The journal entry to record a purchase of inventory on credit under the perpetual system include: a

  1. The journal entry to record a purchase of inventory on credit under the perpetual system include:

a debit to Merchandise Inventory

a debit to Purchases

a credit to Accounts Payable

Both A and C

2 The Allowance for Doubtful Accounts is listed on the balance sheet under the caption:

owner’s equity

current liabilities

current assets

fixed assets

3 Which of the following is an operating expense?

Salaries expense

Payroll tax expense

Purchases

Both A and B

4 Which of the following situations would more likely not result in bad debts?

The company extends credit easily

The company has a strict credit policy

The company has a cash-only policy

None of these answers are correct

5 The cost of a plant asset did not include installation costs that were expensed This error would cause:

the period’s net income to be overstated

the period’s net income to be understated

the period’s end assets to be understated

Both B and C

6 An item that can be converted into cash or used up during the normal operating cycle is:

a current asset

Plant and Equipment

a current liability

a long term liability

7 If $6,000 was the beginning inventory, purchases were $10,000, and sales were $7,000, what would the ending inventory be?

9000

6000

0

3000

8 Ending inventory:

increases Cost of Goods Sold

decreases Cost of Goods Sold

does not affect Cost of Goods Sold

increases liabilities

9 Workers’ Compensation Insurance is:

paid by the employer to protect the employee against job-related injury or death

paid by the employee to protect himself against job-related accidents or death

paid by the employer to protect the employee against injury or death unrelated to the job

paid by the employee to protect himself against accidents or death unrelated to the job

10 The time frame when customers are allowed to pay their bills and still be eligible for a discount is the:

credit period

discount period

closing period

due date

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