Accounting Principles Exam Questions With All Correct Answers

Accounting Principles Exam Questions With All Correct Answers Which of the following expressions is incorrect? Sales revenue - cost of goods sold - Operating expenses = Net income Operating expenses - Cost of goods sold = Gross profit Net income + Operating expenses = Gross profit Gross profit - Operating expenses = Net income - ANSWER Operating expenses - Cost of goods sold = Gross profit Net income - ANSWER gross profit - operating expenses or Sales revenue - cost of goods sold - Operating expenses Gross profit - ANSWER Net income + Operating expenses = Which of the following items will not result in an adjustment to the inventory account balance under a perpetual system? 1) A return of merchandise inventory to the supplier 2) A purchase of merchandise 3) Payment of freight costs for goods received from a supplier 4) Payment of freight costs for goods shipped to a customer - ANSWER 4) Payment of freight costs for goods shipped to a customer Marigold Corp. sells merchandise on account for $1300 to Sheffield Company with credit terms of 2/10, n/30. Sheffield Company returns $150 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? $1124 $1076 $1127 $1075 - ANSWER $1127 At the beginning of the year, Bridgeport had an inventory of $390000. During the year, the company purchased goods costing $1150000. If Bridgeport reported ending inventory of $300000 and sales of $1880000, their cost of goods sold and gross profit rate would be 1) $1240000 and 66%. 2) $850000 and 65.96% 3) $1240000 and 34.04%. 4) $1030000 and 34%. - ANSWER $1240000 and 34.04%. (Beginning inventory + purchased goods - ending inventory = COGS), then COGS - sales revenue / sales revenue x 100 = gross profit percentage (rate). Gross profit percentage formula - ANSWER COGS - sales revenue / sales revenue x 100 Cost of goods sold formula - ANSWER beginning inventory + purchases - ending inventory Zips Corp purchased $10,000 of inventory on October 1 of this year with terms 2/10 n/30. Which of the following is true? (Round to whole dollars, if necessary and assume there are 365 days in the current year). 1) If Zips does not have the cash to pay by October 10, it will lose the discount. 2) If Zips Corp can borrow the cash from the bank at 5% interest, Zips will save $200. 3) If Zips Corp can borrow the cash from the bank at 5% interest, it will save $173. 4) If Zips Corp can borrow the money from the bank, it will incur $500 of interest expense. - ANSWER If Zips Corp can borrow the cash from the bank at 5% interest, it will save $173. $10,000 * .02 = $200 discount received $10,000 * .05 * 20/365 days = $27 interest expense. Net savings: $200 - $27 = $173 Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination (2) FOB shipping point and purchases made (3) FOB destination (4) FOB shipping point. Which items should be included in Tidwell's inventory at December 31? - ANSWER (1) and (4) Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants to maintain a high current ratio. Which inventory costing method should Ace consider using? 1) LIFO 2) No inventory costing method directly affects the current ratio 3) FIFO 4) Average - ANSWER 3) FIFO Ayayai Corp. sells three different products. The following information is available on December 31: Inventory item Units Cost per unit Market value per unit X 280 $3.80 $3.50 Y 560 $2.00 $1.50 Z 1410 $3.00 $4.00 After applying the lower-of-cost-or-net-realizable-value rule to each item, what will Ayayai total ending inventory balance be? 1) $6414 2) $6050 3) $6190 4) $7465 - ANSWER 2) $6050