Chapter 5 Question Review 1
Chapter 5 Questions
Multiple Choice
1. At the beginning of the year, Paradise Co. had an inventory of $200,000. During the year, the
company purchased goods costing $900,000. Paradise Co reported ending inventory of $300,000 at the
end of the year. Their cost of goods sold is
a. $1,000,000
b. $800,000
c. $1,400,000
d. $400,000
2. Under the perpetual inventory system, in addition to making the entry to record a sale, a company
would
a. debit Inventory and credit Cost of Goods Sold.
b. debit Cost of Goods Sold and credit Purchases.
c. debit Cost of Goods sold and credit Inventory.
d. make no additional entry until the end of the period.
3. Gross profit equals the difference between net sales and
a. operating expenses.
b. cost of goods sold.
c. net income.
d. cost of goods sold plus operating expenses.
4. Income from operations appears on
a. both a multiple-step and a single-step income statement.
b. neither a multiple-step nor a single-step income statement.
c. a single-step income statement.
d. a multiple-step income statement.
5. The entry for a buyer to record the return of goods under a perpetual inventory system assuming the
purchase was made on account would include a
a. debit to inventory
b. debit to purchase returns and allowances
c. credit to accounts payable
d. debit to accounts payable
6. Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is
recorded in which account?
a. Freight Expense
b. Freight-In
c. Inventory
d. Freight-Out
