Accounting Quiz#1 The accountant at Landry Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. Th

Accounting Quiz

#1 The accountant at Landry Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $8,740. The LIFO method will result in income before taxes of $7,900. What is the difference in tax that would be paid between the two methods?

$840

$588

Cannot be determined from the information provided.

$252

#2 Which sales accounts normally have a debit balance?

Neither (a) nor (b).

both (a) and (b).

Sales returns and allowances.

Sales discounts

#3 Apple-A-Day Company has the following inventory data:

July 1     Beginning inventory     20 units at $20     $   400

7     Purchases     70 units at $21     1,470

22     Purchases     10 units at $22          220

                                                          $2,090

A physical count of merchandise inventory on July 30 reveals that there are 30 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

$1,480

$1,470

$1,450.

$1,430

#4 An advantage of the single-step income statement over the multiple-step form is

the amount of information it provides.

its comprehensiveness.

its simplicity.

its use in computing ratios.

#5 Which of the following statements is true regarding the profit margin ratio?

The profit margin ratio can be improved by decreasing the gross profit rate and/or controlling operating expenses and other costs

The profit margin ratio does not vary across industries.

Discount stores with high merchandise turnover generally have higher profit margins.

If the profit margin ratio has a higher value, this suggests favorable return on each dollar of salees

#6 Under the perpetual inventory system, in addition to making the entry to record a sale, a company would

make no additional entry until the end of the period.

debit Cost of Goods sold and credit Inventory.

debit Cost of Goods Sold and credit Purchases.

debit Inventory and credit Cost of Goods Sold.

#7 For a jewelry retailer, which is an example of Other Revenues and Gains?

repair revenue

unearned revenue

gain on sale of display cases

discount received for paying for merchandise inventory within the discount period

#8 Gross profit equals the difference between

net sales revenues and cost of goods sold plus operating expenses.

net sales revenues and operating expenses.

net sales revenues and cost of goods sold.

net income and operating expenses.

#9 Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct?

Discounts taken by Adams Company's customers are credited to Inventory.

A return of merchandise inventory by one of Adams Company's customers is credited to Inventory.

Freight paid to get merchandise inventory to Adams Company's store is debited to Freight Expense.

Returns of merchandise inventory by Adams Company to a manufacturer are credited to Inventory.

#10 Which of the following is not a true statement about a multiple-step income statement?

There is a section for cost of goods sold.

There may be a section for operating assets.

There may be a section for non-operating activities.

Operating expenses are often classified as selling and administrative expenses.