Penn Foster Exam 061694RR

1.

If current assets decrease and current liabilities increase, the current ratio

A. will change based on the change in total assets.

B. remains the same.

C. decreases.

D. increases.

2.   Nick Company reports the following inventory information:

Inventory Number

Inventory Quantity

Unit Cost

Unit Market Value

APD 4837

440

$51.29

$51.48

CPZ 2837

290

$76.59

$77.02

IXL 9291

310

$42.34

$42.47

EOD 1717

200

$22.19

$21.75

DKS 3088

180

$31.22

$31.17

What is the total value of the merchandise under LCM (lower-of-cost or market)?

A. $67,961.70

B. $68,210.30

C. $67,864.70

D. $68,113.30

A. $168

B. $182

C. $196

D. $175

4.   ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to record the payment of this invoice is

A. debit Accounts Payable $340; credit Cash $340.

B. debit Accounts Payable $350; credit Cash $350.

C. debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.

D. debit Accounts Payable $340; debit Inventory $10; credit Cash $350.

5.   Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is the inventory record for Product C124:

Date

Received

Sold

Cost/Unit

Balance

April 22

534

$6.58

$3,513.72

May 17

433

$6.70

$2,901.10

June 21

389

$6.76

$2,629.64

August 2

436

$6.44

$2,807.84

What is the average cost per unit after the receipt of the June 21 inventory?

A. $6.72

B. $6.62

C. $6.67

D. $6.61

6.   A low gross profit percentage means that

A. general and administrative expenses are very high.

B. the cost of goods sold was relatively high.

C. the cost of goods sold was relatively low.

D. selling expenses are very low.

7.   Under Sarbanes-Oxley, those officers signing off on the reports must have evaluated the company’s internal control within the previous

A. 90 days.

B. nine months.

C. year.

D. six months.

8.   A company’s current ratio increased from 1.23 to 1.45. What does this mean?

A. This means that current assets decreased and current liabilities decreased.

B. There isn’t enough information to explain the increase.

C. This means that current assets increased and current liabilities decreased.

D. This means that current assets increased and current liabilities increased.

9.   New technology, like the latest cell phones and HDTV, would probably be costed using the

A. FIFO method of inventory costing.

B. moving-average method of inventory costing.

C. LIFO method of inventory costing.

D. specific-identification method of inventory costing.

10.   Goods such as milk, bread, and cheese would probably be costed using the _______ method of inventory costing.

A. FIFO

B. average

C. LIFO

D. specific-identification

11.   When a merchandiser sells on account, which of the following is not needed to record the transaction?

A. Cash

B. Cost of goods sold

C. Inventory

D. Accounts receivable

12.   To pay the least income tax possible in periods of rising inventory costs, the company should use which inventory costing method?

A. LIFO

B. Average cost

C. Specific identification

D. FIFO

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

A. A material change in estimated shrinkage

B. A 10% increase in sales

C. Change of inventory methods

D. A change in depreciation method

14.   Net sales times the historical gross profit percentage yields the estimated

A. ending inventory.

B. beginning inventory.

C. cost of goods sold.

D. gross profit.

15.   Under a perpetual inventory system, the account to which transportation charges on incoming merchandise is generally entered is

A. FOB shipping.

B. delivery expense.

C. FOB destination.

D. inventory.

16.   To overstate earnings, a company can

A. overstate expenses and overstate revenue.

B. overstate receivables and understate payables.

C. understate expenses and understate revenue.

D. understate unearned revenue and understate property, plant, and equipment.

17.   Casey Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)

Units

Unit Price

Total Cost

January 1—Beginning Inventory

20

$12

$240

March 8—Sold

14

April 2—Purchase

30

$13

$390

June 5—Sold

25

Aug 6—Purchase

25

$14

$350

Total Cost of Inventory

$980

Ending inventory is 14 units.

What is the cost of goods sold for Casey Company for 2012 using LIFO?

A. $308

B. $784

C. $801

D. $264

18.   One of the biggest factors in implementing SOX was

A. establishing internal control procedures.

B. disclosing deficiencies in internal controls.

C. reviewing the financial reports.

D. the cost of implementing the system.

19.   Which of the following may not limit the effectiveness of internal control systems in an organization?

A. Understanding of policies and procedures

B. Duties not segregated

C. Poorly designed controls

D. Costs not worth benefits

20.   Meranda Corporation purchases $3,500 of inventory on account from Ashley Corporation. The journal entry to record this purchase for Meranda under a perpetual inventory system is

A. debit Inventory; credit Accounts Payable—Meranda.

B. debit Inventory; credit Cash.

C. debit Accounts Payable—Ashley; credit Inventory.

D. debit Inventory; credit Accounts Payable—Ashley.