MBA 510 STUDY EXAMS ANSWERS AND QUESTIONS
SET A+
✔✔This type of I/S reports gross profit as a separate item - ✔✔Multiple step I/S
✔✔This type of I/S reports net income equal to income from operations adjusted for any
non operating items - ✔✔Multiple step I/S
✔✔This type of I/S commonly reports detailed computations of net sales and other
costs and expenses - ✔✔Multiple step I/S
✔✔This type of I/S reports subtotals for various classes of items - ✔✔Multiple step I/S
✔✔This type of I/S reports COGS before reporting gross profit - ✔✔Multiple step I/S
✔✔This type of I/S is limited to two main categories (revenues and expenses) -
✔✔Single step I/S
✔✔This is a contra asset account with a normal credit balance - ✔✔Allowance for sales
discounts
✔✔What is the equation for net sales? - ✔✔Net sales = Sales - sales discount - sales
returns and allowances
✔✔What is the equation for gross margin ratio? - ✔✔Gross margin / Net sales
✔✔Inventory items requiring special attention: - ✔✔1. Goods in transit
2. Goods on consignment
3. Goods damaged or obsolete
✔✔This type of goods in transit the ownership transfers when the goods are passed to
the carrier - ✔✔FOB shipping point
, ✔✔This type of goods in transit the ownership transfers when goods are passed to the
buyer - ✔✔FOB destination
✔✔Within goods on consignment, this is the owner of the goods and the title to the item
is theirs at all times and they can put goods in their inventory - ✔✔Consignor
✔✔Within goods on consignment, this is the seller of the goods and they never have
cosigned goods within their inventory - ✔✔Consignee
✔✔These types of goods are excluded from the inventory account and cannot be sold;
however, if they can be fixed they are included in the inventory account at net realizable
value - ✔✔Damaged or obsolete goods
✔✔What types of goods are excluded from the inventory count? - ✔✔1. Goods in transit
shipped to purchaser FOB destination
2. Goods on confinement (as consignee)
3. Damaged inventory that cannot be resold
4. Goods in transit shipped by seller FOB shipping point
✔✔What type of goods are included on the inventory account? - ✔✔1. Goods in transit
shipped to purchaser FOB shipping point
2. Goods in transit shipped by seller FOB destination
✔✔What is the cost of an inventory item equation? - ✔✔Invoice cost - Any discounts +
Any accidental cost necessary (shipping, storage, insurance)
✔✔When this inventory system count is in use, merchandise inventory is updated each
time it is used - ✔✔Perpetual inventory system
✔✔How many times a year do companies do inventory counts? - ✔✔At least once a
year
✔✔What are the internal controls over physical counts? - ✔✔1. Renumbered tickets
2. Independent counters who confirm validity of inventory
3. Second counts
4. Supervisory review
✔✔What is the equation for net realizable value? - ✔✔Sales price - cost of making sale
✔✔Determining per unit costs assigned to items are done through what 4 methods? -
✔✔1. Specific identification
2. FIFO
3. LIFO
4. Weighted average
SET A+
✔✔This type of I/S reports gross profit as a separate item - ✔✔Multiple step I/S
✔✔This type of I/S reports net income equal to income from operations adjusted for any
non operating items - ✔✔Multiple step I/S
✔✔This type of I/S commonly reports detailed computations of net sales and other
costs and expenses - ✔✔Multiple step I/S
✔✔This type of I/S reports subtotals for various classes of items - ✔✔Multiple step I/S
✔✔This type of I/S reports COGS before reporting gross profit - ✔✔Multiple step I/S
✔✔This type of I/S is limited to two main categories (revenues and expenses) -
✔✔Single step I/S
✔✔This is a contra asset account with a normal credit balance - ✔✔Allowance for sales
discounts
✔✔What is the equation for net sales? - ✔✔Net sales = Sales - sales discount - sales
returns and allowances
✔✔What is the equation for gross margin ratio? - ✔✔Gross margin / Net sales
✔✔Inventory items requiring special attention: - ✔✔1. Goods in transit
2. Goods on consignment
3. Goods damaged or obsolete
✔✔This type of goods in transit the ownership transfers when the goods are passed to
the carrier - ✔✔FOB shipping point
, ✔✔This type of goods in transit the ownership transfers when goods are passed to the
buyer - ✔✔FOB destination
✔✔Within goods on consignment, this is the owner of the goods and the title to the item
is theirs at all times and they can put goods in their inventory - ✔✔Consignor
✔✔Within goods on consignment, this is the seller of the goods and they never have
cosigned goods within their inventory - ✔✔Consignee
✔✔These types of goods are excluded from the inventory account and cannot be sold;
however, if they can be fixed they are included in the inventory account at net realizable
value - ✔✔Damaged or obsolete goods
✔✔What types of goods are excluded from the inventory count? - ✔✔1. Goods in transit
shipped to purchaser FOB destination
2. Goods on confinement (as consignee)
3. Damaged inventory that cannot be resold
4. Goods in transit shipped by seller FOB shipping point
✔✔What type of goods are included on the inventory account? - ✔✔1. Goods in transit
shipped to purchaser FOB shipping point
2. Goods in transit shipped by seller FOB destination
✔✔What is the cost of an inventory item equation? - ✔✔Invoice cost - Any discounts +
Any accidental cost necessary (shipping, storage, insurance)
✔✔When this inventory system count is in use, merchandise inventory is updated each
time it is used - ✔✔Perpetual inventory system
✔✔How many times a year do companies do inventory counts? - ✔✔At least once a
year
✔✔What are the internal controls over physical counts? - ✔✔1. Renumbered tickets
2. Independent counters who confirm validity of inventory
3. Second counts
4. Supervisory review
✔✔What is the equation for net realizable value? - ✔✔Sales price - cost of making sale
✔✔Determining per unit costs assigned to items are done through what 4 methods? -
✔✔1. Specific identification
2. FIFO
3. LIFO
4. Weighted average
