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1 | |
Inventory is considered a current asset because it: |
| | A) | Often reflects the most current trends and styles. |
| | B) | Usually was purchased during the current year. |
| | C) | Will be converted into cash in the course of the company's operating cycle. |
| | D) | Can be returned to the supplier for a cash refund. |
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2 | |
The primary economic function of a wholesaler is to: |
| | A) | Supply merchandise to retailers. |
| | B) | Sell merchandise to the public at "factory-direct" prices. |
| | C) | Manufacture low-cost products. |
| | D) | Sell merchandise on a "cash-and-carry" basis. |
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3 | |
The income statement of Laurel Company shows a large gross profit. This means that Laurel: |
| | A) | Is profitable. |
| | B) | Uses a perpetual inventory system. |
| | C) | Engages in retail sales. |
| | D) | Has sold merchandise at prices above its cost. |
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4 | |
In a perpetual inventory system, purchases of merchandise on account are recorded by debiting: |
| | A) | Cost of Goods Sold. |
| | B) | Accounts Payable. |
| | C) | Purchases. |
| | D) | Inventory. |
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5 | |
Colby's General Store uses a periodic inventory system. At year-end, the balance in the Inventory account is $8,500. Assuming that the inventory records have been maintained properly, a year-end physical inventory: |
| | A) | Is unnecessary. |
| | B) | Probably will indicate slightly less than $8,500 in merchandise on hand, because of inventory shrinkage. |
| | C) | Probably will indicate slightly more than $8,500 in merchandise on hand, because of inflation. |
| | D) | Is needed to establish the ending inventory, as the $8,500 balance in the Inventory account represents the inventory at the beginning of the year. |
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6 | |
Ward Company discovered that merchandise purchased on account was defective and returned this merchandise to the supplier. The entry to record this return will reduce Ward's: |
| | A) | Sales revenue and the cost of goods sold. |
| | B) | Inventory and liabilities. |
| | C) | Inventory and cost of goods sold. |
| | D) | Sales revenue and liabilities. |
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2002 McGraw-Hill Higher Education