Question

1. The following assets are included in Diamond Auto Parts, Inc.'s December 31, 2007 balance sheet.

Accounts Receivable (net of Allowance for Uncollectible Accounts)	$50,000
Accumulated Depreciation, Building	20,000
Building	100,000
Cash	60,000
Land	130,000
Land Held for Future Use	40,000
Merchandise Inventory	70,000
Trademark	110,000

The total dollar amount of assets classified as property, plant, andequipment on Diamond's Auto Parts' December 31, 2007classified balance sheet is __________.

Select one:

a. $210,000

b. $50,000

c. $360,000

d. $430,000

2. ABN Company sold goods, receiving $10,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting?

Select one:

a. $10,000

b. $25,000

c. $35,000

d. None at this time

3. West, Inc. had beginning inventory of $10,000, purchases of $25,000 and ending inventory of $5,000. What is West's cost of merchandise sold?

Select one:

a. $10,000

b. $25,000

c. $5,000

d. $30,000

4. Henry Inc. had the following merchandise transactions in October:

Purchases	$50,000
Purchase returns	$ 3,000
Purchase discounts	$ 1,000
Transportation	$ 2,000

What is the total cost of merchandise purchased for Henry, Inc.?

Select one:

a. $50,000

b. $46,000

c. $52,000

d. $48,000

5. ABC Company had $32,000 in net sales, $15,000 in cost of merchandise sold; $16,000 in operating expenses and $2,000 in other income. What is ABC Company’s gross profit?

Select one:

a. $17,000

b. $ 3,000

c. $ 1,000

d. ($ 1,000)

6. The primary difference between a periodic and perpetual inventory system is that a:

Select one:

a. periodic system determines the inventory on hand only at the end of the accounting period

b. periodic system keeps a record showing the inventory on hand at all times

c. periodic system provides an easy means to determine inventory shrinkage

d. periodic system records the cost of the sale on the date the sale is made

Answer 1

1. Answer: Option a. $210000

Total amount of property, plant, and equipment = Land $130000 + Building $100000 – Accumulated depreciation, building $20000 = $210000.

Cash, accounts receivable, and merchandise inventory are classified as current assets, Trademark as intangible asset and Land held for future use as investment.

2. Answer: Option c. $35000

Under accrual basis of accounting cash and credit sales will be recorded as revenue which is $10000 + $25000 = $35000.

3. Answer: Option d. $30000

Cost of merchandise sold = Beginning inventory + Purchases – Ending inventory = $10000 + $25000 - $5000 = $30000.

4. Answer: Option d. $48000

Total cost of merchandise purchased = Purchases – Purchase returns – Purchase discounts + Transportation = $50000 - $3000 - $1000 + $2000 = $48000.

5. Answer: Option a. $17000

Gross profit = Sales – Cost of merchandise sold = $32000 - $15000 = $17000

6. Answer: Option a. periodic system determines the inventory on hand only at the end of the accounting period.

Options b., c., and d. pertain to a perpetual inventory system.