Question 1

Under the periodic inventory method,indicate the financial statement(s)on which you would find the following items:
a)Cost of goods sold
b)Freight-In
c)Ending Inventory
d)Beginning Inventory
e)Sales Discount

Accepted Answer

The answer of Under the periodic inventory method,indicate the financial...

Question 2

Under the periodic inventory method,the beginning and ending inventories are combined to determine the balance sheet inventory amount.

Accepted Answer

Under the periodic inventory method, the cost of goods sold is determined by subtracting the ending inventory from the sum of beginning inventory and purchases. The balance sheet inventory amount is only determined by the ending inventory.

Question 3

Marie's Law Firm's unadjusted trial balance includes the following:
 $$\begin{array} { l r } 
\text { Cash } & \$ 5,000 \
\text { Unearned Legal Fees } & 2,200 \
\text { Legal Fees Revenue } & 14,200
\end{array}$$ 
Using the above data,record the adjusting entry for $1,000 of the unearned accounting fees earned.

Accepted Answer

The answer of Marie's Law Firm's unadjusted trial balance includes...

Question 4

The amount for beginning inventory is not needed when calculating Cost of Goods Sold.

Accepted Answer

Beginning inventory is needed to calculate Cost of Goods Sold using the formula:
Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory.

Question 5

Beginning inventory is adjusted by crediting Merchandise Inventory and debiting Income Summary.

Accepted Answer

The answer of Beginning inventory is adjusted by crediting Merchandise...

Question 6

The Freight-in account is an operating expense account.

Accepted Answer

The Freight-in account is considered part of the inventory cost and is included in the cost of goods sold when the inventory is sold, not an operating expense.

Question 7

Calculate: (a)net sales, (b)cost of goods sold, (c)gross profit,and (d)net income from the following:
 $$\begin{array} { l r l r } 
\text { Sales } & \$ 2,000 & \text { Beginning Inventory } & \$ 500 \
\text { Sales Discount } & 50 & \text { Net purchases } & 1,200 \
\text { Sales Returns \& } & & \text { Ending Inventory } & 700 \
\text { Allowances } & 80 & \text { Operating Expenses } & 300
\end{array}$$

Accepted Answer

The answer of Calculate: (a)net sales, (b)cost of goods sold,...

Question 8

Mortgage Payable is found on the income statement.

Accepted Answer

Mortgage Payable is a liability account found on the balance sheet, not the income statement.

Question 9

Under the periodic inventory method,the ending inventory is adjusted by debiting Income Summary and crediting Merchandise Inventory.

Accepted Answer

Under periodic inventory method, ending inventory is determined by physically counting the inventory at the end of the accounting period. The adjustment is made by debiting Merchandise Inventory and crediting Purchases account. No adjustment is made through Income Summary. Therefore, the statement is false.

Question 10

Under the accrual system,expenses are recorded when paid.

Accepted Answer

Under the accrual system, expenses are recorded when they are incurred (i.e. when goods or services are received), not necessarily when they are paid.

Question 11

Unearned Revenue is a liability account used to record rent fees received in advance.

Accepted Answer

Unearned Revenue is a liability account used to record income received in advance, including rent fees.

Question 12

Indicate the normal balance of each of the following accounts:
a)Purchases Returns and Allowances
b)Merchandise Inventory
c)Freight-In
d)Sales Returns and allowances
e)Unearned Revenue

Accepted Answer

The answer of Indicate the normal balance of each of...

Question 13

Under the periodic inventory system,an adjustment is not made on the worksheet for inventory.

Accepted Answer

Under the periodic inventory system, an adjustment is made on the worksheet for inventory to account for the cost of goods sold and update the ending inventory balance at the end of the accounting period.

Question 14

Mortgage Payable is a contra-liability account.

Accepted Answer

Mortgage Payable is a liability account, not a contra-liability account. It represents the amount owed on a mortgage loan. A contra-liability account is one that offsets or reduces a liability account, such as a Discount on Bonds Payable account.

Question 15

Why is beginning and ending inventory kept as two separate figures in the cost of goods sold section?

Accepted Answer

The answer of Why is beginning and ending inventory kept...

Question 16

Sales Discount is used when calculating Net Purchases.

Accepted Answer

Sales Discount is deducted from Gross Purchases to arrive at Net Purchases.

Question 17

The amount of supplies used causes an increase in Supplies and a decrease in Expense.

Accepted Answer

Using supplies causes a decrease in Supplies (an asset account) and an increase in Expense, reflecting the consumption of the supplies.

Question 18

Adjustments are journalized before recording them in the worksheet.

Accepted Answer

Adjustments are typically recorded in the worksheet first to see their effect on the financial statements before they are journalized and posted to the ledger.

Question 19

Under the accrual system,revenue is recognized when earned.

Accepted Answer

Under the accrual system of accounting, revenue is recognized when it is earned, regardless of when payment is received. This is in contrast to the cash basis of accounting, where revenue is recognized only when payment is received.

Question 20

Calculate: (a)net sales, (b)cost of goods sold, (c)gross profit,and (d)net income from the following:
 $$\begin{array} { l r l r } 
\text { Sales } & \$ 1,300 & \text { Beginning Inventory } & \$ 11 \
\text { Sales Discount } & 5 & \text { Net purchases } & 1,050 \
\text { Sales Returns \& } & & \text { Ending Inventory } & 16 \
\text { Allowances } & 15 & \text { Operating Expenses } & 100
\end{array}$$

Accepted Answer