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Exam: 061690RR – ACCOUNTING FOR MERCHANDISING
Questions 1 to 20:
Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the
entire question and all the answers before choosing an answer.
1.
Which of the following would probably not cause inventory shrinkage?
A.
Spills of items
B.
Employee theft
C.
Correct counting of all inventory
D.
Spoilage of items
2.
Goods available for sale are $350,000; beginning inventory is $24,000; ending inventory is $32,000; and
cost of goods sold is $275,000. The inventory turnover is
A.
8.59.
B.
9.82.
C.
11.46.
D.
12.50.
3.
Which items may not limit the effectiveness of internal control systems in an organization?
A.
Properly designed controls
B.
Costs not worth benefits
C.
Collusion
D.
Overriding controls
4.
The balance sheet format that lists assets above liabilities is the _______ form.
A.
report
B.
liquidity
C.
account
D.
alphabetical
5.
Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is
the inventory record for Product C124:
Date Received Sold Cost/Unit Balance
April 22 534 $6.58 $3,513.72
May 17 433 $6.70 $2,901.10
June 21 389 $6.76 $2,629.64
August 2 436 $6.44 $2,807.84
6. Meranda Corporation purchases $3,500 of inventory on account from Ashley Corporation. The journal
entry to record this purchase for Meranda under a perpetual inventory system is
A.
debit Inventory; credit Accounts Payable—Meranda.
B.
debit Accounts Payable-Ashley; credit Inventory.
C.
debit Inventory; credit Accounts Payable—Ashley.
D.
debit Inventory; credit Cash.
7.
If current assets decrease and current liabilities increase, the current ratio
A.
decreases.
B.
remains the same.
C.
will change based on the change in total assets.
D.
increases.
8.
Net sales times the historical gross profit percentage yields the estimated
A.
gross profit.
B.
beginning inventory.
C.
ending inventory.
D.
cost of goods sold.
9.
When a merchandiser sells on account, which of the following is not needed to record the transaction?
A.
Cash
B.
Cost of goods sold
C.
Accounts receivable
D.
Inventory
10.
The major difference in the statement of retained earnings between a service business and a
merchandising business is
A.
that the retained earnings statement of a merchandising business includes dividends.
B.
that the retained earnings statement of a service business includes dividends.
C.
nothing. There are no differences between the two.
D.
that the retained earnings statement of a merchandising business shows the cost of goods sold.
11.
Committing a fraud because the employee feels that it will be easy to do is indicative of which part of
the fraud triangle?
A.
Perceived pressure
B.
Realization
Customer:
12.
A company’s gross profit percentage decreases from 58% to 51%. What does this mean?
A.
We can’t determine anything definite from the information given.
B.
This means that net income will be lower.
C.
This means that there will be a net loss.
D.
This means that net income will be higher.
13.
Casey Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012,
were as follows: (
Note: The company uses a perpetual system of inventory.)
What is the cost of goods sold for Casey Company for 2012 using LIFO?
Units Unit Price Total Cost
January 1—Beginning Inventory 20 $12 $240
March 8—Sold 14
April 2—Purchase 30 $13 $390
June 5—Sold 25
Aug 6—Purchase 25 $14 $350
Sept 11—Sold 22
Total Cost of Inventory $980
Ending inventory is 14 units.
A.
$801
B.
$264
C.
$308
D.
$784
14.
Which of the following may not limit the effectiveness of internal control systems in an organization?
A.
Poorly designed controls
B.
Duties not segregated
C.
Costs not worth benefits
D.
Understanding of policies and procedures
15.
ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to record
the payment of this invoice is
A.
debit Accounts Payable $340; credit Cash $340.
B.
debit Accounts Payable $340; debit Inventory $10; credit Cash $350.
C.
debit Accounts Payable $350; credit Cash $350.
D.
debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.
16.
In a balance sheet prepared in report form, liabilities must be listed after
A.
assets with long-term liabilities listed first.
Customer:
B.
stockholders’ equity.
C.
assets in alphabetical order.
D.
assets with current liabilities listed first.
17.
Under a perpetual inventory system, the account to which transportation charges on incoming
merchandise is generally entered is
A.
FOB destination.
B.
delivery expense.
C.
FOB shipping.
D.
inventory.
18.
Which of the following is an incorrect statement if ending inventory is understated?
A.
Net income is understated.
B.
Income tax is understated.
C.
Cost of goods sold is overstated.
D.
Gross profit is overstated.
19.
To overstate earnings, a company can
A.
overstate expenses and overstate revenue.
B.
overstate receivables and understate payables.
C.
understate unearned revenue and understate property, plant, and equipment.
D.
understate expenses and understate revenue.
20.
Physical inventory counts must be done
A.
when using bar-code scan technology.
B.
when using the periodic method of inventory.
C.
regardless of method inventory.
D.
when using the perpetual method of inventory