Multiple choice

1. At the beginning of the year, Hinz Company had an inventory of $400,000. During the year, the company  purchased goods costing $1,600,000. If Hinz Company reported ending inventory of $600,000  and sales of $2,000,000, the company's cost of goods sold and gross profit rate must be

 $1,000,000 and 50%.

$1,400,000 and 70%. 

$1,000,000 and 30%. 

$1,400,000 and 30%.

2. The Merchandise Inventory account is used in each of the following except the entry to record 

the return of goods purchased. 

payment of freight on goods sold. 

payment within the discount period. 

goods purchased on account.

3. On a classified balance sheet, merchandise inventory is classified as 

property, plant, and equipment. 

an intangible asset. 

a current asset. 

a long-term investment.

4. The Sales Returns and Allowances account does not provide information to management about 

errors in overbilling customers. 

inefficiencies in filling orders. 

possible inferior merchandise. 

the percentage of credit sales versus cash sales.