A corporation had $10,000 of merchandise at the beginning of the period, which was fully paid
for. During the year, the corporation purchased $50,000 of merchandise on account and sold
$40,000 (cost basis) of the merchandise to customers. By the end of the year the corporation had
paid $35,000 to its supplier. What is cost of goods sold?
$60,000 ( . )
Instructor Explanation: Cost of goods sold is the expense account for merchandise sold to
customers. Points Received:
A corporation's general ledger contains the following accounts with normal account balances:
Paid-In Capital, $30,000; Accounts Receivable, $20,000; Merchandise Inventory, $35,000;
Accounts Payable, $25,000; and Retained Income $80,000. If Cash is the only other account in
the general ledger, what is its balance?
( Incorrect. You may have obtained this amount by listing as
a decrease to owners' equity instead of an increase to owners'
( Incorrect. You may have obtained this amount by listing
the balance of Sales Revenue as a decrease to owners' equity
and Expenses as increases to owners' equity. )
( CORRECT. This is the amount needed to make assets =
liabilities + owners' equity )
( Incorrect. You may have obtained this answer by listing
cost of goods sold as an increase to owners' equity instead of
a decrease to owners' equity )
Instructor Explanation: Find the value of non-cash assets, liabilities, and owners' equity, put the
values in the fundamental accounting equation and solve for cash. Points Received:
Which one is a characteristic of the recording of transactions in accounting?
Each transaction affects
( Incorrect. Transactions must affect at least two
( CORRECT. )
Changes in accounts
always include one
( Incorrect. For example, borrowing money
increases cash and increases liabilities. )