Deck 14: Adjustments and the Work Sheet for a Merchandising Business

Question 1

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
If beginning inventory is $30,000 and ending inventory is $35,000, the cost of the inventory on hand at the end of the accounting period is $35,000.

Answer 1

True

Question 2

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
The merchandise inventory account is never debited or credited during the year using the periodic method.

Answer 2

True

Question 3

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
The income summary account will always reflect the same balance as the merchandise inventory account at the end of the accounting period.

Answer 3

False

Question 4

The credit to the merchandise inventory account when making adjustments at the end of the accounting period will be the same amount as was debited at the end of the previous accounting period.

Question 5

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
The credit amount for Income Summary in the Adjusted Trial Balance column reflects the inventory on hand at the end of the accounting period.

Question 6

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
Merchandise Inventory has a normal credit balance.

Question 7

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
After adjustments are made to the merchandise inventory account and posting is completed, the income summary account will reflect both the amount of beginning and ending inventory.

Question 8

Some businesses require payment before delivering a product or performing a service.

Question 9

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
If beginning inventory is $12,000 and ending inventory is $9,000, the first step in the adjusting process is to credit Merchandise Inventory for $12,000.

Question 10

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
Two adjustments are made to the merchandise inventory account on the work sheet.

Question 11

Unearned Revenue is a liability account.

Question 12

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
Both the debit and credit amounts in the merchandise inventory account at the end of an accounting period are used to calculate the cost of goods sold.

Question 13

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
The merchandise inventory account always reflects the current inventory on hand.

Question 14

Under the cash basis of accounting, revenue is recorded when earned regardless of when cash is received.

Question 15

Cash received in advance for performing a service or delivering a product is called unearned revenue.

Question 16

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
At the end of the accounting period, the merchandise inventory account is credited for the beginning inventory amount.

Question 17

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
If the ending inventory is understated for any reason, net income will be overstated.

Question 18

If beginning inventory is $80,000 and ending inventory is $10,000, the balance of the merchandise inventory account after adjustments will be $70,000.

Question 19

Match the terms with the definitions.a.average cost
b.weighted-average method
c.consignee
d.consigned goods
e.specific identification method
f.retail method
g.cost
h.physical inventory
i.periodic inventory system
j.in transit
k.inventory sheet
l.natural business year
m.lower-of-cost-or-market method
The amount of inventory on hand is determined by physically counting the goods on hand and determining the cost of those goods.

Question 20

The transaction to record unearned revenue results in an increase to an asset account.

Question 21

In journalizing adjusting entries, Merchandise Inventory is credited for the amount of ending inventory.

Question 22

The balance of Unearned Revenue is reported on the income statement at the end of the accounting period.

Question 23

The adjusted balance of the merchandise inventory account is extended to the Balance Sheet columns of the work sheet.

Question 24

A contra-revenue account is given a ".1" extension to its related ledger account's number.

Question 25

Purchases Discounts is a contra-cost account.

Question 26

Adjustments are made on the work sheet for both beginning and ending Merchandise Inventory.

Question 27

In journalizing adjusting entries, an Unearned Revenue account is credited for any portion earned during the accounting period.

Question 28

Only the debit adjustment amount in the merchandise inventory account is extended to the Adjusted Trial Balance columns of the work sheet.

Question 29

When part of the amount of unearned revenue has been earned and the account adjusted accordingly, a revenue account must be adjusted by that partial amount.

Question 30

Only the adjusted credit balance in the merchandise inventory account is extended to the Adjusted Trial Balance columns of the work sheet.

Question 31

When unearned revenue is finally earned, a revenue account is debited to reflect the amount of the revenue earned.

Question 32

An increase in a revenue account may reflect a decrease in a liability account.

Question 33

After journalizing adjusting entries, the amounts must be posted to the accounts in the general ledger.

Question 34

When part of the amount of unearned revenue has been earned, the unearned revenue account must be adjusted.

Question 35

Which of the following accounts is never debited or credited during the accounting period?

A) Owner's Capital
B) Purchases Returns and Allowances
C) Merchandise Inventory
D) Interest Income

Question 36

An increase in a revenue account may reflect an increase in an asset account.

Question 37

Only the debit amount for the income summary account must be extended in the work sheet.

Question 38

Purchases Returns and Allowances is a contra-revenue account.

Question 39

Actually counting the goods on hand at the end of the accounting period and determining the cost of these goods by reviewing the accounting records is called

A) the cost of goods sold.
B) the physical inventory.
C) freight-in.
D) accumulated depreciation.

Question 40

A beginning inventory of $75,000 is removed from the merchandise inventory account by

A) debiting $75,000 to Merchandise Inventory.
B) crediting $75,000 to Merchandise Inventory.
C) debiting $75,000 to Purchases.
D) crediting $75,000 to Income Summary.

Question 41

Which of the following accounts would NOT be found under the heading of "Cost of Goods Sold" in a chart of accounts?

A) Purchases
B) Purchases Returns and Allowances
C) Freight-In
D) Supplies

Question 42

An example of a contra-revenue account is

A) Purchases.
B) Purchases Returns and Allowances.
C) Purchases Discounts.
D) Sales Returns and Allowances.

Question 43

On a work sheet, the amount entered in the Credit column of the Balance Sheet to balance the debits and credits is $56,000. This represents

A) an error of $28,000 in balancing the accounts.
B) a net income of $56,000.
C) a net loss of $56,000.
D) accumulated depreciation and other expenses.

Question 44

Sports, Inc., plans to sell season football tickets for the 10 games played from September through November. These tickets sell for $5 each at the gate or for $45 per season package purchased before April 30. On April 30, the office reports that it has sold 200 season ticket packages and has only 50 left. The correct entry to record the sale of the season tickets is

A) debit Cash and credit Unearned Revenue for $9,000.
B) debit Cash and credit Revenue for $11,250.
C) debit Unearned Revenue and credit Revenue for $9,000.
D) to determine cost of goods sold.

Question 45

If the ending inventory is understated for any reason,

A) net income will be overstated.
B) net income will be understated.
C) liabilities will be overstated.
D) liabilities will be understated.

Question 46

Unearned revenue is reported as a(n)

A) current liability on the balance sheet.
B) contra-asset account on the chart of accounts.
C) owner's equity account on the work sheet.
D) asset on the balance sheet.

Question 47

If a difference is found between the physical count and the amount in the perpetual inventory records, an adjusting entry is made to which of the following accounts?

A) Inventory Short and Over
B) Purchases
C) Accounts Payable
D) Accounts Receivable

Question 48

The income summary account, after adjusting entries are posted, reflects the

A) beginning inventory amount.
B) ending inventory amount.
C) beginning and ending inventory amounts.
D) cash income from business transactions.

Question 49

Which account balance is NOT used to compute the cost of goods sold?

A) Sales
B) Merchandise Inventory
C) Purchases
D) Purchases Discounts

Question 50

Under the perpetual inventory method, when inventory is purchased, Merchandise Inventory

A) is debited and Cash or Accounts Payable is credited.
B) is credited and Cash or Accounts Payable is debited.
C) and Accounts Payable are credited and Cash is debited.
D) and Accounts Payable are debited and Cash is credited.

Question 51

Cash received prior to delivering a product or performing a service is called a(n)

A) unearned asset.
B) unearned revenue.
C) unearned expense.
D) unearned contra-asset.

Question 52

A work sheet is prepared

A) from [date] to [date].
B) for the [period] ended [date].
C) at any time in the accounting period.
D) always on December 31.

Question 53

Merchandise Inventory is listed as a(n)

A) current asset.
B) current liability.
C) expense.
D) revenue.

Question 54

Which of the following is NOT a formal part of the accounting system?

A) balance sheet
B) income statement
C) statement of owner's equity
D) the work sheet

Question 55

A typical account found under the heading of "Revenue" in a chart of accounts is

A) Cash.
B) Sales.
C) Freight-In.
D) Purchases.

Question 56

On a work sheet, the Debit column of the Income Statement totals $550,356 and the Credit column totals $734,225. This represents

A) unbalanced totals indicating that an error exists.
B) a net loss to the business.
C) other expenses.
D) a net income for the business.

Question 57

On a work sheet, the Debit columns of the Income Statement and the Balance Sheet both total more than the Credit columns. This represents

A) an error in the accounting procedures for the period.
B) a net loss.
C) a net income.
D) no gain or loss.

Question 58

During the accounting period, the Unearned Revenue account had a balance of $50,000 for computer equipment and software yet to be delivered. On March 31, a delivery of all of the equipment was made, leaving $5,000 worth of software pending. The correct journal entry to record this activity on March 31 is to

A) debit Unearned Revenue and credit Revenue for $45,000.
B) debit Unearned Revenue and credit Revenue for $5,000.
C) debit Cash and credit Unearned Revenue for $45,000.
D) debit Computer Equipment and credit Cash for $45,000.

Question 59

Both the debit and credit amounts from which of the following accounts are extended to the Adjusted Trial Balance columns of the work sheet?

A) Merchandise Inventory
B) Purchases Returns and Allowances
C) Interest Revenue
D) Income Summary

Question 60

At the end of the accounting period, the correct entry in the general journal to adjust for ending inventory is to

A) debit Merchandise Inventory and credit Unearned Revenue.
B) debit Income Summary and credit Merchandise Inventory.
C) debit Merchandise Inventory and credit Income Summary.
D) debit Other Revenue and credit Income Summary.

Question 61

Match the terms with the definitions.a.contra-cost accounts
b.contra-revenue accounts
c.physical inventory
d.unearned revenue
A physical count of goods on hand.

Question 62

Use the following information to prepare the cost of goods sold section of the income statement for Beth's Jewels.

Question 63

Journalize the necessary adjusting entries for the following (partial) trial balance. Based on a physical count, the ending merchandise inventory is $67,000. Unearned revenue at year-end was $4,230.

Question 64

Journalize the adjusting entries from the partial work sheet for a merchandising firm.

Question 65

Prepare the cost of goods sold section of the income statement for L. I. Grill from the information given below:

Question 66

Match the terms with the definitions.a.contra-cost accounts
b.contra-revenue accounts
c.physical inventory
d.unearned revenue
Accounts that are deducted from the Purchases account when computing cost of goods sold (i.e., Purchases Returns and Allowances, Purchases Discounts).

Question 67

Match the terms with the definitions.a.contra-cost accounts
b.contra-revenue accounts
c.physical inventory
d.unearned revenue
Accounts that are deducted from Sales on the income statement (i.e., Sales Returns and Allowances, Sales Discounts).

Question 68

Match the terms with the definitions.a.contra-cost accounts
b.contra-revenue accounts
c.physical inventory
d.unearned revenue
Cash received in advance of delivering a product or performing a service.

Question 69

Complete the Adjustments column of the work sheet represented below. Ending merchandise inventory is $92,000.

Question 70

At the end of the accounting period, the correct entry in the general journal to adjust for beginning inventory is to

A) debit Purchases and credit Merchandise Inventory.
B) debit Merchandise Inventory and credit Sales.
C) debit Income Summary and credit Merchandise Inventory.
D) debit the Capital account and credit a revenue account.