1. Which of the following transactions is not part of the operating cycle:

1.  Which of the following transactions is not part of the operating cycle:

a.  Purchase of equipment on credit

b.  Purchase of merchandise inventory on credit

c.  Payment for purchases made on credit

d.  Sales of merchandise inventory for cash

e.  Collection of cash from credit sales

2.  Assuming that net purchases were $300,000 during the year and that ending inventory was $4,000 more than the beginning inventory of $60,000, how much was cost of goods sold?

a.  $236,000

b.  $244,000

c.  $296,000  

d.  $304,000

e.  $364,000

3.  A sale on April 20 with terms of n/10 eom is due to be collected by

a.  April 30.

b.  May 1.

c.  May 10.

d.  May 20.

e.  May 31.

4.  Which of the following is true about FOB shipping point:

a.  Title passes at destination.

b.  Seller pays transportation costs.

c.  Title pass at origin.

d.  Buyer does not pay transportation costs

e.  Seller owns good in transit

5.  When a merchandiser takes advantage of a discount available, the journal entry of the supplier includes a

a.  debit to Purchases Discounts.

b.  credit to Sales Discounts.

c.  credit to Cash.

d.  credit to Accounts Receivable.

e.  credit to Purchases Discounts.

6.  A company whose customers have returned goods that were previously sold on credit

a.  debits Sales Returns and Allowances and credits Accounts Receivable.

b.  debits Accounts Payable and credits Purchases.

c.  debits Sales and credits Accounts Receivable.

d.  debits Accounts Receivable and credits Accounts Payable.

e.  debits Purchases Returns and Allowances and credits Accounts Receivable.

The following information relates to questions 8 through 10:

Beginning inventory200 units @ $11

Purchase—April100 units @  $8

Purchase—September300 units @ $12

A periodic inventory system is used; ending inventory is 350 units.

7.  What is cost of goods sold under the average-cost method?

a.  $2,450

b.  $2,583

c.  $2,750  

d.  $3,267

e.  $3,850

8.  What is ending inventory under LIFO?

a.  $2,500

b.  $2,600

c.  $3,000

d.  $3,600  

e.  $4,000

9.  What is cost of goods sold under FIFO?

a.  $2,500

b.  $2,600  

c.  $3,000

d.  $3,600

e.  $4,000

10.  Which of the following items is classified as an intangible asset?

a.  Forest lands

b.  Prepaid insurance

c.  Goodwill

d.  Land held for future use

e.  Accounts receivable

11.  Return on assets equals

a.  average owner’s equity divided by average total assets.

b.  net income divided by average total assets.

c.  average total assets divided by total liabilities.

d.  net sales divided by average total assets.

e.  average total assets divided by net income.

12.  Which of the following is a measure of liquidity?

a.  Current ratio

b.  Return on equity

c.  Debt to equity

d.  Return on assets

e.  Profit margin

13.  Which of the following accounting conventions discourages the use of procedures that tend to overstate assets or income?

a.  Materiality

b.  Consistency

c.  Cost-benefit

d.  Full disclosure

e.  Conservatism

14.  The normal operating cycle includes all the following events except the

a.  Collection on an account receivable.

b.  purchase of merchandise.

c.  sale of merchandise on credit.

d.  recording of depreciation.

e.  manufacture of merchandise.

15.  Corporate books would not contain which of the following accounts?

a.  Dividends

b.  Richard Arlen, Capital

c.  Retained Earnings

d.  Paid-in Capital 

e.  Common Stock

16.  Which of the following items is not classified as a current asset?

a.  Special fund to purchase land

b.  Inventory

c.  Office supplies

d.  Prepaid rent

e.  Short-term investments

17.  Presenting all important information to the users of financial statements most clearly follows the convention of

a.  cost-benefit.

b.  conservatism.

c.  full disclosure.

d.  materiality.

e.  relevancy.

18.  Contributed capital can be found in which balance sheet section?

a.  Investments

b.  Stockholders’ equity

c.  Current assets

d.  Long-term liabilities

e.  Property, plant, and equipment

19.  Which of the following items appear in a different section of the income statement depending on whether the income statement is prepared on a single-step basis or on a multistep basis?

a.  Office salaries

b.  Sales

c.  Advertising expense

d.  Interest expense

e.  Office rent