Financial Accounting for Merchandising Businesses

Question 1. Under a perpetual inventory system, transportation charges on incoming merchandise are generally entered to the _______ account.

Answer: Inventory

Question 2. Beginning inventory plus net purchases equals 

Answer: Cost of goods available for sale

Question 3. In order to pay the least income tax possible in periods of constant costs, the company should use which of the following inventory costing methods? 

Answer: LIFO

Question 4. In the United States, GAAP's overriding principles of accounting are written by the 

Answer: FASB

Question 5. Under a perpetual inventory system, when goods are returned to a retailer from a customer, _______ is debited and _______ is credited. 

Answer: Sales Returns and Allowances; Cost of Goods Sold

Question 6. Give the correct example of a kickback .

Answer: B. Ben gives his hardware salesman tickets to the football game. In exchange, the salesman gives Ben an unfairly low price on hardware.

Question 7. Which of the following is not part of the fraud triangle? 

Answer: Realization

Question 8. 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 _______. 

Answer: Accounts Receivable; Cost of Goods Sold

Question 9. Which element of internal control deals with a company having large amounts of cash on hand?

Answer: Risk Assessment

Question 10. Which of the following would probably not need to be disclosed in a footnote? 

Answer: Change of inventory methods

Question 11. _______ occurs if a disgruntled employee convinces another to steal from the company. 

Answer: A control activity

Question 12. 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? 

Answer: $103.50

Question 13. Which of the following is not part of the control environment? 

Answer: Assessing chances of fraud

Question 14. A/An _______ is used to determine the amount of inventory actually on hand at the end of the accounting period. 

Answer: Physical inventory count

Question 15. Under the average cost method, the flow of costs through the accounting records will _______ to the physical flow of goods through the business. 

Answer: Have no relationship

Question 16. If an employee overbills a company for travel, this would be considered a/an 

Answer: Expense scheme

Question 17. Kira says, "I found that Monotype Corporation's financial statements don't follow GAAP." What type of audit opinion is this? 

Answer: Qualified

Question 18. The cost of goods sold equals 

Answer: Beginning inventory plus net purchases minus ending inventory

Question 19. Gordon the CPA says, "I am unable to give an opinion about the validity of this accounting information." What kind of opinion is this? 

Answer: Disclaimer

Question 20. The factor that makes a person feel forced to steal money because of high medical bills is 

Answer: Perceived pressure