ACCOUNTING FOR MERCHANDISING

1. Gordon the CPA says, “I am unable to give an opinion about the validity of this accounting information.” What kind of opinion is this? A. Qualified B. Unqualified C. Disclaimer D. Adverse 2. A new car lot would probably cost its inventory using the _______ method of inventory costing. A. FIFO B. specific-identification C. moving average D. LIFO 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? A. LIFO B. FIFO C. Average cost D. Any method, as there is no effect on net income or taxes for the period if costs are constant. 4. If the replacement cost of inventory is less than its historical cost, the company will write down the inventory by A. increasing inventory for replacement cost and decreasing inventory for historical cost. B. increasing cost of goods sold and decreasing inventory. C. increasing inventory and decreasing cost of goods sold. D. making a note in the financial statements only. 5. Michelle, a customer of Regal Company, returned $45 of goods that were purchased on account. Under the perpetual inventory system, Regal will record a debit to _______ and a credit to _______ for $45. A. Sales; Accounts Receivable (Michelle) B. Cost of Goods Sold; Inventory C. Sales Returns and Allowances; Accounts Receivable (Michelle) D. Sales; Cost of Goods Sold 6. Give the correct example of a kickback. A. Marcy understates her company’s unearned revenue in order to make the total revenue look more impressive. B. A customer buys a DVD player, but Courtney does not record the transaction. Later, Courtney keeps the money for herself. C. Ben gives his hardware salesman tickets to the football game. In exchange, the salesman gives Ben an unfairly low price on hardware. D. Wyatt ate only cheap sandwiches during his business trip, but he claimed over $100 in food expenses to his company. 7. Beginning inventory plus net purchases equals A. gross profit. B. ending inventory. C. cost of goods available for sale. D. cost of goods sold. 8. _______ occurs if a disgruntled employee convinces another to steal from the company. A. The control environment B. Monitoring C. A control activity D. Collusion 9. As it relates to accounting fraud, which of the following best describes perceived pressure? A. The opportunity to commit and conceal fraud B. An employee’s justification of his or her actions C. Intentional misrepresentation of financial statements D. A need to obtain cash or other assets 10. Olympic Enterprises has the following inventory data: Assuming FIFO, what is the cost of goods sold for June 14? Date Quantity Unit Cost June 1 Beginning inventory 5 $52 June 4 Purchase 10 $55 June 7 Sale 12 June 11 Purchase 9 $58 June 14 Sale 8 A. $440 B. $464 C. $455 D. $456 11. If net sales decrease and cost of goods sold increases, the gross profit percentage A. decreases. B. increases. C. remains the same. D. will change based upon the change in total assets. 12. In the United States, GAAP’s overriding principles of accounting are written by the A. IRS. B. SEC. C. IASB. D. FASB. 13. A company has net sales of $126,000, cost of goods sold of $72,000, operating expenses of $38,000, and other expenses of $3,000. The company’s net income is A. $51,000. B. $54,000. C. $16,000. D. $13,000. 14. The major difference in the statement of retained earnings between a service business and a merchandising business is A. that the retained earnings statement of a merchandising business includes Dividends. B. that the retained earnings statement of a merchandising business shows the Cost of Goods Sold. C. that the retained earnings statement of a service business includes Dividends. D. nothing. There are no differences between the two. 15. Land is an example of a A. current asset. B. long-term asset. C. current liability. D. long-term liability. 16. A/An _______ is used to determine the amount of inventory actually on hand at the end of the accounting period. A. physical inventory count B. inventory layer C. inventory shrinkage D. footnote 17. If a misstatement of inventory occurs, the net income for _______ periods will be misstated. A. 0 B. 2 C. 1 D. 3 End of exam 18. Cash register schemes are a form of A. employee embezzlement. B. fraudulent financial reporting. C. management fraud. D. bribery. 19. Which type of audit opinion is also referred to as a clean opinion? A. Adverse B. Unqualified C. Disclaimer D. Qualified 20. Which of the following is not part of the fraud triangle? A. Perceived pressure B. Realization C. Rationalization D. Perceived opportunity

 

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