Question 6 (40 marks)

Choose the best answer for each of the following questions [20* 2 mark each]:

1. The goal of reporting realistic figures and never overstating assets or net income applies to the ________.

1. materiality concept
2. conservatism principle
3. disclosure principle
4. consistency principle

2. ABC Company earned revenues of $19,000 and incurred expenses of $4,000. The company declared and paid cash dividends of $1,500. What is the balance in the Income Summary account after closing net income or loss to the Retained Earnings account?

1. debit balance of $19,000
2. credit balance of $4,000
3. credit balance of $15,000
4. balance of $0
5. Another answer.

3. An invoice of $600 for merchandise purchased is showing 3/15, n/30 as terms of credit. If the invoice is paid on or before the fifteenth day, the amount to be paid is ________.

1. $582
2. $600
3. $618
4. $621
5. Another answer.

4. A company purchased inventory for $73,000 from a vendor on account, FOB shipping point, with terms of 4/10, n/30. The company paid the shipper $1,500 cash for freight in. The company paid the vendor nine days after the sale. If there was no beginning inventory, the cost of inventory would be ________. (Assume a perpetual inventory system.)

1. $71,580
2. $74,500
3. $68,580
4. $71,500
5. Another answer.

5. Quality Jewelers uses the perpetual inventory system. On April 2, Quality sold merchandise for $60,000 to a customer on account with terms of 2/15, n/30. The allowances and returns on this sale amounted to $10,000. The cost of goods sold was $23,000. On April 20, Quality received payment from the customer. Calculate the amount of gross profit.

1. $50,000
2. $23,000
3. $27,000
4. $25,800
5. Another answer.