Financial Accounting

Questions

1. If ending inventory in Period 1 is overstated, gross profit in Period 2 is A. not affected.

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B. overstated.

C. understated.

D. the same as in Period 1.

 

2. The major difference in the statement of retained earnings between a service business and a merchandising business is A. that the retained earnings statement of a merchandising business includes Dividends.

B. nothing. There are no differences between the two.

C. that the retained earnings statement of a service business includes Dividends.

D. that the retained earnings statement of a merchandising business shows the Cost of Goods Sold.

 

3. The cost of goods sold equals A. beginning inventory minus net purchases plus ending inventory.

B. beginning inventory plus net purchases minus ending inventory.

C. ending inventory plus net purchases minus beginning inventory.

D. beginning inventory plus net sales minus ending inventory.

 

4. If an employee overbills a company for travel, this would be considered a/an A. check tampering scheme.

B. cash register scheme.

C. disbursement scheme.

D. expense scheme.

 

5. A/An _______ is used to determine the amount of inventory actually on hand at the end of the accounting period. A. inventory layer

B. footnote

C. physical inventory count

D. inventory shrinkage

 

 

 

6. A method of valuing inventory based on the average of units is called the A. FIFO method.

B. LIFO method.

C. specific cost method.

D. average cost method.

 

7. Beginning inventory plus net purchases equals A. gross profit.

B. cost of goods sold.

C. ending inventory.

D. cost of goods available for sale.

 

8. If there is a difference between the physical count and the perpetual record, the account in which the difference is recorded is the A. Sales.

B. Revenue.

C. Cost of Goods Sold.

D. Inventory Expense.

 

9. Under the average cost method, the flow of costs through the accounting records will _______ to the physical flow of goods through the business. A. exactly match

B. match closely

C. be nearly opposite

D. have no relationship

 

10. Olympic Enterprises has the following inventory data:

Assuming FIFO, what is the cost of goods sold for June 14?

Date Quantity Unit Cost

June 1 Beginning inventory 5 $52

June 4 Purchase 10 $55

June 7 Sale 12

June 11 Purchase 9 $58

June 14 Sale 8

A. $456

B. $455

C. $464

D. $440

 

11. If net sales decrease and cost of goods sold increases, the gross profit percentage A. increases.

 

 

B. decreases.

C. will change based upon the change in total assets.

D. remains the same.

 

12. In a FOB destination agreement, when will ownership transfer to the buyer? A. When the goods arrive at the delivery location

B. When the buyer physically touches the goods

C. When the goods leave the seller’s location

D. When the buyer has paid for the goods in full

 

13. An audit opinion in which the auditors are taking exception to a specific treatment of accounting information is the A. qualified opinion.

B. adverse opinion.

C. disclaimer of opinion.

D. unqualified opinion.

 

14. A new car lot would probably cost its inventory using the _______ method of inventory costing. A. moving average

B. specific-identification

C. LIFO

D. FIFO

 

15. Which of the following is not part of the fraud triangle? A. Realization

B. Rationalization

C. Perceived opportunity

D. Perceived pressure

 

16. Gordon the CPA says, “I am unable to give an opinion about the validity of this accounting information.” What kind of opinion is this? A. Adverse

B. Disclaimer

C. Unqualified

D. Qualified

 

17. What does GAAS stand for? A. Goals, assessment activities, and statuses

B. Generally accepted auditing standards

C. Goals, accruals, audits, and standards

D. General accounts and statuses

 

18. Which of the following would probably not need to be disclosed in a footnote?

 

 

End of exam

A. Change of inventory methods

B. A material change in estimated shrinkage

C. A change in depreciation method

D. A 10% increase in sales

 

19. Goods available for sale are $350,000; beginning inventory is $24,000; ending inventory is $32,000; and cost of goods sold is $275,000. What is the inventory turnover? A. 8.59

B. 9.82

C. 12.50

D. 11.46

 

20. _______ occurs if a disgruntled employee convinces another to steal from the company. A. Monitoring

B. The control environment

C. A control activity

D. Collusion