Question 1

The respective normal account balances of Purchases Purchase Discounts and Freight-in are

Accepted Answer

A)  credit credit debit. 
B)  debit credit credit. 
C)  debit credit debit. 
D)  debit debit debit. 
A)  credit credit debit. 
B)  debit credit credit. 
C)  debit credit debit. 
D)  debit debit debit.

Question 2

Detailed records of goods held for resale are not maintained under a

Accepted Answer

A)  perpetual inventory system. 
B)  periodic inventory system. 
C)  double entry accounting system. 
D)  single entry accounting system. 
A)  perpetual inventory system. 
B)  periodic inventory system. 
C)  double entry accounting system. 
D)  single entry accounting system.

Question 3

Which of the following would not be considered a merchandising company?

Accepted Answer

A)  Retailer 
B)  Wholesaler 
C)  Service firm 
D)  Dot Com firm 
A)  Retailer 
B)  Wholesaler 
C)  Service firm 
D)  Dot Com firm

Question 4

On October 1 Lance's Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $350 each. During the month of October the following transactions occurred.
Oct. 4 Purchased 40 bicycles at a cost of $350 each from Lamont Bicycle Company terms 1/10 n/30.
6 Sold 20 bicycles to Team Minnesota for $500 each terms 2/10 n/30.
7 Received credit from Lamont Bicycle Company for the return of 2 defective bicycles.
13 Issued a credit memo to Team Minnesota for the return of a defective bicycle.
14 Paid Lamont Bicycle Company in full less discount.
Instructions
Prepare the journal entries to record the transactions assuming the company uses a perpetual inventory system.

Accepted Answer

None

Question 5

On November 2 2016 Yakima Company has cash sales of $7000 from merchandise having a cost of $3900. The entries to record the day's cash sales will include:

Accepted Answer

A)  a $3900 credit to Cost of Goods Sold. 
B)  a $7000 credit to Cash. 
C)  a $3900 credit to Inventory. d a $7000 debit to Accounts Receivable. 
A)  a $3900 credit to Cost of Goods Sold. 
B)  a $7000 credit to Cash. 
C)  a $3900 credit to Inventory. d a $7000 debit to Accounts Receivable.

Question 6

A credit granted to a customer for returned goods requires a debit to

Accepted Answer

A)  Sales Revenue and a credit to Cash. 
B)  Sales Returns and Allowances and a credit to Accounts Receivable. 
C)  Accounts Receivable and a credit to a contra-revenue account. 
D)  Cash and a credit to Sales Returns and Allowances. 
A)  Sales Revenue and a credit to Cash. 
B)  Sales Returns and Allowances and a credit to Accounts Receivable. 
C)  Accounts Receivable and a credit to a contra-revenue account. 
D)  Cash and a credit to Sales Returns and Allowances.

Question 7

If a merchandising company sells land at more than its cost the gain should be reported in the sales revenue section of the income statement.

Accepted Answer

A) True 
 B)False

Question 8

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

Accepted Answer

The answer of The freight cost incurred by a seller...

Question 9

In a periodic inventory system a return of defective merchandise to a supplier is recorded by crediting

Accepted Answer

A)  Accounts Payable. 
B)  Inventory. 
C)  Purchases. 
D)  Purchase Returns and Allowances. 
A)  Accounts Payable. 
B)  Inventory. 
C)  Purchases. 
D)  Purchase Returns and Allowances.

Question 10

Ayala Company sells merchandise on account for $9000 to Verde Company with credit terms of 2/10 n/30. Verde Company returns $1500 of merchandise that was damaged along with a check to settle the account within the discount period. What is the amount of the check?

Accepted Answer

A)  $7350 
B)  $7200 
C)  $8820 
D)  $7320 
A)  $7350 
B)  $7200 
C)  $8820 
D)  $7320

Question 11

During 2016 Wu Han Co. generated revenues of $95000. The company's expenses were as follows: cost of goods sold of $47000 operating expenses of $16000 and a loss on the sale of equipment of $5000. Wu Han's gross profit is

Accepted Answer

A)  $27000. 
B)  $32000. 
C)  $48000. 
D)  $95000. 
A)  $27000. 
B)  $32000. 
C)  $48000. 
D)  $95000.

Question 12

The Income statement is

Accepted Answer

A)  required under GAAP but not under IFRS. 
B)  required under IFRS in the same format as under GAAP. 
C)  required under IFRS but not under GAAP. 
D)  required under IFRS with some differences as compared to GAAP. 
A)  required under GAAP but not under IFRS. 
B)  required under IFRS in the same format as under GAAP. 
C)  required under IFRS but not under GAAP. 
D)  required under IFRS with some differences as compared to GAAP.

Question 13

The respective normal account balances of Sales Revenue Sales Returns and Allowances and Sales Discounts are

Accepted Answer

A)  credit credit credit. 
B)  debit credit debit. 
C)  credit debit debit. 
D)  credit debit credit. 
A)  credit credit credit. 
B)  debit credit debit. 
C)  credit debit debit. 
D)  credit debit credit.

Question 14

Geoffrg Company has the following account balances: $$\begin{array} { l r } 
\text { Purchases } & \$ 88,000 \
\text { Sales Returns and Allowances } & 12,800 \
\text { Purchase Discounts } & 6,000 \
\text { Freight-In } & 8,000 \
\text { Delivery Expense } & 12,000
\end{array}$$ The cost of goods purchased for the period is

Accepted Answer

A)  $102000. 
B)  $82000. 
C)  $90000. 
D)  $94000. 
A)  $102000. 
B)  $82000. 
C)  $90000. 
D)  $94000.

Question 15

Caine Company has sales revenue of $74000 cost of goods sold of $42000 and operating expenses of $17000 for the year ended December 31. Caine's gross profit is

Accepted Answer

A)  $0. 
B)  $15000. 
C)  $32000. 
D)  $59000. 
A)  $0. 
B)  $15000. 
C)  $32000. 
D)  $59000.

Question 16

In terms of liquidity inventory is

Accepted Answer

A)  more liquid than cash. 
B)  more liquid than accounts receivable. 
C)  more liquid than prepaid expenses. 
D)  less liquid than store equipment. 
A)  more liquid than cash. 
B)  more liquid than accounts receivable. 
C)  more liquid than prepaid expenses. 
D)  less liquid than store equipment.

Question 17

Inventory is reported as a long-term asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

A credit sale of $3600 is made on July 15 terms 3/10 n/30 on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?

Accepted Answer

A)  $3395 
B)  $3492 
C)  $3392 d $3600 
A)  $3395 
B)  $3492 
C)  $3392 d $3600

Question 19

Helen Hunt and Cory Coates two salespersons in adjoining territories regularly compete for bonuses. During the last month their dollar volume of sales on which the bonuses are based was nearly equal. On the last day of the month both made a large sale. Both orders were shipped on the last day of the month and both were received by the customer on the fifth of the following month. Helen's sale was FOB shipping point and Cory's was FOB destination. The company "counts" sales for purposes of calculating bonuses on the date that ownership passes to the purchaser. Helen's sale was therefore counted in her monthly total of sales Cory's was not. Cory is quite upset. She has asked you to just include it or to take Helen's off as well. She also has told you that you are being unethical for allowing Helen to get a bonus just for choosing a particular shipping method.
Write a memo to Cory. Explain your position.

Accepted Answer

The answer of Helen Hunt and Cory Coates two salespersons...

Question 20

If a company has sales revenue of $634000 net sales of $600000 and cost of goods sold of $378000 the gross profit rate is

Accepted Answer

A)  37%. 
B)  40% 
C)  60%. 
D)  66%. 
A)  37%. 
B)  40% 
C)  60%. 
D)  66%.

Exam 5: Accounting for Merchandising Operations

The respective normal account balances of Purchases Purchase Discounts and Freight-in are

Detailed records of goods held for resale are not maintained under a

Which of the following would not be considered a merchandising company?

On November 2 2016 Yakima Company has cash sales of $7000 from merchandise having a cost of $3900. The entries to record the day's cash sales will include:

A credit granted to a customer for returned goods requires a debit to

If a merchandising company sells land at more than its cost the gain should be reported in the sales revenue section of the income statement.

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

In a periodic inventory system a return of defective merchandise to a supplier is recorded by crediting

Ayala Company sells merchandise on account for $9000 to Verde Company with credit terms of 2/10 n/30. Verde Company returns $1500 of merchandise that was damaged along with a check to settle the account within the discount period. What is the amount of the check?

During 2016 Wu Han Co. generated revenues of $95000. The company's expenses were as follows: cost of goods sold of $47000 operating expenses of $16000 and a loss on the sale of equipment of $5000. Wu Han's gross profit is

The Income statement is

The respective normal account balances of Sales Revenue Sales Returns and Allowances and Sales Discounts are

Geoffrg Company has the following account balances: Purchases \ 88,000 Sales Returns and Allowances 12,800 Purchase Discounts 6,000 Freight-In 8,000 Delivery Expense 12,000 The cost of goods purchased for the period is

Caine Company has sales revenue of $74000 cost of goods sold of $42000 and operating expenses of $17000 for the year ended December 31. Caine's gross profit is

In terms of liquidity inventory is

Inventory is reported as a long-term asset on the balance sheet.

A credit sale of $3600 is made on July 15 terms 3/10 n/30 on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?

If a company has sales revenue of $634000 net sales of $600000 and cost of goods sold of $378000 the gross profit rate is

Accounting in Action

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Adjusting the Accounts

Completing the Accounting Cycle

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

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