Accounting Topics and Managerial Accounting
1. A proprietorship employs one full-time accountant. This person is considered an employee. On the
desk in front of her are five different business documents. Which one of the following would not be
considered an original source document from the proprietorship's point of view?
A) A bank receipt for $10,000 evidencing yesterday's cash receipts deposited in the bank.
B) The original copy of the insurance policy taken out by the proprietorship to insure the vehicle it
purchased during its first month of operations. The annual insurance premium of $500 was printed
within the contract.
C) The invoice received by the proprietorship from Samsung Electronics when the proprietorship
purchased its first lot of inventory to be sold to its customers.
D) A cancelled check for $500 representing payment in full for the annual insurance premium
mentioned in item B above.
E) A copy of the Balance Sheet at the end of the c - ✔✔E) A copy of the Balance Sheet at the end of the
company's first year of existence.
10. The ending inventory of Cape Harbor Co. is $46,000. If beginning inventory was $64,000 and
goods available (cost of goods available for sale) totaled $117,000, the cost of goods sold is
a. $135,000.
b. $64,000.
c. $71,000.
d. $53,000. - ✔✔10. c($117,000 − $46,000)
11. Chime Company had cost of goods sold of $150,000. The beginning and ending inventories
were $13,000 and $28,000, respectively. Purchases for the period must have been
a. $178,000.
b. $165,000.
c. $163,000.
d. $135,000. - ✔✔11. b($150,000 + $28,000
,− $13,000)
13. What is Wedge's gross profit percentage (rounded to the nearest percentage)?
a. 55%
b. 18%
c. 45%
d. 16% - ✔✔13. a($160,000 −
$72,000)/$160,000
14. What is Wedge's rate of inventory turnover?
a. 2.9 times
b. 5.5 times
c. 2.6 times
d. 2.5 times - ✔✔14. c [$72,000 ÷ ([$26,000
+ $29,000]/2)]
15. Beginning inventory is $110,000, purchases are $220,000, and sales total $500,000. The
normal gross profit percentage is 35%. Using the gross profit method, how much is ending
inventory?
a. $175,000
b. $215,000
c. $5,000
d. $280,000 - ✔✔15. c[$110,000 + $220,000
− [$500,000 × (1 −
0.35)]]
,16. An overstatement of ending inventory in one period results in
a. an understatement of the beginning inventory of the next period.
b. no effect on net income of the next period.
c. an overstatement of net income of the next period.
d. an understatement of net income of the next period. - ✔✔16. d
2. Cost of goods sold will appear on which financial statement?
a. statement of retained earnings
b. balance sheet
c. statement of cash flows
d. income statement - ✔✔d. income statement
3 types of accounting - ✔✔financial - managerial - tax
3. How is inventory classified in the financial statements?
a. As an expense
b. As a contra account to Cost of Goods Sold
c. As a revenue
d. As a liability
e. As an asset - ✔✔e. As an asset
5. Tortoise Sales' LIFO cost of ending inventory would be
a. $120.
b. $360.
, c. $96.
d. $430. - ✔✔c [(25 + 39 + 12 − 60)
× $6]
5000 in merchandise returned during an accounting period would be Rside entry to - ✔✔accounts
receivable 5000
6. Tortoise Sales' cost of ending inventory using the average cost method is
a. $540.
b. $140.
c. $120.
d. $150. - ✔✔c [16 × ($150
7. When applying the lower-of-cost-or-market rule to inventory, "market" generally means
a. resale value.
b. original cost, less physical deterioration.
c. current replacement cost.
d. original cost. - ✔✔c. current replacement cost.
8. During a period of rising prices, the inventory method that will yield the highest net
income and asset value is
a. LIFO.
b. average cost.
c. specific identification.
d. FIFO. - ✔✔d. FIFO.
1. A proprietorship employs one full-time accountant. This person is considered an employee. On the
desk in front of her are five different business documents. Which one of the following would not be
considered an original source document from the proprietorship's point of view?
A) A bank receipt for $10,000 evidencing yesterday's cash receipts deposited in the bank.
B) The original copy of the insurance policy taken out by the proprietorship to insure the vehicle it
purchased during its first month of operations. The annual insurance premium of $500 was printed
within the contract.
C) The invoice received by the proprietorship from Samsung Electronics when the proprietorship
purchased its first lot of inventory to be sold to its customers.
D) A cancelled check for $500 representing payment in full for the annual insurance premium
mentioned in item B above.
E) A copy of the Balance Sheet at the end of the c - ✔✔E) A copy of the Balance Sheet at the end of the
company's first year of existence.
10. The ending inventory of Cape Harbor Co. is $46,000. If beginning inventory was $64,000 and
goods available (cost of goods available for sale) totaled $117,000, the cost of goods sold is
a. $135,000.
b. $64,000.
c. $71,000.
d. $53,000. - ✔✔10. c($117,000 − $46,000)
11. Chime Company had cost of goods sold of $150,000. The beginning and ending inventories
were $13,000 and $28,000, respectively. Purchases for the period must have been
a. $178,000.
b. $165,000.
c. $163,000.
d. $135,000. - ✔✔11. b($150,000 + $28,000
,− $13,000)
13. What is Wedge's gross profit percentage (rounded to the nearest percentage)?
a. 55%
b. 18%
c. 45%
d. 16% - ✔✔13. a($160,000 −
$72,000)/$160,000
14. What is Wedge's rate of inventory turnover?
a. 2.9 times
b. 5.5 times
c. 2.6 times
d. 2.5 times - ✔✔14. c [$72,000 ÷ ([$26,000
+ $29,000]/2)]
15. Beginning inventory is $110,000, purchases are $220,000, and sales total $500,000. The
normal gross profit percentage is 35%. Using the gross profit method, how much is ending
inventory?
a. $175,000
b. $215,000
c. $5,000
d. $280,000 - ✔✔15. c[$110,000 + $220,000
− [$500,000 × (1 −
0.35)]]
,16. An overstatement of ending inventory in one period results in
a. an understatement of the beginning inventory of the next period.
b. no effect on net income of the next period.
c. an overstatement of net income of the next period.
d. an understatement of net income of the next period. - ✔✔16. d
2. Cost of goods sold will appear on which financial statement?
a. statement of retained earnings
b. balance sheet
c. statement of cash flows
d. income statement - ✔✔d. income statement
3 types of accounting - ✔✔financial - managerial - tax
3. How is inventory classified in the financial statements?
a. As an expense
b. As a contra account to Cost of Goods Sold
c. As a revenue
d. As a liability
e. As an asset - ✔✔e. As an asset
5. Tortoise Sales' LIFO cost of ending inventory would be
a. $120.
b. $360.
, c. $96.
d. $430. - ✔✔c [(25 + 39 + 12 − 60)
× $6]
5000 in merchandise returned during an accounting period would be Rside entry to - ✔✔accounts
receivable 5000
6. Tortoise Sales' cost of ending inventory using the average cost method is
a. $540.
b. $140.
c. $120.
d. $150. - ✔✔c [16 × ($150
7. When applying the lower-of-cost-or-market rule to inventory, "market" generally means
a. resale value.
b. original cost, less physical deterioration.
c. current replacement cost.
d. original cost. - ✔✔c. current replacement cost.
8. During a period of rising prices, the inventory method that will yield the highest net
income and asset value is
a. LIFO.
b. average cost.
c. specific identification.
d. FIFO. - ✔✔d. FIFO.
