ACCOUNTING 26TH EDITION BY WARREN -Test Bank

ACCOUNTING 26TH EDITION BY WARREN -Test Bank

1. The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 – 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 – Business Forms
ACCT.ACBSP.APC.17 – Inventories Reporting ACCT.AICPA.BB.01 – Industry
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
2. In a merchandise business, sales minus operating expenses equal net income.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 – 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
3. Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 – 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.17 – Inventories Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

4. Service businesses provide services for income, while a merchandising business sells merchandise.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 – 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 – Business Forms
ACCT.ACBSP.APC.17 – Inventories Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
5. In retail businesses, inventory is reported as a current asset.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 – 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
6. Under a periodic inventory system, the cost of merchandise on hand at the end of the year is determined by a physical count of the inventory.
a. True
b. False

ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

7. In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
8. Freight in is the amount paid by the company to deliver merchandise sold to a customer.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
9. Freight in is considered a cost of purchasing inventory.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
10. The cost of merchandise inventory is limited to the purchase price less any purchase discounts.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic

11. Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.
a. True
b. False

ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
12. If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 – 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic