Reference no: EM132572622

Question 1: Under a perpetual inventory system

a.the purchase returns and allowances account is credited when goods are returned to vendors

b.there is no need for a year-end physical count

c.increases in inventory resulting from purchases are debited to Purchases

d.accounting records continuously disclose the amount of inventory

Question 2: When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?

a.debit Merchandise Inventory; credit Accounts Payable

b.debit Merchandise Inventory; credit Purchases

c.debit Merchandise Inventory; credit Cash Discounts

d.debit Accounts Payable; credit Merchandise Inventory

Question 3: Sales is equal to the cost of merchandise sold less the gross profit.

True

False

Question 4: Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

True

False

Question 5: Under a periodic inventory system

a.merchandise inventory is debited when goods are returned to vendors

b.accounting records continuously disclose the amount of inventory

c.a physical inventory is taken at the end of the period

d.a separate account for each type of merchandise is maintained in a subsidiary ledger

Question 6: If ending inventory for the year is understated, net income for the year is overstated.

True

False

Question 7: Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.

True

False

Question 8: The lower of cost or market is a method of inventory valuation.

True

False

Question 9: When comparing a retail business to a service business, the financial statement that changes the least is the

a.balance sheet

b.income statement

c.statement of cash flows

d.statement of owner's equity