Question 1

When merchandise is purchased on account under the perpetual inventory system, the journal entry is:

Accepted Answer

A) debit Purchases and credit Accounts Payable. 
B) debit Accounts Payable and credit Inventory. 
C) debit Inventory and credit Accounts Payable. 
D) debit Accounts Payable and credit Purchases. 
A) debit Purchases and credit Accounts Payable. 
B) debit Accounts Payable and credit Inventory. 
C) debit Inventory and credit Accounts Payable. 
D) debit Accounts Payable and credit Purchases.

Question 2

Inventory for a merchandising business is classified as a(n):

Accepted Answer

A) liability. 
B) revenue. 
C) part of Stockholders' Equity. 
D) asset. 
A) liability. 
B) revenue. 
C) part of Stockholders' Equity. 
D) asset.

Question 3

Sales is a(n)________ account.

Accepted Answer

A) asset 
B) liability 
C) revenue 
D) contra- 
A) asset 
B) liability 
C) revenue 
D) contra-

Question 4

When a customer returns goods, the journal entry for a merchandiser using the perpetual inventory system will include a debit to Sales Returns and Allowances and a debit to Inventory.

Accepted Answer

A) True 
 B)False

Question 5

If net sales increases and cost of goods sold decreases, the gross profit ratio:

Accepted Answer

A) remains the same. 
B) decreases. 
C) increases. 
D) cannot be determined from the information given. 
A) remains the same. 
B) decreases. 
C) increases. 
D) cannot be determined from the information given.

Question 6

When a buyer purchases goods FOB shipping point, they debit Inventory for the shipping costs.

Accepted Answer

A) True 
 B)False

Question 7

A discount offered as an inducement for prompt payment of an invoice is called a(n):

Accepted Answer

A) invoice discount. 
B) purchase discount. 
C) early discount. 
D) cash discount. 
A) invoice discount. 
B) purchase discount. 
C) early discount. 
D) cash discount.

Question 8

Which of the following is NOT a selling expense?

Accepted Answer

A) Advertising 
B) Salary of salesperson 
C) Utility bill 
D) Commissions 
A) Advertising 
B) Salary of salesperson 
C) Utility bill 
D) Commissions

Question 9

Amazon.com is an example of a wholesaler.

Accepted Answer

A) True 
 B)False

Question 10

The Balance Sheet format that lists assets above liabilities is the:

Accepted Answer

A) account form. 
B) report form. 
C) alphabetical form. 
D) liquidity form. 
A) account form. 
B) report form. 
C) alphabetical form. 
D) liquidity form.

Question 11

Cash is listed as the first current asset because it is the account:

Accepted Answer

A) with the most value. 
B) that is most liquid. 
C) that is most used. 
D) that is first alphabetically. 
A) with the most value. 
B) that is most liquid. 
C) that is most used. 
D) that is first alphabetically.

Question 12

Stella, Inc. purchased 75 telescopes for $25 each from Luna Co. When they unpacked the telescopes, Stella found that 20 of the telescopes were damaged in shipping. Luna offers to take them back, or provide an allowance of $300. How would the journal entries differ if Stella chose to take the allowance instead of return the telescopes?

Accepted Answer

A) The company would debit the Allowance account instead of Purchase Returns. 
B) The company would debit and credit the same accounts, but for a greater amount. 
C) The company would debit and credit the same accounts, but for a lesser amount. 
D) There would be no difference in journal entries. 
A) The company would debit the Allowance account instead of Purchase Returns. 
B) The company would debit and credit the same accounts, but for a greater amount. 
C) The company would debit and credit the same accounts, but for a lesser amount. 
D) There would be no difference in journal entries.

Question 13

Retailers may buy goods from the manufacturer and then sell the goods to consumers.

Accepted Answer

A) True 
 B)False

Question 14

When accounting for a merchandising business, which of the following is TRUE?

Accepted Answer

A) Wholesalers must use the periodic inventory system. 
B) Retailers must use the perpetual inventory system. 
C) Wholesalers must use the periodic inventory system; retailers may use either the perpetual or periodic inventory system. 
D) Retailers and wholesalers may use either the perpetual or periodic inventory system. 
A) Wholesalers must use the periodic inventory system. 
B) Retailers must use the perpetual inventory system. 
C) Wholesalers must use the periodic inventory system; retailers may use either the perpetual or periodic inventory system. 
D) Retailers and wholesalers may use either the perpetual or periodic inventory system.

Question 15

When a merchandiser sells on account, which of the following accounts is NOT needed to record the transaction?

Accepted Answer

A) Cost of Goods Sold 
B) Accounts Receivable 
C) Inventory 
D) Cash 
A) Cost of Goods Sold 
B) Accounts Receivable 
C) Inventory 
D) Cash

Question 16

TNT Inc. had an inventory balance of $19,000 on January 1, and $23,500 on December 31. The cost of goods sold during the period was $25,250. What is the purchase amount?

Accepted Answer

A) $4,500 
B) $1,750 
C) $29,750 
D) $34,250 
A) $4,500 
B) $1,750 
C) $29,750 
D) $34,250

Question 17

The Statement of Retained Earnings for a merchandiser is prepared differently than that of a service business.

Accepted Answer

A) True 
 B)False

Question 18

The major difference in the Balance Sheet between a service business and a merchandising business is:

Accepted Answer

A) that the Balance Sheet of a merchandising business includes Equipment as a current asset. 
B) that the Balance Sheet of a merchandising business includes Prepaid Expenses as a long-term asset. 
C) that the Balance Sheet of a merchandising business includes Inventory as a current asset. 
D) nothing. There are no differences between the two. 
A) that the Balance Sheet of a merchandising business includes Equipment as a current asset. 
B) that the Balance Sheet of a merchandising business includes Prepaid Expenses as a long-term asset. 
C) that the Balance Sheet of a merchandising business includes Inventory as a current asset. 
D) nothing. There are no differences between the two.

Question 19

Sassycat Corporation has $7,000 cash, $6,000 equipment, and $3,000 inventory. The current assets section of the balance sheet would total $10,000

Accepted Answer

A) True 
 B)False

Question 20

A gross profit percentage of 43% means that for every $1 of gross profit, the company has $0.43 of net income.

Accepted Answer

A) True 
 B)False

When merchandise is purchased on account under the perpetual inventory system, the journal entry is:

Inventory for a merchandising business is classified as a(n):

Sales is a(n)________ account.

When a customer returns goods, the journal entry for a merchandiser using the perpetual inventory system will include a debit to Sales Returns and Allowances and a debit to Inventory.

If net sales increases and cost of goods sold decreases, the gross profit ratio:

When a buyer purchases goods FOB shipping point, they debit Inventory for the shipping costs.

A discount offered as an inducement for prompt payment of an invoice is called a(n):

Which of the following is NOT a selling expense?

Amazon.com is an example of a wholesaler.

The Balance Sheet format that lists assets above liabilities is the:

Cash is listed as the first current asset because it is the account:

Retailers may buy goods from the manufacturer and then sell the goods to consumers.

When accounting for a merchandising business, which of the following is TRUE?

When a merchandiser sells on account, which of the following accounts is NOT needed to record the transaction?

TNT Inc. had an inventory balance of $19,000 on January 1, and $23,500 on December 31. The cost of goods sold during the period was $25,250. What is the purchase amount?

The Statement of Retained Earnings for a merchandiser is prepared differently than that of a service business.

The major difference in the Balance Sheet between a service business and a merchandising business is:

Sassycat Corporation has $7,000 cash, $6,000 equipment, and $3,000 inventory. The current assets section of the balance sheet would total $10,000

A gross profit percentage of 43% means that for every $1 of gross profit, the company has $0.43 of net income.

Business, Accounting, and You

Analyzing and Recording Business Transactions

Adjusting and Closing Entries

Inventory

The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics

Cash and Receivables

Long-Term and Other Assets

Current Liabilities and Long-Term Debt

Corporations: Paid-In Capital and Retained Earnings

The Statement of Cash Flows

Financial Statement Analysis

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Exam 4: Accounting for a Merchandising Business

When merchandise is purchased on account under the perpetual inventory system, the journal entry is:

Inventory for a merchandising business is classified as a(n):

Sales is a(n)________ account.

When a customer returns goods, the journal entry for a merchandiser using the perpetual inventory system will include a debit to Sales Returns and Allowances and a debit to Inventory.

If net sales increases and cost of goods sold decreases, the gross profit ratio:

When a buyer purchases goods FOB shipping point, they debit Inventory for the shipping costs.

A discount offered as an inducement for prompt payment of an invoice is called a(n):

Which of the following is NOT a selling expense?

Amazon.com is an example of a wholesaler.

The Balance Sheet format that lists assets above liabilities is the:

Cash is listed as the first current asset because it is the account:

Retailers may buy goods from the manufacturer and then sell the goods to consumers.

When accounting for a merchandising business, which of the following is TRUE?

When a merchandiser sells on account, which of the following accounts is NOT needed to record the transaction?

TNT Inc. had an inventory balance of $19,000 on January 1, and $23,500 on December 31. The cost of goods sold during the period was $25,250. What is the purchase amount?

The Statement of Retained Earnings for a merchandiser is prepared differently than that of a service business.

The major difference in the Balance Sheet between a service business and a merchandising business is:

Sassycat Corporation has $7,000 cash, $6,000 equipment, and $3,000 inventory. The current assets section of the balance sheet would total $10,000

A gross profit percentage of 43% means that for every $1 of gross profit, the company has $0.43 of net income.

Business, Accounting, and You

Analyzing and Recording Business Transactions

Adjusting and Closing Entries

Inventory

The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics

Cash and Receivables

Long-Term and Other Assets

Current Liabilities and Long-Term Debt

Corporations: Paid-In Capital and Retained Earnings

The Statement of Cash Flows

Financial Statement Analysis

Filters