College Accounting
Chapter 5 - Bell Ringers Obj. 5 & 6
Name___________________________________
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1) Inventory is the most important asset for a merchandiser.
1)
2) A small decrease in the gross profit percentage generally signals a rise in income.
2)
3) Owners and managers generally strive to sell inventory quickly.
3)
4) With a periodic inventory method, purchases, purchase discounts, purchase returns and
allowances are recorded in separate accounts.
4)
5) With a periodic inventory method, cost of goods sold is computed by adding ending inventory to
cost of goods available for sale.
5)
6) With a periodic inventory method, it is necessary to conduct a physical count of inventory to
determine cost of goods sold.
6)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
7) Which of the following is gross profit divided by net sales?
A) Debt ratio
B) Gross profit percentage
C) Current ratio
D) Rate of inventory turnover
7)
8) Which of the following is cost of goods sold divided by average inventory?
A) Debt ratio
B) Gross profit percentage
C) Current ratio
D) Rate of inventory turnover
8)
9) Which of the following is the gross profit percentage?
A) Gross profit times net sales revenue
B) Gross profit plus net sales revenue
C) Gross profit divided by net sales revenue
D) Gross profit minus net sales revenue
9)
10) Which of the following correctly describes the rate of inventory turnover?
A) The rate of inventory turnover indicates how rapidly inventory is sold.
B) The rate of inventory turnover indicates how quickly inventory is received from the supplier
after the order is placed.
C) The rate of inventory turnover indicates how many days it takes the inventory to travel
between the seller's warehouse and the buyer's warehouse.
D) The rate of inventory turnover indicates how many days it takes from the time an order is
received to the day it is shipped.
10)
11) A company's net sales revenues are $540,000. Its cost of goods sold is $360,000. Which of the
following is its gross profit percentage?
A) 100%
B) 300%
C) 33.33%
D) 66.67%
11)
12) Which of the following is represented by the inventory account on the balance sheet?
A) Ending inventory
B) Cost of merchandise available for sale
C) Cost of goods sold
D) Beginning inventory
12)
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13) If a company uses the periodic inventory method, which of the following is subtracted from cost of
goods available for sale to arrive at cost of goods sold?
A) Ending inventory
B) Purchase discounts and purchase returns and allowances
C) Beginning inventory
D) Net purchases
13)
14) If a company uses the periodic inventory method, which of the following is subtracted from
purchases to arrive at net purchases?
A) Purchase discounts and purchase returns and allowances
B) Beginning inventory
C) Cost of goods available for sale
D) Ending inventory
14)
15) If a company uses the periodic inventory method, which of the following is added to beginning
inventory to arrive at cost of goods available for sale?
A) Ending inventory
B) Net purchases and freight in
C) Purchase discounts and purchase returns and allowances
D) Purchases
15)
16) A company that uses the periodic inventory method purchases inventory of $1,000 on account with
terms of 2/10 net/30. Which of the following entries would be made to record the payment for the
inventory if the payment is made within 10 days?
A) The accounting entry would be a $980 debit to Accounts Payable, a $20 debit to Purchase
Discounts and a $1,000 credit to Cash.
B) The accounting entry would be a $1,000 debit to Accounts Payable and a $1,000 credit to
Cash.
C) The accounting entry would be a $1,000 debit to Accounts Payable, a $20 credit to Purchase
Discounts and a $980 credit to Cash.
D) The accounting entry would be a $20 debit to Purchase Discounts, a $1,000 debit to Accounts
Payable and a $1,020 credit to Cash.
16)
17) A company uses the periodic inventory method. Which of the following entries would be made to
record a purchase of inventory on account?
A) The accounting entry would be a debit to Inventory and a credit to Accounts Payable.
B) The accounting entry would be a debit to Accounts Payable and a credit to Inventory.
C) The accounting entry would be a debit to Accounts Payable and a credit to Purchases.
D) The accounting entry would be a debit to Purchases and a credit to Accounts Payable.
17)
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Answer Key
Testname: CH5BR5-6
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TRUE
FALSE
TRUE
TRUE
FALSE
TRUE
B
D
C
A
C
A
A
A
B
C
D
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