AC/113 AC113 AC 113 UNIT 5 QUIZ

 1.

Question :

When using the indirect method of preparing the statement of cash flows, how is each of the following items treated?


              Depreciation expense        Increase in a current asset

Student Answer:

 Add                                Subtract

 Add                               Add

 Subtract                        Add

 Subtract                        Subtract

Question 2.

Question :

If a company purchased $2,000 of merchandise on account and paid for it during the discount period with the terms of 2/10, n/30, the effect on the accounts would be:

Student Answer:

 decreases Accounts Payable by $2,000 and decreases cash by $2,000.

 increases Merchandise Inventory by $2,000 and increases Accounts Payable by $2,000.

 decreases Accounts Payable by $1,960 and decreases Merchandise Inventory by $1,960.

 decreases Accounts Payable by $2,000, decreases Merchandise Inventory by $40, and decreases Cash by $1,960.

Question 3.

Question :

How is inventory shrinkage recorded?

Student Answer:

 As a contra asset

 As a reduction to merchandise inventory

 As an increase to merchandise inventory

 As a separate liability account

Question 4.

Question :

If a $10,000 sale is made on January 1st, with terms of 2/10, n/30 how much would the discount be if payment is made on January 9th?

Student Answer:

 $10,000

 $200

 $1,000

 $0

Question 5.

Question :

Which term indicates that merchandise is free of transportation charges to the buyer?

Student Answer:

 FOB destination

 Freight in

 FOB shipping point

 Transportation in