Exam: 061553RR - Accounting for Merchandising-If the replacement cost of inventory is less than its historical cost

1.If the replacement cost of inventory is less than its historical cost, the company will write down the

inventory by

A.increasing inventory and decreasing cost of goods sold.

B.making a note in the financial statements only.

C.increasing cost of goods sold and decreasing inventory.

D.increasing inventory for replacement cost and decreasing inventory for historical cost.

2.Which element of internal control deals with a company having large amounts of cash on hand?

A.Information and communication

B.Risk assessment

C.Control environment

D.Control activities

3.Under a perpetual inventory system, when goods are returned to a retailer from a customer, _______ is

debited and _______ is credited.

A.Cost of Goods Sold; Sales Returns and Allowances

B.Sales; Cost Goods Sold

C.Inventory; Sales

D.Sales Returns and Allowances; Cost of Goods Sold

4.Under the average cost method, the flow of costs through the accounting records will _______ to the

physical flow of goods through the business.

A.match closely

B.have no relationship

C.exactly match

D.be nearly opposite

5.As it relates to accounting fraud, which of the followingbestdescribes perceived pressure?

A.Intentional misrepresentation of the financial statements

B.An element of the fraud triangle in which the employee justifies his or her actions

C.An element of the fraud triangle in which the employee feels a need to obtain cash or other assets

D.An element of the fraud triangle in which the employee believes there is a chance to commit and conceal fraud

6.Which of the following isnotpart of the fraud triangle?

A.Realization

B.Perceived pressure

C.Rationalization

D.Perceived opportunity

7.The factor that makes a person feel forced to steal money because of high medical bills is

A.realization.

B.perceived opportunity.

C.perceived pressure.

D.rationalization.

8.An employee believes that getting away with fraud without being detected is likely. This best relates to

which element of the fraud triangle?

A.Realization

B.Rationalization

C.Perceived opportunity

D.Perceived pressure

9.When merchandise is sold under the perpetual system of inventory, the journal entry to record a sale of

merchandise on account includes debiting _______ and crediting _______.

A.Cost of Goods Sold; Sales

B.Accounts Receivable; Inventory

C.Accounts Receivable; Sales

D.Accounts Receivable; Cost of Goods Sold

10.If net sales decrease and cost of goods sold increases, the gross profit percentage

A.increases.

B.remains the same.

C.decreases.

D.will change based upon the change in total assets.

11.A company has net sales of $126,000, cost of goods sold of $72,000, operating expenses of $38,000,

and other expenses of $3,000. Approximately what is the company's gross profit percentage?

A.0.429

B.0.127

C.0.103

D.0.241

12.A method of valuing inventory based on the average of units is called the

A.LIFO method.

B.FIFO method.

C.average cost method.

D.specific cost method.

13.Land is an example of a

A.long-term liability.

B.current asset.

C.current liability.

D.long-term asset.

14._______ occurs if a disgruntled employee convinces another to steal from the company.

A.Collusion

B.A control activity

C.Monitoring

D.The control environment

15.Lyman Company returned $750 of goods it had purchased from another company. The original invoice

was for $4,200, 3/10, n/30. What is the discount if Lyman pays the balance within the discount period?

A.$103.50

B.$126.00

C.$0.00

D.$22.50

16.If there is a difference between the physical count and the perpetual record, the account in which the

difference is recorded is the

A.Inventory Expense.

B.Revenue.

C.Cost of Goods Sold.

D.Sales.

17.Which of the following would probablynotneed to be disclosed in a footnote?

A.A 10% increase in sales

B.Change of inventory methods

C.A material change in estimated shrinkage

D.A change in depreciation method

18.In order to attract investors and borrow on attractive terms, a company would use ________ in times

when inventory costs are rising.

A.average costing

B.specific-identification costing

C.LIFO

D.FIFO

19.Michelle, a customer of Regal Company, returned $45 of goods that were purchased on account.

Under the perpetual inventory system, Regal will record a debit to _______ and a credit to _______ for

End of exam

$45.

A.Sales; Cost of Goods Sold

B.Sales Returns and Allowances; Accounts Receivable (Michelle)

C.Sales; Accounts Receivable (Michelle)

D.Cost of Goods Sold; Inventory

20.A company has net sales of $126,000, cost of goods sold of $72,000, operating expenses of $38,000,

and other expenses of $3,000. The company's net income is

A.$54,000.

B.$51,000.

C.$16,000.

D.$13,000.