Deck 8: Purchasinghuman Resourcespayment Process: Recording and Evaluating Expenditure Process Activities

Question 1

Which of the following is not part of the expenditure process?

A)Determine the need for goods/services
B)Receive cash from sales during the period
C)Receive goods and services
D)Pay suppliers of goods and services

Answer 1

Receive cash from sales during the period

Question 2

Which of the following entries reflects the use of a periodic inventory system?

A)
B)
C)
D)

Answer 2

Question 3

Which of the following could not be net pay?

A)Gross pay less FICA,union dues,income tax withheld
B)Gross pay less FICA,health insurance,income tax withheld
C)Gross pay less FICA,income tax withheld
D)Gross pay less FICA,income tax withheld,federal unemployment taxes

Answer 3

Gross pay less FICA,income tax withheld,federal unemployment taxes

Question 4

Which of the following is not a special journal?

A)Depreciation journal
B)Sales journal
C)Cash receipts journal
D)Purchases journal

Question 5

Which of the following is the entry used to determine cost of goods sold when the periodic inventory system is used?

A)
B)
C)
D)

Question 6

If a company uses the perpetual inventory method and it purchases inventory on account worth $2,000 with terms 2/10 n/30 what will be the cost of the inventory when the inventory is purchased if it is using the net method?

A)$2,000
B)$1,800
C)$1,960
D)$2,200

Question 7

The purpose of the account payable subsidiary ledgers is:

A)Keep track of the various products being manufactured
B)Monitor the balance in the various cash accounts at banks
C)Identify individuals and companies who the company owes money
D)Identify the cash inflow expected from people who owe money to the company

Question 8

Which of the following entries reflects the use of a perpetual inventory system?

A)
B)
C)
D)

Question 9

Net pay is equal to:

A)Gross pay plus FICA
B)Gross pay plus all deductions
C)Gross pay minus all deductions
D)Gross pay less all deductions plus employer payroll taxes

Question 10

Which of the following entries is made when a discount is taken and the periodic system uses the gross method?

A)
B)
C)
D)

Question 11

Which of the following entries is made when a discount is not taken and the perpetual system uses the net method?

A)
B)
C)
D)

Question 12

The net method records

A)The purchase discounts lost
B)The purchased discounts taken
C)Both purchase discounts lost and taken
D)Only returns taken at a discount

Question 13

In a purchases journal only one amount is recorded but that amount is posted by

A)Debiting Accounts Payable and crediting Inventory
B)Debiting Inventory and crediting cash
C)Debiting cash and crediting accounts payable
D)Debiting inventory and crediting accounts payable

Question 14

The total of the accounts payable subsidiary ledger is equal to:

A)The balance in the general ledger purchases account
B)The balance in the general ledger accounts receivable account
C)The total amount the company owes to those provided inventory to the company
D)The total amount of the liabilities in the general ledger

Question 15

A company,using the net method,purchased inventory for $3,000 and term 2/10 net 30 but did not pay the bill in time to take advantage of the discount.The cost recorded in the inventory account after this event would be?

A)$3,000
B)$2,940
C)$3,060
D)Not enough data to determine

Question 16

The purchase discount lost accounts is used when with -

A)The gross method is used with periodic system and the terms of the discount are not met.
B)The net method is used with the perpetual system and the terms of the discount are met.
C)The gross method is used with the periodic system the terms of the discount are not met.
D)The net method applied to either the periodic or perpetual systems and the terms of the discount are not met.

Question 17

Which of the following entries is made when a discount is taken and the perpetual system uses the gross method?

A)
B)
C)
D)

Question 18

The gross method records the purchase discount.

A)When it is taken
B)When the inventory is purchased
C)When the inventory is sold
D)When the inventory is returned

Question 19

Which of the following entries reflects the use of a periodic inventory system?

A)
B)
C)
D)

Question 20

Which of the following entries reflects the use of a perpetual inventory system?

A)
B)
C)
D)

Question 21

Bonita Industries purchased $5,000 of merchandise on account for resale purposes.Bonita plans to sell the merchandise for $7,500.If Bonita returned $1,000 of merchandise for credit,the journal entry to record the return would include a:

A)debit to Accounts Payable for $1,000
B)credit to Inventory for $1,500
C)debit to Sales for $1,500
D)credit to Cash for $1,000

Question 22

In a perpetual inventory system,if the terms of sale are FOB shipping point the journal entry to record the payment of freight charges on purchased merchandise includes a:

A)debit to Inventory
B)credit to Freight Out
C)credit to Accounts Payable
D)debit to Cost of Goods Sold

Question 23

In a perpetual inventory system that uses the gross method which of the following is true?

A)When a discount is taken the Purchase Discount account is credited.
B)The Accounts Payable account is debited for the cash paid.
C)The Inventory account is reduced when the discount is taken.
D)The Purchase Discount Lost account is debited when the discount is not taken.

Question 24

All of the following payroll taxes are expenses incurred by an employer except:

A)social security taxes
B)federal income taxes
C)federal unemployment taxes
D)state unemployment taxes

Question 25

In a perpetual inventory system,the journal entry to record the sale of merchandise on account would include a:

A)debit to Cost of Goods Sold
B)credit to Accounts Payable
C)debit to Inventory
D)credit to Cash

Question 26

The payroll tax which is paid by both the employee and the employer is:

A)FICA
B)FUTA
C)SUTA
D)Federal Income Taxes

Question 27

In a periodic inventory system,the journal entry to record the sale of merchandise on account would include a:

A)debit to Cost of Goods Sold
B)credit to Accounts Payable
C)debit to Inventory
D)no entry involving Inventory or Cost of Goods Sold

Question 28

Purchase Discounts Lost should be:

A)added to the Merchandise Inventory account to determine the cost of inventory on hand
B)considered a loss account to be reported on the income statement
C)included on the income statement as a financing expense for the period
D)part of the cost of goods sold

Question 29

BLP Corporation reported wages expense of $224,000,wages payable of $89,400 at the beginning of the year,and wages payable of $71,300 at the end of the year.Cash payments for wages during the year were:

A)$205,900
B)$224,000
C)$242,100
D)$295,300

Question 30

Hurricane Enterprises purchased $4,000 of merchandise on account,terms 2/10,n/30.Assuming Hurricane uses the gross price method to account for purchase discounts,and it pays for the merchandise on the 9th day after the invoice date,which of the following would not be used in either the acquisition of the merchandise or the payment of the invoice :

A)credit to Cash for $3,920
B)credit to purchase discount for $80
C)debit to Accounts Payable for $3,920
D)debit to Purchase $4,000

Question 31

Payroll deductions are a(n)______ to the employer at the time they are withheld.

A)expense
B)loss
C)liability
D)revenue

Question 32

Which of the following payroll items is an expense to the employer?

A)Federal income taxes
B)Union dues
C)State unemployment taxes
D)United way contributions by employee

Question 33

In a perpetual inventory system,the journal entry to record the purchase of merchandise on account includes a:

A)credit to Cash
B)debit to Purchases
C)debit to Inventory
D)credit to Accounts Receivable

Question 34

Omni Manufacturing reported cost of goods sold of $547,000,beginning and ending inventory of $76,400 and $68,600,respectively,and beginning and ending accounts payable of $39,700 and $27,500,respectively.Cash payments for merchandise inventory during the year were:

A)$527,000
B)$542,600
C)$551,400
D)$567,000

Question 35

Purchase Discounts does all of the following except:

A)Decrease cost of goods sold
B)Decrease net purchase purchases
C)Increases net income
D)Decreases ending inventory

Question 36

Orleans Enterprises purchased $37,500 of merchandise on account,terms 2/10,n/30.Assuming Orleans uses the net price method to account for purchase discounts,and it pays for the merchandise on the 30th day after the invoice date,the journal entry to record the payment would include a:

A)credit to Cash for $36,750
B)credit to Inventory for $37,500
C)debit to Accounts Payable for $37,500
D)debit to Purchase Discounts Lost for $750

Question 37

Orleans Enterprises purchased $37,500 of merchandise on account,terms 2/10,n/30. Assuming Orleans uses the net price method to account for purchase discounts,the
Journal entry to record the purchase would include a:

A)debit to Inventory for $37,500
B)credit to Accounts Payable for $36,750
C)credit to Cash for $36,750
D)debit to Purchase Discounts Lost for $750

Question 38

JAFCO,Inc.reported insurance expense of $137,000,prepaid insurance of $8,300 at the beginning of the year,and prepaid insurance of $5,600 at the end of the year.Cash payments for insurance during the year were:

A)$134,300
B)$137,000
C)$139,700
D)$142,600

Question 39

Corinthian Industries reported cost of goods sold of $765,000,beginning and ending inventory of $85,200 and $98,600,respectively,and beginning and ending accounts payable of $54,300 and $62,500,respectively.Cash payments for merchandise inventory during the year were:

A)$743,400
B)$759,800
C)$770,200
D)$786,600

Question 40

Which of the following payroll items is not used to determine net pay?

A)Federal income taxes
B)Union dues
C)Social security taxes
D)State unemployment taxes

Question 41

Explain the difference between a periodic inventory system and a perpetual one.If a firm uses a perpetual inventory system,it still has to physically count the inventory on hand at least once a year.Why?

Question 42

Carolina Corporation reported the following account balances at the beginning and end of 2010:
Determine the amount of cash paid for (

A)supplies,(b)salaries,and (c)inventory during 2010.

Question 43

Which of the following payroll-related items is paid only by the employee?

A)FICA tax
B)Union dues
C)State unemployment tax
D)Federal unemployment tax

Question 44

Kinsey Company had beginning inventory of $50,000,ending inventory of $54,000,and cost of goods sold of $240,000.What was the cost of goods purchased?

A)$294,000
B)$290,000
C)$244,000
D)$236,000

Question 45

Ogallah Corporation purchased $100,000 inventory on account with terms of 1/10 net 30 on November 1,2010.
Required:
Assume periodic inventory system and gross method
(A.)Make the entries to record the purchase of the inventory and subsequent payment of amount due on Nov 9,2010
Assume perpetual inventory system and net method
(B.)Make the entries to record the purchase of the inventory and subsequent payment of the amount due on Nov 30,2010.

Question 46

Why are subsidiary ledgers used?

Question 47

Wildcat Supply had a beginning balance of $600 in Utilities Payable account at the start of the year and an ending balance of $1,000.During the year Wildcat paid $4,000 cash to the utilities company.How much utilities expense was incurred during this year?

A)$4,000
B)$4,400
C)$4,600
D)Can't be determined with the information given

Question 48

If a firm overstates its ending inventory,how are its income statement and balance sheet affected for the current and next year?

Question 49

Acme Paint company had a beginning balance in its prepaid advertising account of $1,000 and an ending balance of $750.During the year it spent $600 cash on advertising.How much advertising expense did Acme incur this year?

A)$850
B)$600
C)$1,600
D)$1,350

Question 50

Park Corp had a beginning balance in its prepaid rent account of $10,000 and an ending balance of $7,500.Rent expense for the year was $12,000.How much cash did Park pay for rent during the year?

A)$14,500
B)$9,500
C)$12,000
D)$7,500

Question 51

Thermalite Corporation uses the perpetual inventory system and the net price method.Prepare Thermalite's journal entries to record the following transactions:

Question 52

The following information was taken from the accounting records of Swanson Farms in 2010.For each of the following determine the amount of expense Swanson Farms should report on its income statement related to data presented below and give the entry made to record the expense.
A.Beginning balance Prepaid Insurance $1,000
Ending balance Prepaid Insurance $1,400
Cash Paid for Insurance $2,000
B.Beginning Balance Salaries Payable $20,000
Ending Balance Salaries Payable $15,000
Cash Paid for Salaries in 2010 $150,000
C.Beginning Balance Supplies $-0-
Ending Balance Supplies $1,000
Cash paid for supplies $1,600

Question 53

If wages payable increases between the beginning and end of a month,this indicates that

A)Wages paid were more than wages expense for the month.
B)Wages expense was more than wages paid for the month.
C)All wages expense for the month were paid as incurred.
D)No wages were paid during the period

Question 54

Information from the 2010 financial statements of Bravura Corporation is shown below.Calculate the cash paid for merchandise inventory.

Question 55

An increase in prepaid insurance indicates that

A)insurance expense and insurance paid were equal
B)no insurance expense was recorded during the period
C)insurance expense for the period exceeded insurance paid
D)insurance paid during the period exceeded insurance expense

Question 56

Lacross Corporation purchased $50,000 inventory on account with terms of 1/10 net 30 on September 1,2010.
Required:
Assume periodic inventory system and net method
(A.)Make the entries to record the purchase of the inventory and subsequent payment of amount due on Sept 30,2010
Assume perpetual inventory system and gross method
(B.)Make the entries to record the purchase of the inventory and subsequent payment of the amount due on Sept 9,2010.

Question 57

The following information was taken from the accounting records of Trego Farms in 2010.For each of the following determine the amount of cash Trego Farms paid for the item given the data presented below.
A.Beginning balance Prepaid Insurance $1,000
Ending balance Prepaid Insurance $1,400
Insurance Expense for 2010 $2,000
B.Beginning Balance Salaries Payable $20,000
Ending Balance Salaries Payable $15,000
Salaries Expense for 2010 $150,000
C.Beginning Balance Supplies $4,000
Ending Balance Supplies $5,000
Supplies Expense for 2010 $2,800

Question 58

Iowa Corporation had a beginning balance of $8,600 in Utilities Payable account at the start of the year and an ending balance of $4,000.During the year Iowa recorded $10,000 of utilities expense.How much cash did Iowa pay the utility company during the year?

A)$14,600
B)$5,400
C)$10,00
D)Can't be determined with the information given

Question 59

Gross pay for the employees of Mr.Scott Corporation for February 28,2010 is as follows:
Information on withholding and payroll taxes are shown below:
Required:
(A.)Make the journal entry to record the February payroll.
(B.)Record the journal entry for the employer's payroll taxes.
(C.)Make the journal entry to record the employer's monthly payment of payroll tax liabilities.

Question 60

Why would the amount of supplies expense differ from the amount of cash paid for supplies in a year?

Question 62

The following information was taken from the accounting records of Russell Oil Corp in 2010.For each of the following make the entries associated with the changes in the account given the data available.
A.Beginning balance Prepaid Insurance $3,000
Ending balance Prepaid Insurance $3,900
Cash paid for insurance for 2010 $3,500
B.Beginning Balance Salaries Payable $15,000
Ending Balance Salaries Payable $ 7,000
Salaries Expense for 2010 $350,000
C.Beginning Balance Supplies $14,000
Ending Balance Supplies $11,000
Supplies Expense for 2010 $32,000