Accounting 520 – Exam 2
Name: ______________________________________________________________________
Date: ______________________________________________________________________
Grade: __________________________________________________________________
Please circle the correct answer:
1. Which one of the following types of inventory accounts would be used by a wholesaler or retailer?
a. Raw materials inventory
b. Work in process inventory
c. Finished goods inventory
d. Merchandise inventory
2. The inventory account a manufacturer uses to record the cost of products completed and available
for sale is called
a. Raw materials inventory
b. Work in process inventory
c. Finished goods inventory
d. Merchandise inventory
3. Items should be reported as part of the company’s “inventory” at year end, if they are
a. Purchased from a creditor, available for sale, and paid for the following year.
b. Held in anticipation of an increase in market value.
c. Determined to be part of cost of goods sold.
d. Sold during the period.
4. For what reason might retailers like Target select an accounting period that ends on or near the end
of January?
a. The company originally started business operations on that date.
b. Business activity has reached a slow period that is suited to the preparation of its financial
statements at the end of the year.
c. The company’s CPAs are attempting to spread out the workload.
d. The Internal Revenue Service requires merchandise companies to select such a date for their
fiscal year.
5. Which one of the following accounts most likely would appear on the income statement of a
merchandise company, but not on the income statement of a service company?
a. Cost of Goods Sold
b. Selling Expenses
c. Administrative Expenses
d. Income Tax Expense
6. Which one of the following is not a cash equivalent?
a. 30–day certificate of deposit
b. 60–day commercial paper
c. 90–day U.S. treasury bill
d. 180–day note issued by a local or state government
7. Effective cash management and control includes all of the following except
a. The use of a petty cash fund
b. Bank reconciliations
c. Short–term investments of excess cash
d. Purchase of stocks and bonds
8. Checks presented for payment and paid by the bank are known as
a. Canceled checks
b. Certified checks
c. NSF checks
d. Outstanding checks
9. Deposits made by a company but not yet reflected in a bank statement are called
