Question 1

If a company purchases goods FOB shipping point, the purchasing company will be responsible for the payment of the freight costs.

Accepted Answer

A) True 
 B)False

Question 2

When goods are returned that relate to a prior cash sale,

Accepted Answer

A)  the Sales Returns and Allowances account should not be used. 
B)  the Cash account will be credited. 
C)  Sales Returns and Allowances will be credited. 
D)  Accounts Receivable will be credited. 
A)  the Sales Returns and Allowances account should not be used. 
B)  the Cash account will be credited. 
C)  Sales Returns and Allowances will be credited. 
D)  Accounts Receivable will be credited.

Question 3

The operating cycle of a merchandising company differs from that of a service company in that it

Accepted Answer

A)  is usually longer in days. 
B)  is usually shorter in days. 
C)  involves the purchase of inventory. 
D)  involves the sale of merchandise. 
A)  is usually longer in days. 
B)  is usually shorter in days. 
C)  involves the purchase of inventory. 
D)  involves the sale of merchandise.

Question 4

On September 1, Shediac Bay Marine had an inventory of 20 boats at a cost of $1,800 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred:
Sept. 3 Purchased 40 boats at $1,800 each from Moncton Fibreglas. The boats were shipped FOB destination terms n/30.
3 The appropriate party paid the freight costs.
6 Received credit of $7,200 for the return of 4 boats purchased on Sept. 3 that were defective.
7 Paid for the September 3 purchase.
9 Sold 20 boats for $3,000 each to Rothesay Yacht Club on credit.
13 Cash sale of 15 boats for $3,000 each to Deer Island Ferry.
21 Purchased 25 boats at $1,800 each from Buctouche Supply terms n/30.
Instructions
a. Journalize the September transactions for Shediac Bay Marine, using a perpetual inventory system.
b. Determine the number of boats the company should have remaining on September 30.

Accepted Answer

The answer of On September 1, Shediac Bay Marine had...

Question 5

The term n/30 means

Accepted Answer

A)  the entire bill must be paid within 30 days. 
B)  the purchaser must pay 3% interest if their payment is late. 
C)  the seller is offering a 30% discount for early payment. 
D)  the seller is expected to deliver the goods within 30 days. 
A)  the entire bill must be paid within 30 days. 
B)  the purchaser must pay 3% interest if their payment is late. 
C)  the seller is offering a 30% discount for early payment. 
D)  the seller is expected to deliver the goods within 30 days.

Question 6

A company buys merchandise costing $25,000 with terms of 2/10 n/30. The adjustment to the Merchandise Inventory account, assuming the discount is taken, will be

Accepted Answer

A)  $250. 
B)  $300. 
C)  $500. 
D)  $0. 
A)  $250. 
B)  $300. 
C)  $500. 
D)  $0.

Question 7

FOB means

Accepted Answer

A)  Free on board. 
B)  Freight on board. 
C)  Freight on back order. 
D)  Free on buyer. 
A)  Free on board. 
B)  Freight on board. 
C)  Freight on back order. 
D)  Free on buyer.

Question 8

Which of the following accounts has a normal debit balance?

Accepted Answer

A)  Purchase Returns and Allowances 
B)  Purchase Discounts 
C)  Sales 
D)  Sales Returns and Allowances 
A)  Purchase Returns and Allowances 
B)  Purchase Discounts 
C)  Sales 
D)  Sales Returns and Allowances

Question 9

The normal operating cycle of a merchandising company is shorter than the cycle of a service company.

Accepted Answer

A) True 
 B)False

Question 10

Under IFRS, expenses must be classified on an income statement on the basis of

Accepted Answer

A)  size. 
B)  importance. 
C)  nature or function. 
D)  usual or unusual expenses. 
A)  size. 
B)  importance. 
C)  nature or function. 
D)  usual or unusual expenses.

Question 11

Two categories of expenses in merchandising companies are

Accepted Answer

A)  cost of goods sold and financing expenses. 
B)  operating expenses and financing expenses. 
C)  cost of goods sold and operating expenses. 
D)  sales and cost of goods sold. 
A)  cost of goods sold and financing expenses. 
B)  operating expenses and financing expenses. 
C)  cost of goods sold and operating expenses. 
D)  sales and cost of goods sold.

Question 12

To increase their gross profit margin, a company should decrease their operating expenses.

Accepted Answer

A) True 
 B)False

Question 13

The Sales Returns and Allowances account is a contra revenue account.

Accepted Answer

A) True 
 B)False

Question 14

In a periodic inventory system, detailed records of each inventory purchase are maintained.

Accepted Answer

A) True 
 B)False

Question 15

When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do NOT agree with the physical count

Accepted Answer

A)  has an effect on Cost of Goods Sold. 
B)  has no effect on Cost of Goods Sold. 
C)  requires reporting a loss when actual is higher than records. 
D)  requires reporting a gain when actual is lower than records. 
A)  has an effect on Cost of Goods Sold. 
B)  has no effect on Cost of Goods Sold. 
C)  requires reporting a loss when actual is higher than records. 
D)  requires reporting a gain when actual is lower than records.

Question 16

Jewel's Gems sells gold necklaces. On December 1, 2014, Jewel's had 230 necklaces in inventory at a cost of $120 each. During December, the following transactions occurred:
Dec. 1 Purchased 500 necklaces at $120 each from Lindal Gold Fashions on account, terms net 30.
4 Returned 30 of the necklaces purchased from Lindal because they were defective.
9 Paid the balance due on the Lindal account payable.
12 Sold 600 necklaces for $250 each, terms n/30, FOB destination.
13 Freight of $250 on the Dec 12 sale paid by the appropriate party.
16 Purchased 150 necklaces from Green wholesale Jewelers for $120, terms n/30.
17 Sold 30 of the necklaces for cash, $325 each.
19 Customer returned 2 of the necklaces purchased on Dec 17. Provided a cash refund. The necklaces were returned to inventory.
Instructions
Using the perpetual inventory system, prepare the journal entries to record the transactions.

Accepted Answer

The answer of Jewel's Gems sells gold necklaces. On December...

Question 17

A physical inventory should be taken

Accepted Answer

A)  after every purchase of merchandise. 
B)  after every sale. 
C)  at or near the balance sheet date. 
D)  only if a computer accounting system is used. 
A)  after every purchase of merchandise. 
B)  after every sale. 
C)  at or near the balance sheet date. 
D)  only if a computer accounting system is used.

Question 18

Sackville Company purchased merchandise from Amherst Company with freight terms of FOB shipping point. The freight costs will be paid by the

Accepted Answer

A)  seller. 
B)  buyer. 
C)  transportation company. 
D)  buyer and the seller. 
A)  seller. 
B)  buyer. 
C)  transportation company. 
D)  buyer and the seller.

Question 19

The following information is for the Cappelio Appliance Company, which uses the perpetual inventory system:
June 2 Sold 70 toaster ovens to the Motor Inn for $7,700 on account. Credit terms: n/30. Quantity discounts of 10% are given on all orders of 65 or more items. Cost of each toaster oven was $50.
5 Cash sales of 50 toaster ovens amounted to $5,500. Cost was $50 each.
8 Credited the Motor Inn account for $495 as an adjustment on 5 damaged units purchased by the Motor Inn on June 2. The units were scrapped.
15 Received a cheque from the Motor Inn in full payment of its account less damage allowance.
Instructions
Record the following transactions in the general journal.

Accepted Answer

The answer of The following information is for the Cappelio...

Question 20

In a profitable company, the gross profit margin will always be _________ the profit margin.

Accepted Answer

A)  higher than 
B)  lower than 
C)  equal to 
D)  The gross profit margin and the profit margin can never be the same. 
A)  higher than 
B)  lower than 
C)  equal to 
D)  The gross profit margin and the profit margin can never be the same.

If a company purchases goods FOB shipping point, the purchasing company will be responsible for the payment of the freight costs.

When goods are returned that relate to a prior cash sale,

The operating cycle of a merchandising company differs from that of a service company in that it

The term n/30 means

A company buys merchandise costing $25,000 with terms of 2/10 n/30. The adjustment to the Merchandise Inventory account, assuming the discount is taken, will be

FOB means

Which of the following accounts has a normal debit balance?

The normal operating cycle of a merchandising company is shorter than the cycle of a service company.

Under IFRS, expenses must be classified on an income statement on the basis of

Two categories of expenses in merchandising companies are

To increase their gross profit margin, a company should decrease their operating expenses.

The Sales Returns and Allowances account is a contra revenue account.

In a periodic inventory system, detailed records of each inventory purchase are maintained.

When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do NOT agree with the physical count

A physical inventory should be taken

Sackville Company purchased merchandise from Amherst Company with freight terms of FOB shipping point. The freight costs will be paid by the

In a profitable company, the gross profit margin will always be _________ the profit margin.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

Exam 5: Accounting for Merchandising Operations

If a company purchases goods FOB shipping point, the purchasing company will be responsible for the payment of the freight costs.

When goods are returned that relate to a prior cash sale,

The operating cycle of a merchandising company differs from that of a service company in that it

The term n/30 means

A company buys merchandise costing $25,000 with terms of 2/10 n/30. The adjustment to the Merchandise Inventory account, assuming the discount is taken, will be

FOB means

Which of the following accounts has a normal debit balance?

The normal operating cycle of a merchandising company is shorter than the cycle of a service company.

Under IFRS, expenses must be classified on an income statement on the basis of

Two categories of expenses in merchandising companies are

To increase their gross profit margin, a company should decrease their operating expenses.

The Sales Returns and Allowances account is a contra revenue account.

In a periodic inventory system, detailed records of each inventory purchase are maintained.

When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do NOT agree with the physical count

A physical inventory should be taken

Sackville Company purchased merchandise from Amherst Company with freight terms of FOB shipping point. The freight costs will be paid by the

In a profitable company, the gross profit margin will always be _________ the profit margin.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters