Question

1) ABC Company’s December 31, 2017 inventory value was reported $ 500,000. The physical inventory count value was $ 475,000. The adjusting entry required to record the discrepancy was:

A) Debit Cost of Goods Sold $ 25,000 and credit inventory $ 25,000

B) Debit inventory $ 25,000 and credit Cost of Goods Sold $ 25,000

C) Can’t be determined

D) Debit Cost of Goods Sold $ 12,500 and credit inventory $ 12,500

2) Credit terms of 1/10 n/30 indicates that the buyer is:

A) Allowed a 10% discount if payment is made within 30 days.

B) Allowed a 1% discount if payment is made within 10 days.

C) Allowed a 1% discount if payment is made within 30 days.

D) Allowed a 30% discount if payment is made within 10 days.

3) A debit to Sales Returns and Allowances will:

A) Increase Inventory

B) Increase Net Purchases

C) Increase Net Sales

D) Decrease Net Sales

4) Using a perpetual inventory system, the entry to record the purchase of merchandise on account involves a:

A) Debit to Inventory

B) Debit to Accounts Payable

C) Credit to Inventory

D) Credit to Cash

5) A purchase return or allowance under a perpetual inventory system is credited to:

A) Accounts Payable

B) Purchase Returns and Allowances

C) Inventory

D) Purchases

6) Which of the following accounts is not a contra account?

A. Inventory

B. Accumulated Amortization

C. Sales Returns and Allowances

D. Sales Discounts

7) To calculate the gross margin percentage,

A. Divide net sales by net income

B. Divide current assets by current liabilities

C. Divide total liabilities by total assets

D. Divide gross margin by net sales

8) If a purchaser returns goods purchased on account to the supplier under a perpetual inventory system, the purchaser would debit:

A) Inventory and credit Accounts Payable.

B) Accounts Payable and credit Inventory.

C) Inventory and credit Accounts Receivable.

D) Accounts Receivable and credit Inventory.

9) The seller is responsible for the shipping costs when the shipping terms are:

A) FOB destination.

B) COD destination.

C) FOB shipping point.

D) COD shipping point.

10) Under a perpetual inventory system, the entry to record the cost of goods sold would include a debit to:

A) Cost of Goods Sold and a credit to Inventory for the retail price of the inventory.

B) Inventory and a credit to Sales Revenue for the retail price of the inventory.

C) Cost of Goods Sold and a credit to Inventory for the cost of the inventory.

D) Inventory and a credit to Cost of Goods Sold for the cost of the inventory.

11) To update the inventory records for the sale of merchandise under a perpetual inventory system, the entry would include a:

A) Credit to Inventory.

B) Debit to Accounts Payable.

C) Debit to Sales Revenue.

D) Credit to Cost of Goods Sold.

12) Under a perpetual inventory system, the entries to record a $2,600 sales return of undamaged goods for a sale originally made on account, when the merchandise had a cost of $1,200, include a:

A) Debit to Inventory of $1,200.

B) Debit to Sales Returns and Allowances of $1,200.

C) Credit to Cost of Goods Sold of $2,600.

D) Credit to Sales Returns and Allowances of $1,200.

13) Which of the following is true about freight in?

A) Freight in is added to the cost of merchandise inventory.

B) Freight in is a selling expense.

C) Freight in is an operating expense.

D) Freight in is deducted from Accounts payable.

14) Under a perpetual inventory system, the adjusting entry to account for inventory shrinkage would include a:

A) Credit to Miscellaneous Expense.

B) Credit to Cost of Goods Sold.

C) Credit to Inventory.

D) Debit to Miscellaneous Expense.

15) Inventory held by a business is a(n) ________ and when sold becomes a(n) ________.

A) Liability, withdrawal

B) Asset, expense

C) Liability, asset

D) Asset, contra asset

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

A B G H Answer Part 1) The correct answer is A) Debit Cost of goods sold $ 25000 and credit inventory $ 25000 Explanation:- Since the Physical inventory cost is $ 475000 and inventory cost as per books is $ 500000, So excess $ 25000 has been expenses to cost of goods sold and inventory has to be credited. Part 2) The correct answer is B) Allowed a 10% discount if payment is made within 10 days Explanation The given term means that payment has to be made in 30 days, but if payment is made with in 10 days then 1 % discount will be allowed. Part 3) The correct answer is D) Decrease Net sales Explanation * Net sales = sales - sales return and allowances. As sales return increases with debit in sales return and allowances due to which net sales decreases. Part 4) The correct answer is - A) Debit to inventory Explanation when inventory in purchased under prepetual inventory system, then inventory account is debited and account payable will be credited. *As per HomeworkLib policy we are requiered to solve the first 4 parts only. For remaining parts you have to post separate question.