11) The cost of inventory that is still on hand is called:
A) cost of goods sold, an expense that appears on the balance sheet.
B) inventory, a long-term asset that appears on the balance sheet.
C) inventory, a current asset that appears on the balance sheet.
D) purchases, an asset that appears on the balance sheet.
12) Another term for gross profit is:
A) gross income.
B) gross sales.
C) gross margin.
D) gross operating income.
13) Two accounts that would appear on the financial statements of a merchandising company that are not needed by a service company are:
A) cost of goods sold and depreciation.
B) cost of goods sold and net income.
C) cost of goods sold and inventory.
D) inventory and depreciation.
14) Sales revenue is based on the ________ of the inventory, while cost of goods sold is based on the ________ of the inventory.
A) cost, selling price
B) cost, cost
C) selling price, retail price
D) selling price, cost
15) Which is the CORRECT order for items to appear on the income statement?
A) Sales revenue, operating expenses, gross profit, net income
B) Sales revenue, gross profit, net income, operating expenses
C) Sales revenue, gross profit, cost of goods sold, operating expenses
D) Sales revenue, cost of goods sold, gross profit, operating expenses
16) A periodic inventory system:
A) is used for inexpensive goods.
B) is not expensive to maintain.
C) does not keep a running record of inventory on hand.
D) is all of the above.
17) The inventory system that uses computer software to keep a running record of inventory on hand is the:
A) cost of goods sold inventory system.
B) periodic inventory system.
C) perpetual inventory system.
D) hybrid inventory system.
18) Roadway Company purchases inventory from Fedway Company with the shipping terms FOB destination. This means that:
A) Roadway Company owns the goods while they are in transit.
B) Legal title passes to Roadway Company when the goods leave Fedway's shipping dock.
C) Fedway Company will pay the freight on this transaction.
D) Roadway Company will include the goods in their inventory as soon as they leave Fedway's shipping dock.
19) Under a perpetual inventory system, when a sale is made, the seller prepares:
A) no journal entry.
B) one journal entry only.
C) two journal entries.
D) three journal entries.
20) How do purchase returns and allowances and purchase discounts affect gross purchases?
A) Both are added to purchases.
B) Both are subtracted from purchases.
C) Purchase returns and allowances are added to purchases; purchase discounts are subtracted from purchases.
D) Purchase returns and allowances are subtracted from purchases; purchase discounts are added to purchases.