Answered: 1. When merchandise is shipped FOB…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. When merchandise is shipped FOB (free on board) Destination:

Select one:

A. The buyer pays for the shipment.

B. Title passes to buyer when merchandise is shipped.

C. Title passes to buyer when merchandise is delivered.

D. None of the above

2. Which of the following is NOT an element of internal control?

Select one:

A. Control environment

B. Control procedures

C. Management risk

D. Risk assessment

3. In a merchandising business, when merchandise sold on account, a journal entry is booked to Debit to Accounts Receivable and Credit to Sales. In addition:

Select one:

A. Cost of goods sold is debited and Merchandise inventory is credited.

B. Cost of goods sold is credited and Merchandise inventory is debited.

C. Accounts Receivable is credited and Sales is debited.

D. None of the above.

4. One of the primary objectives of inventory controls is:

Select one:

A. Safeguarding inventory from damage or theft.

B. Selling inventory at an affordable price

C. Both A & B

D. None of the above

5. When merchandise is shipped FOB (free on board) Destination:

Select one:

A. The buyer pays for the shipment.

B. Title passes to buyer when merchandise is delivered.

C. Title passes to buyer when merchandise is shipped.

D. There is no charge for the shipment.

6. Which of the following statement is true regarding inventory costing?

Select one:

A. Under LIFO, the first units purchased are sold and ending inventory is made up of the most recent purchase

B. The cost of ending inventory is the same Under the LIFO and FIFO methods.

C. Both statements are true

D. None of the above statements are true

7. If inventory original cost is $3,000, estimated selling price is $2,500, estimated selling expense is $100, using the LCM method inventory is valued at:

Select one:

A. $3,000

B. $2,500

C. $3,100

D. $2,400

8. Bentley Manufacturing Co. uses the LIFO method of costing its inventory, which indicates that:

Select one:

A. Merchandise are sold in the order in which they are received

B. Last merchandise purchased is sold out first

C. There is no specific order in which merchandise is sold

D. None of the above

9. A Credit memo is a note from a seller indicating its intent to credit a customer’s accounts receivable.

Select one:

True

False

10. In a period of rising prices, the FIFO method of costing inventory results in income tax savings for companies.

Select one:

True

False

11. When prices increase, FIFO reports higher gross profit and net incomethan LIFO.

Select one:

True

False

12. A debit memo represents a decrease to accounts payable and therefore results in less money owed to the seller.

Select one:

True

False

13. When seller pays for shipping, the cost of freight is added to the cost of inventory by debiting Merchandise Inventory.

Select one:

True

False

14. FOB (free on board) destination Point means the seller is not responsible for the shipping charges.

Select one:

True

False

15. FOB (free on board) Shipping Point means there is no charge for shipping the goods from the seller to the buyer.

Select one:

True

False

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