Question

Which of the following is a temporary account?

Select one:

a. Revenues

b. Land

c. Account payable

d. Cash

If the company uses FIFO, what is the value of cost of goods sold for October?

1-Oct beginning inventory 50@4

10-Oct Purchase [email protected]

20-Oct Purchase 150@5

31-Oct Sold 220@7

Select one:

a. $1,000

b. $1,200

c. $1,065

d. $1,028

Which of the following accounts is not a temporary account?

Select one:

a. Revenues

b. Withdrawals

c. Income summery

d. Account receivable

The buyer received an invoice from the seller for merchandise with a list price of $400 and credit terms of 2/10, n/60. The number 10 in the credit terms is the

Select one:

a. credit period

b. cash discount allowed for early payment of the invoice

c. discount period

d. trade discount

Answer 1

Ans:

1.

A permanent account is an account which appear on the balance sheet of financial statements. All other accounts that appears in the books of the company are temporary accounts.

So here revenue account is an temporary account, because Cash , Land and Account Payable are part of Permanent account.

So correct answer is option A.

2.

FIFO Method is used for inventory valuation using First In First Out concept:

Opening Inventory : 50 @ $4

Pur 1 : 100 @ $4.5

Pur 2 : 150 @ $5.0

Sold Units : 220.

Cost of Units Sold : 50*$4 + 100*$4.5 + 70*$5 = $1,000

So correct answer is option A.

3.

A permanent account is an account which appear on the balance sheet of financial statements. All other accounts that appears in the books of the company are temporary accounts.

So revenue, withdrawl and income statement are temporary accounts and  Account receivable is a permanent account.

So correct answer is option B.

4.

2/10 here means if a buyer pays within 10 days of purchase he gets a discount of 2% on payment. So the term 10 here means Discount period. Period in which a buyer can claim discount.

So correct answer is option C.

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