specializes in the sale of top-of-the-line sound systems.This year,the store has begun to carry the Surround Sound manufactured by Carp Co.Thus far,World of Sound has recorded the following transactions involving the Surround Sound
 
-If World of Sound uses a perpetual inventory system,the journal entry to record the purchase on May 18th would include which of the following?

Accepted Answer

With a perpetual inventory system, inventory is debited when goods are purchased. Therefore, the journal entry to record the purchase of Surround Sound on May 18th would include a debit to Inventory for $38,250.

Question 12

The purchasing agent of Superb Service Co.wants to know the dollar amount of inventory purchased on account during the year from a particular supplier.This information can be found most easily in Superb Service's:

Accepted Answer

The dollar amount of inventory purchased on account from a particular supplier would be recorded in the accounts payable subsidiary ledger, which maintains a record of all individual creditor balances.

Question 13

The basic purpose of a subsidiary ledger is to:

Accepted Answer

A subsidiary ledger provides detailed information about the individual items that make up the balance of a general ledger account. This allows accountants to track specific transactions and make adjustments as necessary. It does not provide a chronological record of all business transactions, enable the preparation of financial statements on its own, or provide information to persons outside of the organization.

Question 14

Sutton Supplies reports net sales of $3,750,000,net income of $375,000,and gross profit of $900,000.The company's cost of goods sold is:

Accepted Answer

The answer of Sutton Supplies reports net sales of $3,750,000,net...

Question 15

The operating cycle:

Accepted Answer

The operating cycle starts with using cash to purchase merchandise and ends with collecting the cash back from customers. It includes all the activities involved in converting cash to inventory, inventory to accounts receivable, and accounts receivable back to cash. It is not repeated only once per year and could have more than seven steps, depending on the business. It could be longer for a manufacturer than for a retailer, depending on the production and sales cycles.

Question 16

Which of the following should not be classified as inventory in the balance sheet of a large automobile dealership?

Accepted Answer

"Company cars" provided to specific company executives for their personal use should not be classified as inventory because they are not intended for sale. The other options listed are all items that are intended for sale or use in the business and therefore should be classified as inventory on the balance sheet.

Question 17

[The following information applies to the questions displayed below.]
Washington Warehouse is a small retail business that specializes in the sale of top-of-the-line televisions.This year,the store has begun to carry the Flat TV manufactured by Bass Co.Thus far,Washington has recorded the following transactions involving the Flat TV:
 
-If Washington uses a perpetual inventory system,the journal entry to record the sale on February 12th would include all of the following except:

Accepted Answer

A perpetual inventory system updates the inventory account after each sale or purchase. Thus, the journal entry for the sale on February 12th would include a debit to Cost of Goods Sold for $12,600, a credit to Sales Revenue for $15,300, and a credit to Inventory for $12,600 to reduce inventory. There would be no credit to Purchases, as this account is used to record the cost of goods acquired, not sold.

Question 18

Hicksville's Department Store uses a perpetual inventory system.At year-end,the balance in the Inventory control account is $1,200,000.Assuming that the inventory records have been maintained properly,a year-end physical inventory:

Accepted Answer

The answer of Hicksville's Department Store uses a perpetual inventory...

Question 19

The average gross profit margin is a measure of relative profitability.

Accepted Answer

The average gross profit margin is a measure of how much profit a company makes on each dollar of sales after deducting the cost of goods sold. Therefore, it is a measure of relative profitability.

Question 20

Which of the following appears in the income statement of a merchandising business,but not in the income statement of a business that renders only services?

Accepted Answer

Gross profit is a term used in the income statement of a merchandising business which is calculated as sales revenue minus cost of goods sold. A business that renders only services does not have cost of goods sold and therefore does not have gross profit. Interest revenue, advertising expense, and income tax expense can appear in the income statement of both types of businesses.

Quiz 6: Merchandising Activities