Question 4 (40 marks)

Requirement:Choose the best answer for each of the following questions

1. Which of the following inventory costing methods yields the lowest net income during a period of rising inventory costs?

1. specific identification
2. last-in, first-out
3. weighted-average
4. first-in, first-out

2. ----------- A measure of how quickly an asset may be converted into cash.

1. Materiality Concept
2. Cash Basis Accounting
3. Accrual Basis Accounting
4. Liquidity

3. -----------Records revenues when earned and expenses when incurred.

1. Materiality Concept
2. Accrual Basis Accounting
3. Time Period Concept
4. Liquidity

4. ----------- A business's activities can be divided into small segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year.

1. Materiality Concept
2. Accrual Basis Accounting
3. Time Period Concept
4. Liquidity

5. ----------- A company must perform strictly proper accounting only for significant items.

1. Materiality Concept
2. Cash Basis Accounting
3. Accrual Basis Accounting
4. Time Period Concept

6. ----------- Is an asset account that is used only for goods purchased that the business owns and intends to resell to customers.

1. Materiality Concept
2. Perpetual Inventory System
3. Merchandise Inventory account
4. Cash Basis Accounting

7. At May 1, 2017, Deitrich Company had beginning inventory consisting of 300 units with a unit cost of 3.50. During May, the company purchased inventory as follows:

600 units at 3.50

900 units at 4.00

The company sold 1,500 units during the month for 6 per unit. Deitrich uses the average-cost method. The average cost per unit for May is

1. 3.50.
2. 3.75.
3. 3.80.
4. 4.00.

8. ----------- An inventory system that keeps a running computerized record of merchandise

1. Perpetual Inventory System
2. Merchandise Inventory account
3. Cash Basis Accounting
4. Accrual Basis Accounting

9. Revenue is earned when the business has ________.

1. entered into an agreement with the customer about the goods or services to be delivered
2. prepared a journal entry to record revenue
3. received cash from the customer before goods or services are delivered
4. delivered a good or service to the customer

10. The goal of reporting realistic figures and never overstating assets or net income applies to the ________.

1. materiality concept
2. conservatism principle
3. disclosure principle
4. consistency principle

11. ABC Company earned revenues of $19,000 and incurred expenses of $4,000. The company declared and paid cash dividends of $1,500. What is the balance in the Income Summary account after closing net income or loss to the Retained Earnings account?

1. debit balance of $19,000
2. credit balance of $4,000
3. credit balance of $15,000
4. balance of $0

12. An invoice of $600 for merchandise purchased is showing 3/15, n/30 as terms of credit. If the invoice is paid on or before the fifteenth day, the amount to be paid is ________.

1. $582
2. $600
3. $618
4. $621

13. A company purchased inventory for $73,000 from a vendor on account, FOB shipping point, with terms of 4/10, n/30. The company paid the shipper $1,500 cash for freight in. The company paid the vendor nine days after the sale. If there was no beginning inventory, the cost of inventory would be ________. (Assume a perpetual inventory system.)

1. $71,580
2. $74,500
3. $68,580
4. $71,500

14. Quality Jewelers uses the perpetual inventory system. On April 2, Quality sold merchandise for $60,000 to a customer on account with terms of 2/15, n/30. The allowances and returns on this sale amounted to $10,000. The cost of goods sold was $23,000. On April 20, Quality received payment from the customer. Calculate the amount of gross profit.

1. $50,000
2. $23,000
3. $27,000
4. $25,800

15. Which of the following accounting elements does the matching principle help to match?

1. revenues and liabilities
2. expenses and assets
3. expenses and revenues
4. expenses and liabilities

16. Unearned Revenue is classified as a(n) ________ account.

1. liability
2. asset
3. revenue
4. Equity

17. Ted's Used Cars uses the specific identification method of costing inventory. During March, Ted purchased three cars for $8,000, $10,000, and $13,000, respectively. During March, two cars are sold for $11,000 each. Ted determines that at March 31, the $13,000 car is still on hand. What is Teds gross profit for March?

1. $3,000.
2. $4,000.
3. $1,000.
4. $9,000.

18. Prepaid insurance is classified as a(n) ________ account.

1. liability
2. asset
3. revenue
4. Equity

19. The following contains information from the records of XYZ Company.

XYZ Company

Selected Financial Information

December 31, 2017

Current Assets	$90,000
Current Liabilities	30,000
Long-Term Assets	95,000
Long-Term Liabilities	65,000
Total Revenues	50,000
Total Expenses	37,000

Calculate the current ratio. (Round your answer to two decimals.)

1. 1.46
2. 3.00
3. 0.64
4. 2.28

20. Which of the following statements is correct with respect to inventories?

1. The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
2. It is generally good business management to sell the most recently acquired goods first.
3. Under FIFO, the ending inventory is based on the latest units purchased.
4. FIFO seldom coincides with the actual physical flow of inventory.