You are given a choice of taking the simple interest on 100,000 invested for 2 years

1.Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

(Points : 5)True
False

2. The Merchandise Inventory account balance at the end of the current period is equal to the amount of beginning merchandise inventory for the next period. (Points : 5) True False

3. All of the following statements regarding inventory shrinkage are true except: (Points : 5) Inventory shrinkage refers to the loss of inventory. Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. Inventory shrinkage is recognized by debiting an operating expense. Inventory shrinkage is recognized by debiting Cost of Goods Sold. Inventory shrinkage can be caused by theft or deterioration.

4. The credit terms 2/10, n/30 are interpreted as: (Points : 5) 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 30% discount if paid within 2 days. 30% discount if paid within 10 days. 2% discount if paid within 30 days.

5. Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles. (Points : 5) True False

6. Merchandise inventory: (Points : 5) Is a long-term asset. Is a current asset. Includes supplies. Is classified with investments on the balance sheet. Must be sold within one month.

7. An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a: (Points : 5) Balanced income statement. Single-step income statement. Multiple-step income statement. Combined income statement. Simplified income statement.

8. When a credit customer returns merchandise to the seller, under a perpetual inventory system, the seller would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold. (Points : 5) True False

9. A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals: (Points : 5) $200. $1,564. $1,568. $1,600. $1,800.

10. There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand. (Points : 5) True False

11. Companies are allowed to use FIFO for financial reporting and LIFO for tax reporting, according to IRS requirements. (Points : 5) True False

12. A company's cost of inventory was $317,500. Due to phenomenal demand the market value of its inventory increased to $323,000. This company should write up the value of its inventory according to the consistency principle. (Points : 5) True False

13. LIFO assumes that inventory costs flow in the order incurred. (Points : 5) True False

14. Days' sales in inventory is calculated as: (Points : 5) Ending inventory divided by cost of goods sold. Cost of goods sold divided by ending inventory. Ending inventory divided by cost of goods sold times 365. Cost of goods sold divided by ending inventory times 365. Ending inventory times cost of goods sold.

15. Harriet's Toy Shop had net sales of $852,000. The gross profit was $230,000. Calculate Harriet's cost of goods sold. (Points : 10)

16. A company made the following merchandise purchases and sales during the month of July: July 1 purchased 380 units at $15 each July 5 purchased 270 units at $20 each July 9 sold 500 units July 14 purchased 300 units at $24 each July 20 sold 250 units July 30 purchased 250 units at $30 each There was no beginning inventory. If the company uses the First In, First Out inventory valuation method and the perpetual inventory system, what would be the cost of the 450 units of ending inventory? (Points : 10)

17. Complete the journal entries for JonesCompany as follows: (be sure to label your answers appropriately)

(a) Smith Company returned merchandise to you for $700 that was purchased on account 2 weeks prior. The cost of the merchandise was $550

(b) Rollins Company paid the $6,000 invoice for merchandise bought on account last week and took a sales discount of 2%

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