Accounting - Inventory

Inventory is a relatively liquid asset and usually appears above Accounts Receivable on the balance sheet.

• True

• False

• Aaa.. I cant choose

Operating income is:

• A measure of profitability after deducting cost of sales from net sales.

• A measure of profitability after deducting cost of sales and all expenses incurred in operating the business from net sales.

• A measure of liquidity after deducting cost of sales from net sales.

• The equivalent of net sales.

Merchandising companies that are small and do not use a perpetual inventory system may elect to use:

• A physical inventory system

• A periodic inventory system

• An inventory shrinkage method

• An inventory subsidiary ledger system.

Which of the following should not be classified as inventory in the balance sheet of a large automobile dealership?

• Pickup trucks offered for sale.

• Used cars taken in trade and offered for sale on the company's used-car lot.

• Spark plugs, oil filters, and other parts which are intended for use by the service department in repairing and servicing customers' cars.

• Company cars" provided to specific company executives for their personal use.

Gross profit is the difference between:

• Net sales and the cost of goods sold.

• The cost of merchandise purchased and the cost of merchandise sold.

• Net sales and net income.

• Net sales and all expenses.

The credit term 2/10, n/30 means:

• That after 10 days 2% interest is charged.

• That there is a 10% discount if payment is received within 30 days.

• That there is a 2% discount if payment is received within 10 days and no discount if payment is not received within 30 days.

• There is a 10% discount if paid immediately and 2% if paid within 30 days.

Which of the following statements about a periodic inventory system is not correct?

• These systems are used primarily by small businesses with manual accounting systems.

• The system does not include an up-to-date inventory ledger.

• The balance in the Inventory account remains unchanged until the end of the period.

• The Cost of Goods Sold account is updated as sales transactions occur.

The cost of the transportation of inventory purchased:

• Are expensed in the current period.

• Increases income.

• Reduces the sales price.

• Becomes part of the cost of inventory.

As a retailer, which of the following percentages is the most attractive to you?

• Gross profit of 30%.

• Cost of goods sold as a percentage of net sales equal to 70%.

• Gross margin of 30%.

• All three are the same.

The Sales Returns and Allowances account is debited when:

• Merchandise is returned to a supplier.

• Merchandise is returned by a customer.

• Payment is made to a supplier within the discount period.

• An account receivable is collected within the discount period.