DONALD RUDDY COMPANY
Adjusted Account Balances
For the Year Ended December 31, 20XX
Accounts Payable $ 5,060
Accounts Receivable 5,340
Accumulated Depreciation—Office Equipment 400
Advertising Expense 210
Allowance for Doubtful Accounts 300
Cash 7,170
Depreciation Expense—Office Equipment 200
Insurance Expense 140
Merchandise Inventory, January 1, 20XX 5,000
Notes Payable 1,000
Office Equipment 2,000
Office Supplies 90
Office Supplies Expense 210
Prepaid Insurance 190
Purchases 40,000
Purchase Discounts 170
Purchase Returns and Allowances 500
Rent Expense 1,500
Ruddy, Capital 4,100
Ruddy, Drawing 250
Salaries Expense 8,055
Salaries Payable 550
Sales 60,380
Sales Discounts 200
Sales Returns and Allowances 350
Taxes Payable 420
Transportation-in 250
Utilities Expense 385
Vehicle 1,340
Note: The ending merchandise inventory on December 31, 20XX, was $3,000.

1. The cost of goods sold is
A. $44,580. C. $38,580.
B. $41,580. D. $33,580.

2. The net cost of purchases are
A. $39,080. C. $39,750.
B. $39,580. D. $39,830.

3. The cost of goods available for sale is
A. $39,080. C. $41,580.
B. $39,330. D. $44,580.

4. Net sales for the period amount to
A. $59,830. C. $60,380.
B. $60,180. D. $60,930.

5. What are the total operating expenses?
A. $10,105 C. $10,700
B. $10,490 D. $11,000

A trial balance as of December 31, 20XX, for the Sylvia Goody Company is entered on the work sheet at the back of this unit.

Additional data:
a. Increase in allowance for doubtful accounts $ 113
b. Interest accrued on notes receivable 24
c. Depreciation on equipment 320
d. Expired insurance 126
e. Store supplies on hand 85
f. Interest accrued on notes payable 36
g. Salaries accrued but not paid 340
h. Merchandise Inventory, December 31, 20XX 7,220

6. On the work sheet prepared for the Sylvia Goody Company as of December 31, the
debit total under Adjustments is
A. $1,039. C. $926.
B. $1,015. D. $913.

7. Which one of the following statements is true for the ending inventory balance?
A. It will appear as a debit in the Trial Balance column.
B. It will appear as a debit in the Adjusted Trial Balance column.
C. It will appear as a credit in the Balance Sheet column.
D. It will appear as a credit in the Income Statement column.

8. Which one of the following statements applies to the $714 in the Transportation-in
account?
A. It will appear in the debit column of the Income Statement.
B. It will appear in the credit column of the Income Statement.
C. It will appear in the debit column of the Balance Sheet.
D. It will appear in the credit column of the Balance Sheet.

9. The cost of goods purchased that would appear on a formal income statement prepared
for the Sylvia Goody Company, based on the information in the work sheet,
would be
A. $20,939. C. $20,221.
B. $20,423. D. $19,709.

10. The net income for the Sylvia Goody Company for the period ending December 31,
20XX, is
A. $10,382. C. $11,120.
B. $10,406. D. $14,206.

11. When a firm is using a periodic inventory procedure, the cost of goods purchased is
equal to
A. Beginning Inventory + Purchases – Purchase Returns and Allowances – Purchase
Discounts + Transportation-in.
B. Ending Inventory + Purchases – Purchase Returns and Allowances – Purchase
Discounts + Transportation-in.
C. Purchases – Purchase Returns and Allowances – Purchase Discounts +
Transportation-in.
D. Purchases – Purchase Returns and Allowances – Purchase Discounts –
Transportation-in.

12. An example of a contra-revenue account found on the Income Statement is the
A. Uncollectible Accounts Expense.
B. Transportation-in.
C. Purchase Returns and Allowances.
D. Sales Returns and Allowances.

13. Company A records purchases using the net price method. If an item is purchased
from a supplier for $800 on terms of 3/10, n/30, the correct accounting entry would be
A. Purchases 776
Purchase Discounts 24
Accounts Payable 800
B. Purchases 776
Accounts Payable 776
C. Accounts Payable 800
Purchases 776
Purchase Discounts 24
D. Purchases 800
Accounts Payable 800

14. What account will be debited to record an accounts receivable amount considered to be
a bad debt if the direct write-off method of accounting is used?
A. Uncollectible Accounts Expense
B. Cash
C. Allowance for Doubtful Accounts
D. Sales

Here’s a partial record of the J. Shafer Company as of December 31, 20XX.
Purchase Returns $ 1,500
Sales Discounts 900
Operating Expenses 20,000
Transportation-in 1,100
Ending Inventory 7,400
Sales 53,500
Beginning Inventory 9,500
Purchases 27,200

15. The cost of goods sold is
A. $37,800. C. $29,800.
B. $36,700. D. $28,900.

16. The company’s net income is
A. $17,400. C. $4,600.
B. $16,800. D. $3,700.

17. The term used to designate that the buyer of merchandise is responsible for the
transportation costs of shipping the merchandise is
A. E.O.M. shipping point. C. E.O.M. destination.
B. F.O.B. shipping point. D. F.O.B. destination.

18. Gross profit on sales minus operating expenses equals
A. net operating income.
C. net sales.
B. cost of goods sold.
D. net operating expenses.

19. The following information about the Wells Company’s merchandising accounts is
available:
Beginning Inventory . . . . . . . . . . . . $100,000
Ending Inventory. . . . . . . . . . . . . . . 40,000
Purchase Discounts . . . . . . . . . . . . . 4,000
Transportation-in . . . . . . . . . . . . . . . 7,500
Purchases. . . . . . . . . . . . . . . . . . . . 55,000
Cost of Goods Sold . . . . . . . . . . . . . 115,000
The information on Purchase Returns and Allowances has been misplaced, and it’s up
to you to determine its final balance from the information given above. The amount of
Purchase Returns and Allowances must be
A. $3,500. C. $11,000.
B. $7,500. D. $15,000.

20. All but one of the following accounts would be credited in the closing process. Which
account would not be credited in the closing entries?
A. Sales Discounts
B. Purchases
C. Transportation-in
D. Purchase Returns and Allowances