Acct 101 Essay

Chapter 5 - Multiple Choice Questions

1. Goods that will be used in production are considered to be a. raw materials b. work in progress c. finished goods d. inventory

A is correct.
Section “Classifying Inventory” – Raw materials are the basic materials that will be used in manufacturing but have not yet been placed into the production process.

2. In a manufacturing business, inventory that is ready for sale is called a. raw materials b. work in process c. finished goods d. store supplies

C is correct.
Section “Classifying Inventory” – Finished goods inventory comprises manufactured items that are completed and ready for sale.

3. The journal entry to record a return of inventory purchased on account under a periodic inventory system would be a. Accounts Payable Purchase Returns and Allowances b. Purchase Returns and Allowances Accounts Payable c. Accounts Payable Inventory d. Inventory Accounts Payable

A is correct.
Section “Recording inventory transactions” –The Purchase Returns and Allowances account is credited to record all returns and allowances rather than directly crediting the Purchases account.

5. Which of the following accounts has a normal credit balance? a. Purchases b. Sales Returns and Allowances c. Freight-in d. Discount received

D is correct.
Section “Recording inventory transactions” – Discount Received is a revenue account whose normal balance is a credit.

6. The respective normal balances of Purchases, Discount received, and Freight-in are a. credit, credit, debit b. debit, credit, credit c. debit, credit, debit d. debit, debit, debit

C. is correct.
Section “Recording inventory transactions” – Purchases is a temporary account whose normal balance is a debit; Discount Received is a revenue account whose normal balance is a credit;