Question 1

On the income statement, adding delivered cost of purchases to beginning merchandise inventory results in
A)cost of goods available for sale.
B)gross profit.
C)cost of goods sold.
D)net income or net loss.
E)ending inventory.

Accepted Answer

The delivered cost of purchases added to beginning merchandise inventory calculates the total cost of the goods that were available for sale during the accounting period. Therefore, the answer is Cost of Goods Available for Sale.

Question 2

Assuming Net Sales is $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, and General Expenses are $22,800, then Gross Profit is
A)$27,700.
B)$207,700.
C)$101,000.
D)$95,300.
E)$72,500.

Accepted Answer

Gross Profit = Net Sales - Cost of Goods Sold

Gross Profit = $180,000 - $79,000 = $101,000

Selling and General Expenses are not included in the calculation of Gross Profit.

Question 3

An account numbered 201 indicates that the account is the first of the
A)property and equipment.
B)current liabilities.
C)selling expenses.
D)current assets.
E)long-term liabilities.

Accepted Answer

B

Question 4

If Ending Merchandise Inventory is $22,000, Purchases are $85,000, Purchases Discounts are $1,800, Freight In is $3,500, and Beginning Merchandise Inventory is $28,000, then Cost of Goods Sold is
A)$80,700.
B)$90,300.
C)$79,700.
D)$92,700.
E)$107,000.

Accepted Answer

The answer of If Ending Merchandise Inventory is $22,000, Purchases...

Question 5

Which of the following lists of items is used to compute the cost of goods available for sale?
A)Delivered cost of purchases and beginning inventory
B)Sales, beginning inventory, and ending inventory
C)Net sales, beginning inventory, and ending inventory
D)Gross profit, beginning inventory, and ending inventory
E)Beginning inventory and ending inventory

Accepted Answer

The cost of goods available for sale is calculated by adding the cost of beginning inventory to the delivered cost of purchases. Therefore, option A includes the two necessary items to compute the cost of goods available for sale. The other options listed do not include the necessary information to compute the cost of goods available for sale.

Question 6

Assuming Net Sales are $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, General Expenses are $22,800, and Interest Expense is $2,000, then Net Income is
A)$27,700.
B)$49,700.
C)$101,000.
D)$95,300.
E)$47,700.

Accepted Answer

Net Income is calculated as Net Sales minus all expenses. So, $180,000 (Net Sales) - $79,000 (Cost of Goods Sold) - $28,500 (Selling Expenses) - $22,800 (General Expenses) - $2,000 (Interest Expense) = $47,700.

Question 7

Cost of goods sold may be computed by
A)adding beginning inventory and ending inventory together.
B)subtracting ending inventory from cost of goods available for sale.
C)subtracting beginning inventory from cost of goods available for sale.
D)adding beginning inventory to cost of goods available for sale.
E)subtracting beginning inventory from net purchases.

Accepted Answer

The answer of Cost of goods sold may be computed...

Question 8

Examples of current assets are
A)supplies capable of being used up within twelve months.
B)merchandise inventories convertible into cash within twelve months or less.
C)receivables convertible into cash within twelve months or less.
D)all of these.
E)none of these.

Accepted Answer

Current assets are assets that are expected to be converted into cash within twelve months or less. Examples of current assets include supplies that can be used up within twelve months, merchandise inventories that can be sold for cash within twelve months or less, and receivables that are expected to be collected within twelve months or less. Therefore, all of the options listed are examples of current assets.

Question 9

Purchases differ from delivered cost of purchases by the amount of
A)Purchases Returns and Allowances, Purchases Discounts, and Freight In.
B)ending merchandise inventory.
C)the cost of goods available for sale.
D)the cost of goods sold.
E)beginning inventory.

Accepted Answer

Purchases differ from delivered cost of purchases by the amount of Purchases Returns and Allowances (if any products were returned or damaged), Purchases Discounts (if any discounts were offered), and Freight In (the cost of shipping the products from the supplier to the buyer).

Question 10

On an income statement, net sales minus cost of goods sold equals
A)delivered cost of purchases.
B)cost of goods available for sale.
C)net income.
D)gross profit.
E)beginning inventory.

Accepted Answer

Net sales minus cost of goods sold equals the gross profit.

Question 11

Operating Expenses consist of
A)Interest Expense and General Expenses.
B)Selling Expenses and Cost of Goods Sold.
C)Interest Expense and Selling Expenses.
D)General Expenses and Selling Expenses.
E)Interest Expense and Cost of Goods Sold.

Accepted Answer

Operating expenses include all expenses incurred from day-to-day operations of a business, such as rent, utilities, salaries, and advertising costs. 
General expenses and selling expenses fall under this category, while interest expense and cost of goods sold are separate categories. Therefore, the correct answer is D.

Question 12

Net purchases is equal to
A)Purchases minus Purchases Returns and Allowances plus Purchases Discounts.
B)Purchases plus Purchases Returns and Allowances plus Purchases Discounts.
C)Purchases minus Purchases Returns and Allowances minus Purchases Discounts.
D)Purchases plus Freight In minus Purchases Discounts.
E)Purchases minus Freight In plus Purchases Returns and Allowances.

Accepted Answer

Net purchases are calculated by subtracting both purchases returns and allowances and purchases discounts from the total purchases. This reflects the actual cost of purchases after accounting for returns, allowances, and discounts received.

Question 13

Debts that are due to be paid within one year or within the company's operating cycle are called
A)liquid liabilities.
B)current liabilities.
C)quick liabilities.
D)deferred liabilities.
E)long-term liabilities.

Accepted Answer

Current liabilities are debts that are due to be paid within one year or within the company's operating cycle.

Question 14

Assuming Net Sales are $164,000, Cost of Goods Sold is $83,000, Selling Expenses are $23,000, and General Expenses are $24,000, then Net Income is
A)$200,000.
B)$80,000.
C)$128,000.
D)$34,000.
E)$81,000.

Accepted Answer

The answer of Assuming Net Sales are $164,000, Cost of...

Question 15

A net income will result if gross profit is greater than
A)purchases.
B)cost of goods available for sale.
C)cost of goods sold.
D)operating expenses.
E)ending inventory.

Accepted Answer

Net income results when gross profit exceeds operating expenses. Gross profit is the revenue after subtracting the cost of goods sold, not directly related to purchases, cost of goods available for sale, or ending inventory in this context.

Question 16

An example of Other Income for a firm other than a bank or real estate office is
A)Rent Income.
B)Interest Income.
C)Gain on Disposal of Property and Equipment.
D)all of these.
E)none of these.

Accepted Answer

The answer of An example of Other Income for a...

Question 17

Assuming Net Sales is $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, General Expenses are $22,800, and Interest Expense is $2,000, then Income from Operations is
A)$27,700.
B)$49,700.
C)$101,000.
D)$95,300.
E)$72,500.

Accepted Answer

Income from Operations = Net Sales - Cost of Goods Sold - Selling Expenses - General Expenses
= $180,000 - $79,000 - $28,500 - $22,800
= $49,700

Therefore, the answer is B) $49,700.

Question 18

Cost of goods available for sale is equal to
A)delivered cost of purchases minus Freight In.
B)delivered cost of purchases plus Freight In.
C)delivered cost of purchases plus beginning inventory.
D)delivered cost of purchases minus beginning inventory.
E)Freight In plus ending inventory.

Accepted Answer

Cost of goods available for sale is the total cost of all the inventory items that were available for sale during a particular period. It can be calculated by adding the cost of beginning inventory to the cost of goods purchased (delivered cost of purchases). Therefore, the correct answer is C, which is delivered cost of purchases plus beginning inventory.

Question 19

If the Cash Short and Over account has a debit balance, the amount is reported under
A)Other Income.
B)Other Expenses.
C)Selling Expenses.
D)Miscellaneous General Expense.
E)Interest Income.

Accepted Answer

A debit balance in the Cash Short and Over account means that there have been more shortages than overages. This is considered a miscellaneous expense since it represents a loss to the company's funds. Therefore, it would be reported under Miscellaneous General Expense.

Question 20

On a classified balance sheet, Prepaid Insurance is classified as
A)a current asset.
B)a general expense.
C)property and equipment.
D)a current liability.
E)an equity account.

Accepted Answer

Prepaid Insurance represents an asset where the payment has been made in advance for insurance coverage. It is generally classified as a current asset on a classified balance sheet.

Quiz 12: Financial Statements, Closing Entries, and Reversing Entries

On the income statement, adding delivered cost of purchases to beginning merchandise inventory results in

Assuming Net Sales is $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, and General Expenses are $22,800, then Gross Profit is

An account numbered 201 indicates that the account is the first of the

If Ending Merchandise Inventory is $22,000, Purchases are $85,000, Purchases Discounts are $1,800, Freight In is $3,500, and Beginning Merchandise Inventory is $28,000, then Cost of Goods Sold is

Which of the following lists of items is used to compute the cost of goods available for sale?

Assuming Net Sales are $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, General Expenses are $22,800, and Interest Expense is $2,000, then Net Income is

Cost of goods sold may be computed by

Examples of current assets are

Purchases differ from delivered cost of purchases by the amount of

On an income statement, net sales minus cost of goods sold equals

Operating Expenses consist of

Net purchases is equal to

Debts that are due to be paid within one year or within the company's operating cycle are called

Assuming Net Sales are $164,000, Cost of Goods Sold is $83,000, Selling Expenses are $23,000, and General Expenses are $24,000, then Net Income is

A net income will result if gross profit is greater than

An example of Other Income for a firm other than a bank or real estate office is

Assuming Net Sales is $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, General Expenses are $22,800, and Interest Expense is $2,000, then Income from Operations is

Cost of goods available for sale is equal to

If the Cash Short and Over account has a debit balance, the amount is reported under

On a classified balance sheet, Prepaid Insurance is classified as