(attempt All) multiple choice

1.

On February 26, Entity B purchased $5,000 of merchandise from Entity C, terms 2/10, net 30.The merchandise cost Entity C $2,500.Both Entity B and Entity useperpetualinventory systems.Entity C's(seller's) entry record this transaction is:

Dr. Inventory5,000

Cr. Accounts Payable5,000

Dr. Accounts receivable5,000

Cr. Sales5,000

Dr. Accounts Receivable5,000

Cr. Sales5,000

Dr. Cost of goods sold2,500

Cr. Inventory2,500

None of the above.

2.

Financial information is presented below:

Operatingexpenses$104,000

Sales returns andallowances4,000

Salesdiscounts9,000

Salesrevenue323,000

Cost of goods sold100,000

The gross profit rate (rounded) would be

.36.

.68.

.34

.42.

3.

Entity C made a salary advance to a new employee.This type of receivable would be classified as:

an account receivable

a note receivable

a trade receivable

an other receivable

4.

In periods of rising prices, which is an advantage of using the LIFO inventory costing method?

Income tax expense will be lower.

Phantom profits are reported.

The value for ending inventory should approximate the current cost of the inventory.

Net income will be the highest and thus reflect the prosperity of the company.

5.

Which of the following statements is correct with respect to inventories?

Under FIFO, the earliest costs are assigned to ending inventory.

Under FIFO, the latest costs are assigned to cost of goods sold.

Inventory costing methods must track the physical flow of the inventory.

There is no requirement that cost flow track the physical flow of the inventory.