Question 1

An invoice is a request by the seller for payment from the purchaser.

Accepted Answer

A) True 
 B)False

Question 2

A single-step income statement shows subtotals for gross profit and operating income.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is the correct order of subtotals that appear on a multi-step income statement?

Accepted Answer

A) Operating income, Gross profit, Net income 
B) Gross profit, Net sales revenue, Net income 
C) Net income, Operating income, Net income 
D) Gross profit, Operating income, Net income 
A) Operating income, Gross profit, Net income 
B) Gross profit, Net sales revenue, Net income 
C) Net income, Operating income, Net income 
D) Gross profit, Operating income, Net income

Question 4

The Gajet Store Inc. started its operations on January 1, 2015. It engages in buying and selling different types of electronic gadgets. The first step in its operating cycle would be to:

Accepted Answer

A) collect cash from customers. 
B) sell goods to customers. 
C) purchase inventory from vendors. 
D) record the sales in accounts. 
A) collect cash from customers. 
B) sell goods to customers. 
C) purchase inventory from vendors. 
D) record the sales in accounts.

Question 5

A company sold merchandise for $1,000 on account with terms of 2/10, n/30. The company uses a perpetual inventory system. Defective merchandise of $200 was returned 2 days later. If the payment was received after 20 days, the journal entry to record the cash receipt will include:

Accepted Answer

A) a debit to Cash for $980 and a credit to Accounts Receivable for $980. 
B) a debit to Cash for $800 and a credit to Accounts Receivable for $800. 
C) a credit to Sales for $800 and a debit to Cash for $ 800. 
D) a credit to Cost of Goods Sold for $1000 and a debit to Sales for $1,000. 
A) a debit to Cash for $980 and a credit to Accounts Receivable for $980. 
B) a debit to Cash for $800 and a credit to Accounts Receivable for $800. 
C) a credit to Sales for $800 and a debit to Cash for $ 800. 
D) a credit to Cost of Goods Sold for $1000 and a debit to Sales for $1,000.

Question 6

A company purchased inventory for $2,200 on account, and recorded the following journal entry:   The vendor's invoice showed terms of 3/10, n/30. Give the journal entry for the payment of the invoice seventeen days after the invoice date.

Accepted Answer

The answer of A company purchased inventory for $2,200 on...

Question 7

A company using the perpetual inventory system, purchased merchandise on account for $5,000. Give journal entry to record the same.

Accepted Answer

The answer of A company using the perpetual inventory system,...

Question 8

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

Accepted Answer

A) Owner's Name, Withdrawals 
B) Sales Revenue 
C) Cost of Goods Sold 
D) Owner's Name, Capital 
A) Owner's Name, Withdrawals 
B) Sales Revenue 
C) Cost of Goods Sold 
D) Owner's Name, Capital

Question 9

Michelin Jewelers uses the perpetual inventory system. On April 2, Michelin sold merchandise with a cost of $5,500 for $9,000 to a customer on account with terms of 3/15, n/30. On April 4, the customer reported damaged goods and Michelin granted a $1,000 sales allowance. On April 10, Michelin received payment from the customer. Calculate the amount of net sales revenue.

Accepted Answer

A) $8,760 
B) $9,000 
C) $8,000 
D) $7,760 
A) $8,760 
B) $9,000 
C) $8,000 
D) $7,760

Question 10

A company that uses the perpetual inventory system purchases inventory for $65,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?

Accepted Answer

A) a debit to Accounts payable for $65,000 and a credit to Cash for $65,000 and a debit to Merchandise Inventory for $1,300 
B) a debit to Accounts payable for $65,000, a credit to Merchandise Inventory for $1,300, and a credit to Cash for $63,700 
C) a debit to Merchandise Inventory for $1,300, a debit to Accounts Payable for $65,000 and a credit to Cash for $66,300 
D) a debit to Accounts Payable for $63,700, a debit to Merchandise Inventory for $1,300 and a credit to Cash for$65,000 
A) a debit to Accounts payable for $65,000 and a credit to Cash for $65,000 and a debit to Merchandise Inventory for $1,300 
B) a debit to Accounts payable for $65,000, a credit to Merchandise Inventory for $1,300, and a credit to Cash for $63,700 
C) a debit to Merchandise Inventory for $1,300, a debit to Accounts Payable for $65,000 and a credit to Cash for $66,300 
D) a debit to Accounts Payable for $63,700, a debit to Merchandise Inventory for $1,300 and a credit to Cash for$65,000

Question 11

A company sold merchandise worth $221 for $350 on account. The seller uses the perpetual inventory system. The entry to record the cost of merchandise sold would include:

Accepted Answer

A) a debit to Sales and a credit to Cash for $350. 
B) a debit to Cash and a credit to Sales for $350. 
C) a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $221. 
D) a debit to Merchandise Inventory for $221 and a credit to Cost of Goods Sold for $221. 
A) a debit to Sales and a credit to Cash for $350. 
B) a debit to Cash and a credit to Sales for $350. 
C) a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $221. 
D) a debit to Merchandise Inventory for $221 and a credit to Cost of Goods Sold for $221.

Question 12

The terms of an invoice are 3/10, n/25. This means that a:

Accepted Answer

A) discount of 10% is allowed if the invoice is paid within 3 days. 
B) discount of 3% is allowed if the invoice is paid within 10 days. 
C) discount of 25% is allowed if the invoice is paid within 10 days. 
D) discount of 3% is allowed if the invoice is paid after 25 days. 
A) discount of 10% is allowed if the invoice is paid within 3 days. 
B) discount of 3% is allowed if the invoice is paid within 10 days. 
C) discount of 25% is allowed if the invoice is paid within 10 days. 
D) discount of 3% is allowed if the invoice is paid after 25 days.

Question 13

Reid Art Supply Company uses a perpetual inventory system. The company had the following transactions during August, 2015:

Accepted Answer

Journal en

Question 14

When a company uses a perpetual inventory system, all merchandise transactions are updated as and when they occur; so, the inventory account will show the current balance at all times.

Accepted Answer

A) True 
 B)False

Question 15

A merchandiser, following the perpetual inventory system, has the following transactions during August, 2015:   Credit terms of invoice are 2/15, n/45. Give journal entries for the above transactions.

Accepted Answer

The answer of A merchandiser, following the perpetual inventory system,...

Question 16

The trial balance of a merchandiser is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system)   Give journal entry to record the inventory shrinkage.

Accepted Answer

The answer of The trial balance of a merchandiser is...

Question 17

On November 1, 2015, Wrenns Martch sold merchandise with a cost of $5,000 for $10,000, FOB destination, with payment terms of 3/10, n/40. Wrenns paid transportation costs of $100. Of these, merchandise sold for $3,000(with a cost of $1,500)was returned on November 6. The company received the payment for the balance amount on November 10, 2015. Calculate the Net sales revenue.

Accepted Answer

A) $6,790 
B) $7,000 
C) $4790 
D) $7790 
A) $6,790 
B) $7,000 
C) $4790 
D) $7790

Question 18

Credit terms of 2/10, n/30 indicate that a discount of 2% will be given if payment is made within 10 days of the invoice date. Otherwise, the total invoice amount is due within 30 days after the invoice date.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the correct formula for calculating gross profit percentage?

Accepted Answer

A) Net profit ÷ Net sales revenue 
B) Gross profit ÷ Net sales revenue 
C) Net sales revenue ÷ Net profit 
D) Net sales revenue ÷ Gross profit 
A) Net profit ÷ Net sales revenue 
B) Gross profit ÷ Net sales revenue 
C) Net sales revenue ÷ Net profit 
D) Net sales revenue ÷ Gross profit

Question 20

Under the perpetual inventory system, the journal entries to record sales returns(the original sale was on account)would be:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Exam 5: Merchandising Operations

An invoice is a request by the seller for payment from the purchaser.

A single-step income statement shows subtotals for gross profit and operating income.

Which of the following is the correct order of subtotals that appear on a multi-step income statement?

The Gajet Store Inc. started its operations on January 1, 2015. It engages in buying and selling different types of electronic gadgets. The first step in its operating cycle would be to:

A company sold merchandise for $1,000 on account with terms of 2/10, n/30. The company uses a perpetual inventory system. Defective merchandise of $200 was returned 2 days later. If the payment was received after 20 days, the journal entry to record the cash receipt will include:

A company purchased inventory for $2,200 on account, and recorded the following journal entry: The vendor's invoice showed terms of 3/10, n/30. Give the journal entry for the payment of the invoice seventeen days after the invoice date.

A company using the perpetual inventory system, purchased merchandise on account for $5,000. Give journal entry to record the same.

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

A company that uses the perpetual inventory system purchases inventory for $65,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?

A company sold merchandise worth $221 for $350 on account. The seller uses the perpetual inventory system. The entry to record the cost of merchandise sold would include:

The terms of an invoice are 3/10, n/25. This means that a:

Reid Art Supply Company uses a perpetual inventory system. The company had the following transactions during August, 2015:

When a company uses a perpetual inventory system, all merchandise transactions are updated as and when they occur; so, the inventory account will show the current balance at all times.

A merchandiser, following the perpetual inventory system, has the following transactions during August, 2015: Credit terms of invoice are 2/15, n/45. Give journal entries for the above transactions.

The trial balance of a merchandiser is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system) Give journal entry to record the inventory shrinkage.

Credit terms of 2/10, n/30 indicate that a discount of 2% will be given if payment is made within 10 days of the invoice date. Otherwise, the total invoice amount is due within 30 days after the invoice date.

Which of the following is the correct formula for calculating gross profit percentage?

Under the perpetual inventory system, the journal entries to record sales returns(the original sale was on account)would be:

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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