ACCT 2101 Exam 2 Review (2025/2026)
questions and answers
cost of goods available for sale - CORRECT ANSWER ✔✔Sales Revenue - Cost of Goods
Purchased
COGS & Gross Profit - CORRECT ANSWER ✔✔What are some things unique to merchandise?
AR decreased, Inventory increased & COGS decreased - CORRECT ANSWER ✔✔Increasing
Returns, how does it affect AR, Inventory, COGS?
decrease AR & no impact on inventory and COGS - CORRECT ANSWER ✔✔Increased
Allowances, how does it affect AR, Inventory, COGS?
Sales returns and allowances, Sales Discounts (NOT sales revenue) - CORRECT ANSWER
✔✔Examples of Contra Revenue Accounts
Net sales - CORRECT ANSWER ✔✔sales - sales returns and allowances and sales discounts
Gross Profit - CORRECT ANSWER ✔✔Net Sales - COGS
Gross Profit Rate - CORRECT ANSWER ✔✔gross profit/net sales
Profit Margin - CORRECT ANSWER ✔✔net income/net sales
quality of earnings ratio - CORRECT ANSWER ✔✔net cash by operating activities/
, net income
Income from Operations - CORRECT ANSWER ✔✔gross profit - operating expenses
just in time inventory - CORRECT ANSWER ✔✔Inventory system in which goods are
manufactured or purchased ONLY when NEEDED
Ex: Dell, who customize computers
cosigned goods - CORRECT ANSWER ✔✔goods held for sale by one party although ownership of
the goods is retained by another party
*DO NOT include in inventory unless already shipped
specific identification method - CORRECT ANSWER ✔✔An actual physical-flow costing method
in which particular items sold and items still in inventory are specifically costed to arrive at cost
of goods sold and ending inventory.
FIFO - CORRECT ANSWER ✔✔inventory accounting in which the oldest items (those first
acquired) are assumed to be the first sold; creates a higher ending inventory and lower cost of
goods sold, higher gross profit and higher taxable income.
LIFO - CORRECT ANSWER ✔✔inventory accounting where recent items are the first sold; create
the lowest ending inventory in a period of rising prices. Also create a lower taxable income,
lower gross profit.
Average Cost Method - CORRECT ANSWER ✔✔An inventory costing method that uses the
weighted-average unit cost to allocate the cost of goods available for sale to ending inventory
and cost of goods sold.
weighted average unit cost - CORRECT ANSWER ✔✔COGAS /
questions and answers
cost of goods available for sale - CORRECT ANSWER ✔✔Sales Revenue - Cost of Goods
Purchased
COGS & Gross Profit - CORRECT ANSWER ✔✔What are some things unique to merchandise?
AR decreased, Inventory increased & COGS decreased - CORRECT ANSWER ✔✔Increasing
Returns, how does it affect AR, Inventory, COGS?
decrease AR & no impact on inventory and COGS - CORRECT ANSWER ✔✔Increased
Allowances, how does it affect AR, Inventory, COGS?
Sales returns and allowances, Sales Discounts (NOT sales revenue) - CORRECT ANSWER
✔✔Examples of Contra Revenue Accounts
Net sales - CORRECT ANSWER ✔✔sales - sales returns and allowances and sales discounts
Gross Profit - CORRECT ANSWER ✔✔Net Sales - COGS
Gross Profit Rate - CORRECT ANSWER ✔✔gross profit/net sales
Profit Margin - CORRECT ANSWER ✔✔net income/net sales
quality of earnings ratio - CORRECT ANSWER ✔✔net cash by operating activities/
, net income
Income from Operations - CORRECT ANSWER ✔✔gross profit - operating expenses
just in time inventory - CORRECT ANSWER ✔✔Inventory system in which goods are
manufactured or purchased ONLY when NEEDED
Ex: Dell, who customize computers
cosigned goods - CORRECT ANSWER ✔✔goods held for sale by one party although ownership of
the goods is retained by another party
*DO NOT include in inventory unless already shipped
specific identification method - CORRECT ANSWER ✔✔An actual physical-flow costing method
in which particular items sold and items still in inventory are specifically costed to arrive at cost
of goods sold and ending inventory.
FIFO - CORRECT ANSWER ✔✔inventory accounting in which the oldest items (those first
acquired) are assumed to be the first sold; creates a higher ending inventory and lower cost of
goods sold, higher gross profit and higher taxable income.
LIFO - CORRECT ANSWER ✔✔inventory accounting where recent items are the first sold; create
the lowest ending inventory in a period of rising prices. Also create a lower taxable income,
lower gross profit.
Average Cost Method - CORRECT ANSWER ✔✔An inventory costing method that uses the
weighted-average unit cost to allocate the cost of goods available for sale to ending inventory
and cost of goods sold.
weighted average unit cost - CORRECT ANSWER ✔✔COGAS /
