1.During the month of March, Wang Company sold merchandise on account for $9,100. The merchandise had cost Wang $4,900. Which of the following represents the effects of this transaction on Wang?s financial statements?;test2 q17 (Points: 2);Row One;Row Two;Row Three;Row Four;2.What is the relationship between gross margin and net income? (Points: 2);Gross Margin ? Merchandise Inventory at the end of the period = Net Income;Gross Margin ? Selling and Administrative Expenses = Net Income;Gross Margin + Selling and Administrative Expenses = Net income;Sales Revenue x Gross Margin Percentage= Net Income;3.Which of the following is not a period cost? (Points: 2);Advertising Expense;Sales Commissions;Cost of Goods Sold;Interest Expense;4.Cost of Goods Sold is reported as a(n): (Points: 2);asset on the balance sheet.;direct reduction of equity on the statement of changes in stockholders? equity.;addition to Sales Revenue on the income statement.;expense on the income statement.;5.Whitney Company?s Cost of Goods Available for Sale for 2010 was $610,000. Which of the following statements is true? (Points: 2);If the merchandise inventory at the end of the year was $100,000, the Cost of Goods Sold was $510,000.;If the merchandise inventory at the end of the year was $100,000, the Cost of Goods;Sold was $710,000.;If the beginning inventory was $95,000, the Cost of Goods Sold was $515,000.;If the beginning inventory was $95,000, the Cost of Goods sold was $705,000.;6.Merchandising businesses: (Points: 2);manufacture the goods they sell.;generate revenue primarily by providing services to customers.;buy the merchandise they sell from suppliers.;include dry cleaning companies and law firms.;7.Gruver Company maintains perpetual inventory records. The company's inventory account had a $5,500 balance as of December 31, 2010. On that date, a physical count of inventory showed only $5,300 of merchandise in stock. The write-down to recognize the missing inventory will: (Points: 2);decrease assets.;increase expense.;decrease equity.;all of the above.;8.Lemon Company sent goods to a customer FOB delivery. What effect will these freight costs have on Lemon company?s financial statements?;test2 q23 (Points: 2);Row One;Row Two;Row Three;Row Four;9.Gross margin is equal to: (Points: 2);Sales Revenue divided by the balance in Merchandise Inventory at the end of the period.;the balance in Merchandise Inventory at the beginning of the period plus the amount of inventory purchased during the year.;Sales Revenue minus Cost of Goods Sold.;Sales Revenue minus Cost of Goods Available for Sale.;10.Which of the following statements accurately describes a fidelity bond? (Points: 2);Insurance that the company buys to protect itself from loss due to employee dishonesty;Proper procedures for processing accounting transactions;Procedures to provide reasonable assurance that the objectives of a company are accomplished;Guidelines that limit the actions and authority of different levels of management;11.Which of the following is not a reason why a business needs strong internal controls over cash? (Points: 2);A small volume of high-denomination currency represents a significant amount of value.;Ownership of cash is difficult to prove.;Cash has universal appeal.;Money is the common unit of measurement in business.;12.What documentation issued by a bank increases a company's checking account balance at the bank? (Points: 2);An account invoice;A debit memo;A credit memo;A certified check;13.What documentation issued by a bank increases a company's checking account balance at the bank? (Points: 2);An account invoice;A debit memo;A credit memo;A certified check;14.In preparing a bank reconciliation, typical adjustments to the bank balance include: (Points: 2);NSF checks.;interest earned on the account.;accounts or notes receivable collected by the bank.;deposits in transit.;15.Wren Company accepted a check from Jay Company as payment for services rendered. Wren's bank statement revealed that the Jay check was an NSF check. Wren has not decided to write off the account. Exclusive of any bank charges what will the entry to record the NSF check have on the accounting equation of Wren Company?;Row Total Assets Total Equity;One No effect No effect;Two Decrease Decrease;Three Decrease No effect;Four No effect Decrease;(Points: 2);Row One;Row Two;Row Three;Row Four;16.Which of the following is not one of the purposes of an internal control system? (Points: 2);Safeguarding the company's assets;Ensuring that the company is using the most effective marketing plan;The assessment of the degree of compliance with company policies and public laws;The evaluation of performance;17.Unger Company uses the perpetual inventory method. Unger sold goods that cost $3,500 for $7,200. If the sale was made to a customer on account, the sale will: (Points: 2);increase total assets by $3,700.;increase total liabilities by $7,200.;increase total liabilities by $3,500.;increase total assets by $7,200.;18.The most effective way to reduce opportunities for ethical or criminal misconduct is: (Points: 2);to obtain fidelity bonds for all employees.;to perform random physical counts frequently.;to implement an effective system of internal controls.;to perform extensive background checks before hiring employees.;19.The following are strong control measures over cash receiptsexceptfor: (Points: 2);a record of all cash collections should be prepared immediately upon receipt.;employees who receive cash should give customers a written receipt.;there should be a significant amount of cash on hand in order to avoid writing checks.;cash receipts should be deposited in a bank as soon as possible.;20.An entry to record the purchase of inventory on account under the perpetual inventory method: (Points: 2);increases total assets.;decreases total liabilities.;decreases total assets.;increases total equity.
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