Multiple Choice Questions
1. The income statement for Feel Good Health Foods shows gross profit of $151,000, operating expenses of $126,000, and cost of goods sold of $215,000. What is the amount of net sales revenue?
a. $277,000
b. $366,000
c. $492,000
d. $341,000
2. The word market as used in the lower of cost or market generally means
a. retail market price.
b. Replacement cost.
c. Retail market price.
d. Liquidation price.
3. The sum of (a) ending inventory and (b) cost of goods sold is
a. Beginning inventory.
b. Goods available.
c. Net purchases.
d. Gross profit.
4. The following data come from the inventory records of Draper Company:
Net sales revenue......................................... $623,000
Beginning inventory .................................... 64,000
ending inventory......................................... 45,000
Net purchases.............................................. 460,000
Based on these facts, the gross profit for Draper Company is
a. $130,000.
b. $163,000.
c. $134,000.
d. Some other amount.
5. Eleanor Barker Cosmetics ended the month of May with inventory of $25,000. Eleanor Barker expects to end June with inventory of $12,000 after cost of goods sold of $102,000. How much inventory must Eleanor Barker purchase during June in order to accomplish these results?
a. $89,000
b. $114,000
c. $115,000
d. Cannot be determined from the data given
6. Two financial ratios that clearly distinguish a discount chain such as Kmart from a high-end retailer such as Saks Fifth Avenue are the gross profit percentage and the rate of inventory turnover. Which set of relationships is most likely for Saks Fifth Avenue?
Gross profit percentage Inventory turnover
a. High Low
b. High High
c. Low Low
d. Low High