Inventory Reporting Quiz
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Questions and Answers

Which of the following would not be reported as inventory?

  • Land acquired for resale by a real estate firm
  • Agricultural produced held by a farm
  • Partially completed goods held by a manufacturing company
  • Machinery required by a manufucturing company for us in the production process (correct)
  • Income from operations is gross profit less

  • administrative expenses.
  • operating expenses. (correct)
  • other expenses and losses.
  • selling expenses.
    1. Two categories of expenses for merchandising companies are

  • cost of goods sold and financing expenses.
  • operating expenses and financing expenses.
  • cost of goods sold and operating expenses. (correct)
  • sales and cost of goods sold.
    1. Sales revenue less cost of goods sold is called

    <p>a. gross profit.</p> Signup and view all the answers

    51 Cost of goods sold is determined only at the end of the accounting period in

    <p>a periodic inventory system.</p> Signup and view all the answers

    A perpetual inventory system would likely be used by a(n

    <p>automobile dealership.</p> Signup and view all the answers

    In a perpetual inventory system, cost of goods sold is recorded

    <p>with each sale.</p> Signup and view all the answers

    Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

    <p>Merchandise Inventory account.</p> Signup and view all the answers

    The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

    <p>Merchandise Inventory.</p> Signup and view all the answers

    The Merchandise Inventory account is used in each of the following except the entry to record

    <p>payment of freight on goods sold</p> Signup and view all the answers

    Study Notes

    Inventory Reporting

    • Income from operations is gross profit less expenses, which implies that inventory is not reported as income.

    Merhcandising Companies

    • Two categories of expenses exist for merchandising companies.

    Gross Profit Calculation

    • Sales revenue less cost of goods sold is called gross profit.

    Inventory Systems

    • Cost of goods sold is determined only at the end of the accounting period in a periodic inventory system.

    Perpetual Inventory System

    • A perpetual inventory system would likely be used by a large retail company.
    • In a perpetual inventory system, cost of goods sold is recorded each time a sale is made.
    • Under a perpetual inventory system, acquisition of merchandise for resale is debited to the Merchandise Inventory account.

    Recording Purchases and Returns

    • The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit the Merchandise Inventory account and debit Accounts Payable or Cash.

    Merchandise Inventory Account

    • The Merchandise Inventory account is used in each of the following except the entry to record cost of goods sold.

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    Description

    Test your knowledge on inventory reporting by identifying which items would not be reported as part of inventory.

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