Question 1

Under the terms FOB destination, title to the merchandise will pass to the purchaser when the goods are received by the purchaser.

Accepted Answer

A) True 
 B)False

Question 2

On a multi-step income statement, which of the following is subtracted from net sales revenue to arrive at gross profit?

Accepted Answer

A) cost of goods available for sale 
B) cost of goods sold 
C) sales discounts and Sales returns and allowances 
D) operating expenses 
A) cost of goods available for sale 
B) cost of goods sold 
C) sales discounts and Sales returns and allowances 
D) operating expenses

Question 3

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.

Accepted Answer

A) True 
 B)False

Question 4

Avery Supplies uses a periodic inventory system. From the following details, calculate net purchases.

Accepted Answer

A) $26,000 
B) $22,000 
C) $25,000 
D) $23,200 
A) $26,000 
B) $22,000 
C) $25,000 
D) $23,200

Question 5

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

Accepted Answer

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

Question 6

The entry to close Cost of Goods Sold includes a debit to Income summary.

Accepted Answer

A) True 
 B)False

Question 7

Freight out is an addition to the Merchandise Inventory account if the seller uses the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 8

A company sold merchandise for $20,000 on account with terms of 3/10, n/30. The company uses a perpetual inventory system. After two days, it received defective merchandise worth $2,000. The journal entry to record the cash receipt for sale if the payment is received within 10 days of the invoice date would include:

Accepted Answer

A) a debit to Cash for $17,460, a credit to Merchandise Inventory for $540, and a credit to Sales Revenue for $18,000. 
B) a debit to Cash for $17,460, a debit to Sales Discount for $540, and a credit to Accounts Receivable for $18,000. 
C) a debit to Cash for $18,000, a debit to Merchandise Inventory for $2,000 and a credit to Accounts Receivable. 
D) a debit to Sales for $20,000, a credit to Accounts Receivable for $20,000, and a credit to Sales Discount for $2,000. 
A) a debit to Cash for $17,460, a credit to Merchandise Inventory for $540, and a credit to Sales Revenue for $18,000. 
B) a debit to Cash for $17,460, a debit to Sales Discount for $540, and a credit to Accounts Receivable for $18,000. 
C) a debit to Cash for $18,000, a debit to Merchandise Inventory for $2,000 and a credit to Accounts Receivable. 
D) a debit to Sales for $20,000, a credit to Accounts Receivable for $20,000, and a credit to Sales Discount for $2,000.

Question 9

An adjusted trial balance of a merchandiser is given below.   Give the journal entry to close the Sales Revenue account.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 10

Gilbert Inc. generated sales revenues of $1,000,000 in the year 2015. Its cost of goods sold amounted to $400,000. Calculate Gilbert's gross profit percentage.

Accepted Answer

A) 40% 
B) 60% 
C) 167% 
D) 250% 
A) 40% 
B) 60% 
C) 167% 
D) 250%

Question 11

The gross profit percentage is one of the most important measures of:

Accepted Answer

A) profitability. 
B) liquidity. 
C) solvency. 
D) marketability. 
A) profitability. 
B) liquidity. 
C) solvency. 
D) marketability.

Question 12

Credit terms of a merchandising company are: 1/15, net 40. This means that the buyer can avail a discount of 1 percent, if the invoice is paid within 40 days of the invoice date.

Accepted Answer

A) True 
 B)False

Question 13

Defective, damaged, or otherwise unsuitable merchandise that is returned to the seller is referred to as purchase allowances by the purchaser.

Accepted Answer

A) True 
 B)False

Question 14

Under the perpetual inventory system, when a wholesaler returns the goods purchased on account, the ________ account is credited.

Accepted Answer

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

Question 15

Merchandise Inventory accounting systems can be broadly categorized into two. They are:

Accepted Answer

A) FIFO; LIFO 
B) perpetual; periodic 
C) wholesale; retail 
D) manufacturer; producer 
A) FIFO; LIFO 
B) perpetual; periodic 
C) wholesale; retail 
D) manufacturer; producer

Question 16

The perpetual inventory system keeps a running record of inventory and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 17

Under the perpetual inventory system, discounts taken on an invoice by the buyer would be:

Accepted Answer

A) debited to Merchandise Inventory. 
B) credited to Merchandise Inventory. 
C) debited to Cost of goods sold. 
D) credited to Cost of goods sold. 
A) debited to Merchandise Inventory. 
B) credited to Merchandise Inventory. 
C) debited to Cost of goods sold. 
D) credited to Cost of goods sold.

Question 18

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the:

Accepted Answer

A) Income Summary account. 
B) Owner's Name, Capital account. 
C) Owner's Name, Withdrawals account. 
D) Fixed asset account. 
A) Income Summary account. 
B) Owner's Name, Capital account. 
C) Owner's Name, Withdrawals account. 
D) Fixed asset account.

Question 19

When a merchandiser records sales returns, the Accounts Receivable account is credited. The seller uses the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 20

A merchandiser had sales returns and allowances of $300, sales discounts of $700, cost of goods sold of $12,000, and all other expenses of $4,500. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include:

Accepted Answer

A) a debit to Income summary for $17,500. 
B) a credit to Income summary for $16,500. 
C) a debit to Income summary for $4,500. 
D) a debit to Income summary for $16,500. 
A) a debit to Income summary for $17,500. 
B) a credit to Income summary for $16,500. 
C) a debit to Income summary for $4,500. 
D) a debit to Income summary for $16,500.

Exam 5: Merchandising Operations

Under the terms FOB destination, title to the merchandise will pass to the purchaser when the goods are received by the purchaser.

On a multi-step income statement, which of the following is subtracted from net sales revenue to arrive at gross profit?

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.

Avery Supplies uses a periodic inventory system. From the following details, calculate net purchases.

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

The entry to close Cost of Goods Sold includes a debit to Income summary.

Freight out is an addition to the Merchandise Inventory account if the seller uses the perpetual inventory system.

An adjusted trial balance of a merchandiser is given below. Give the journal entry to close the Sales Revenue account.

Gilbert Inc. generated sales revenues of $1,000,000 in the year 2015. Its cost of goods sold amounted to $400,000. Calculate Gilbert's gross profit percentage.

The gross profit percentage is one of the most important measures of:

Credit terms of a merchandising company are: 1/15, net 40. This means that the buyer can avail a discount of 1 percent, if the invoice is paid within 40 days of the invoice date.

Defective, damaged, or otherwise unsuitable merchandise that is returned to the seller is referred to as purchase allowances by the purchaser.

Under the perpetual inventory system, when a wholesaler returns the goods purchased on account, the ________ account is credited.

Merchandise Inventory accounting systems can be broadly categorized into two. They are:

The perpetual inventory system keeps a running record of inventory and cost of goods sold.

Under the perpetual inventory system, discounts taken on an invoice by the buyer would be:

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the:

When a merchandiser records sales returns, the Accounts Receivable account is credited. The seller uses the perpetual inventory system.

A merchandiser had sales returns and allowances of $300, sales discounts of $700, cost of goods sold of $12,000, and all other expenses of $4,500. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include:

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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