Net income plus operating expenses is equal to

Net income plus operating expenses is equal to

	a.	Sales
	b.	gross profit
	c.	cost of merchandise available for sale
	d.	cost of merchandise sold

Answer = b

A company, using the periodic inventory system, has merchandise inventory costing $210 on hand at the beginning of the period.  During the period, merchandise costing $635 is purchased.  At year-end, merchandise inventory costing $160 is on hand.  The cost of merchandise sold for the year is

	a.	$685
	b.	$265
	c.	$635
	d.	$795

Answer = a

The inventory system employing accounting records that continuously disclose the amount of inventory is called

	a.	perpetual
	b.	periodic
	c.	physical
	d.	Retail

Answer = a

The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

	a.	Jan. 1  Office Supplies               1,500 Cash                                       1,500
	b.	Jan. 1  Purchases                       1,500 Accounts Payable                    1,500
	c.	Jan. 1  Cash                               1,500 Accounts Receivable               1,500
	d.	Jan. 1  Merchandise Inventory    1,500 Cash                                       1,500

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

	a.	FOB destination
	b.	consigned
	c.	FOB shipping point
	d.	n/30

The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory system would be

	a.	Jan. 1  Merchandise Inventory    1,600 Accounts Payable              1,600
	b.	Jan. 1  Purchases                     1,600 Accounts Receivable        1,600
	c.	Jan. 1  Office Supplies              1,600 Accounts Payable              1,600
	d.	Jan. 1  Purchases                     1,600 Accounts Payable              1,600

Under a periodic inventory system

1. Under a periodic inventory system

	a.	a physical inventory is taken at the end of the period
	b.	merchandise inventory is debited when goods are returned to vendors
	c.	accounting records continuously disclose the amount of inventory
	d.	a separate account for each type of merchandise is maintained in a subsidiary ledger

Answer = a

1. The inventory costing method that reports the most current prices in ending inventory is

	a.	LIFO
	b.	average cost
	c.	specific identification
	d.	FIFO

Answer = d

1. FIFO reports higher gross profit and net income than the LIFO method when

	a.	prices are reduced by 50%
	b.	prices are decreasing
	c.	prices are increasing
	d.	prices remain stable

Answer = c

1. If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?

	a.	FIFO
	b.	average cost
	c.	LIFO
	d.	weighted average

Answer = c