ACC 231 ASU Exam 2 Wolfe –Questions
and Verified Answers (2025/2026)
1. Journal entry for purchasing inventory from a supplier - correct answer --
DR Inventory $ / CR Cash or Accounts Payable $
2. Journal entry for returning items to a supplier - correct answer --DR
Accounts Payable or Cash $ / CR Inventory $
3. Recording a sale of inventory to a customer requires which two journal
entries? - correct answer --One entry to record revenue (DR Cash/AR,
CR Revenue) and one entry to record COGS (DR COGS, CR
Inventory)
4. Journal entry for sale of inventory (recording revenue) - correct answer --
DR Cash or Accounts Receivable $ / CR Revenue $
5. Journal entry for sale of inventory (recording COGS) - correct answer --DR
COGS $ / CR Inventory $
6. Recording a customer return requires which two journal entries? - correct
answer --One entry for the sales return and one entry for the returned
inventory
7. Journal entry for customer returns (recording sales return) - correct answer -
-DR Sales Returns and Allowances $ / CR Cash or Accounts Receivable
$
8. Journal entry for customer returns (recording returned inventory) - correct
answer --DR Inventory $ / CR COGS $
9. Formula for calculating a sales discount or purchase discount - correct
answer --Dollar amount × discount percentage = discount amount
10.Meaning of credit term 5/20, n30 - correct answer --5% discount if paid
within 20 days, otherwise full amount due in 30 days
11.Under FOB Shipping Point, who pays the freight cost? - correct answer --
Buyer pays freight because title transfers when goods leave the
supplier's warehouse
, 12.Under FOB Destination, who pays the freight cost? - correct answer --Seller
pays freight and records it as a delivery expense
13.When does title change hands under FOB Shipping Point? - correct answer -
-As soon as the goods leave the supplier's warehouse
14.When does title change hands under FOB Destination? - correct answer --
As soon as the shipment arrives at the buyer's destination
15.A single-step income statement - correct answer --Details revenues and
expenses and results in net income; straightforward format
16.A multi-step income statement - correct answer --Shows gross profit and
operating profit separately with detailed revenue and expense sources
17.Under a perpetual inventory system, the Inventory account is updated -
correct answer --After each purchase and each sale
18.Under a periodic inventory system, the Inventory account is updated -
correct answer --Only at the end of the accounting period
19.The cost of goods sold formula (periodic system) - correct answer --
Beginning Inventory + Purchases – Ending Inventory = COGS
20.Which inventory costing method assumes the oldest units are sold first? -
correct answer --FIFO (First-In, First-Out)
21.Which inventory costing method assumes the newest units are sold first? -
correct answer --LIFO (Last-In, First-Out)
22.During a period of rising prices, which inventory method results in the
highest net income? - correct answer --FIFO
23.During a period of rising prices, which inventory method results in the
lowest income tax expense? - correct answer --LIFO
24.The weighted-average cost method calculates cost per unit as - correct
answer --Cost of goods available for sale ÷ Total units available for sale
25.The lower-of-cost-or-net-realizable-value (LCNRV) rule requires inventory
to be written down when - correct answer --Market value (NRV) falls
below historical cost
and Verified Answers (2025/2026)
1. Journal entry for purchasing inventory from a supplier - correct answer --
DR Inventory $ / CR Cash or Accounts Payable $
2. Journal entry for returning items to a supplier - correct answer --DR
Accounts Payable or Cash $ / CR Inventory $
3. Recording a sale of inventory to a customer requires which two journal
entries? - correct answer --One entry to record revenue (DR Cash/AR,
CR Revenue) and one entry to record COGS (DR COGS, CR
Inventory)
4. Journal entry for sale of inventory (recording revenue) - correct answer --
DR Cash or Accounts Receivable $ / CR Revenue $
5. Journal entry for sale of inventory (recording COGS) - correct answer --DR
COGS $ / CR Inventory $
6. Recording a customer return requires which two journal entries? - correct
answer --One entry for the sales return and one entry for the returned
inventory
7. Journal entry for customer returns (recording sales return) - correct answer -
-DR Sales Returns and Allowances $ / CR Cash or Accounts Receivable
$
8. Journal entry for customer returns (recording returned inventory) - correct
answer --DR Inventory $ / CR COGS $
9. Formula for calculating a sales discount or purchase discount - correct
answer --Dollar amount × discount percentage = discount amount
10.Meaning of credit term 5/20, n30 - correct answer --5% discount if paid
within 20 days, otherwise full amount due in 30 days
11.Under FOB Shipping Point, who pays the freight cost? - correct answer --
Buyer pays freight because title transfers when goods leave the
supplier's warehouse
, 12.Under FOB Destination, who pays the freight cost? - correct answer --Seller
pays freight and records it as a delivery expense
13.When does title change hands under FOB Shipping Point? - correct answer -
-As soon as the goods leave the supplier's warehouse
14.When does title change hands under FOB Destination? - correct answer --
As soon as the shipment arrives at the buyer's destination
15.A single-step income statement - correct answer --Details revenues and
expenses and results in net income; straightforward format
16.A multi-step income statement - correct answer --Shows gross profit and
operating profit separately with detailed revenue and expense sources
17.Under a perpetual inventory system, the Inventory account is updated -
correct answer --After each purchase and each sale
18.Under a periodic inventory system, the Inventory account is updated -
correct answer --Only at the end of the accounting period
19.The cost of goods sold formula (periodic system) - correct answer --
Beginning Inventory + Purchases – Ending Inventory = COGS
20.Which inventory costing method assumes the oldest units are sold first? -
correct answer --FIFO (First-In, First-Out)
21.Which inventory costing method assumes the newest units are sold first? -
correct answer --LIFO (Last-In, First-Out)
22.During a period of rising prices, which inventory method results in the
highest net income? - correct answer --FIFO
23.During a period of rising prices, which inventory method results in the
lowest income tax expense? - correct answer --LIFO
24.The weighted-average cost method calculates cost per unit as - correct
answer --Cost of goods available for sale ÷ Total units available for sale
25.The lower-of-cost-or-net-realizable-value (LCNRV) rule requires inventory
to be written down when - correct answer --Market value (NRV) falls
below historical cost
