Week 6 Quiz

The bicycle shop (illustrative) tracks each bicycle in a perpetual inventory system. When does that system update the Inventory and Cost of Goods Sold accounts?

Select one.

• With every purchase and every sale
• Only at the end of the period, from a physical count of the floor
• Only on the days the shop pays cash to a supplier
• Once a year, when the closing entries are made

True or false: the bicycle shop (illustrative) bought 10 bicycles FOB shipping point, so the supplier, not the shop, pays the $180 freight.

True or false.

• True
• False

The bicycle shop (illustrative) pays $180 of freight on 10 bicycles it bought FOB shipping point. Which entry records the freight in its perpetual system?

Select one.

• No entry; the supplier records the freight on its own books
• Debit Cash 180; credit Inventory 180
• Debit Inventory 180; credit Cash 180
• Debit Sales Revenue 180; credit Cash 180

The bicycle shop (illustrative) owes its supplier $4,000 for 10 bicycles bought on terms of 2⁄10, n⁄30 and pays within 10 days. Which entry records the payment in its perpetual system?

Select one.

• Debit Accounts Payable 4,000; credit Cash 4,000
• Debit Accounts Payable 4,000; credit Purchase Discount Revenue 80; credit Cash 3,920
• Debit Accounts Payable 3,920; credit Cash 3,920
• Debit Accounts Payable 4,000; credit Inventory 80; credit Cash 3,920

The bicycle shop (illustrative) bought 10 bicycles for $4,000, paid $180 of freight under FOB shipping point, and took an $80 purchase discount. What did each bicycle cost the shop?

Select one.

• $400
• $410
• $418
• $392

The bicycle shop (illustrative) bought 10 bicycles that cost it $410 each and sold 6 of them for $820 each. What is its cost of goods sold for the sale?

Select one.

• $2,460
• $4,100
• $4,920
• $1,640

The bicycle shop (illustrative) sold 6 bicycles for sales revenue of $4,920, and their cost of goods sold was $2,460. What is its gross margin on the sale?

Select one.

• 100 percent
• 200 percent
• 50 percent
• 60 percent

The top of the bicycle shop's (illustrative) multi-step income statement shows Sales Revenue of $4,920 less Cost of Goods Sold of $2,460. Select every statement that is true of that statement.

Select every option that applies.

• Gross profit is Sales Revenue minus Cost of Goods Sold
• Operating expenses are subtracted after gross profit to reach operating income
• The $2,460 of gross profit is the shop's net income for the period
• The $80 purchase discount is shown as a revenue line

The bicycle shop (illustrative) sells 6 bicycles at $820 each on account. Which entry records the revenue side of the sale?

Select one.

• Debit Sales Revenue 4,920; credit Accounts Receivable 4,920
• Debit Cost of Goods Sold 4,920; credit Inventory 4,920
• Debit Cash 4,920; credit Sales Revenue 4,920
• Debit Accounts Receivable 4,920; credit Sales Revenue 4,920

True or false: on a multi-step income statement, operating expenses such as wages and rent are subtracted from gross profit to reach operating income.

True or false.

• True
• False