Question 1

If cost of goods sold is $360,000 and the gross profit rate is 40%, what is the gross profit?

Accepted Answer

A)  $240,000. 
B)  $360,000. 
C)  $600,000. 
D)  $900,000. 
A)  $240,000. 
B)  $360,000. 
C)  $600,000. 
D)  $900,000. A

Question 2

Sales revenue is recognized in the period in which:

Accepted Answer

A)  Merchandise is delivered to the customer. 
B)  The customer orders the merchandise. 
C)  Cash payment is received by the seller. 
D)  Purchases are made to replace the merchandise sold. 
A)  Merchandise is delivered to the customer. 
B)  The customer orders the merchandise. 
C)  Cash payment is received by the seller. 
D)  Purchases are made to replace the merchandise sold. A

Question 3

Which of the following businesses is most likely to use a periodic inventory system?

Accepted Answer

A)  An aircraft manufacturer. 
B)  A supermarket that is part of a national chain. 
C)  An independently owned art gallery with a manual accounting system. 
D)  A beer bar. 
A)  An aircraft manufacturer. 
B)  A supermarket that is part of a national chain. 
C)  An independently owned art gallery with a manual accounting system. 
D)  A beer bar. D

Question 4

Bernice Beverages is not satisfied with the quality of merchandise purchased from Reade Supplies. If American Supplies agrees to settle this matter by granting Bernice Beverages a sales allowance, Bernice Beverages will:

Accepted Answer

A)  Return the entire shipment to Reade Supplies and receive a full refund. 
B)  Return only that portion of the merchandise that it is unable to sell within the discount period. 
C)  Keep the merchandise, but pay a reduced purchase price. 
D)  Keep the merchandise and sell it at a reduced sales price. 
A)  Return the entire shipment to Reade Supplies and receive a full refund. 
B)  Return only that portion of the merchandise that it is unable to sell within the discount period. 
C)  Keep the merchandise, but pay a reduced purchase price. 
D)  Keep the merchandise and sell it at a reduced sales price.

Question 5

Subsidiary ledgers Explain the nature of subsidiary ledgers, and give two specific examples. For each of these examples, explain (1) the unit of organization within this ledger, and (2) the usefulness of this ledger in business operations.

Accepted Answer

Subsidiary ledgers provide detailed info

Question 6

Under the periodic inventory system, no effort is made to keep up-to-date records of either Inventory or Cost of Goods Sold as transactions occur.

Accepted Answer

A) True 
 B)False

Question 7

A perpetual inventory system requires the capability of recording the cost of the goods sold in individual sales transactions.

Accepted Answer

A) True 
 B)False

Question 8

In a periodic inventory system, the cost of goods sold is determined by the following end-of-period computation: Beginning Inventory + Purchases - Ending inventory = Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 9

Inventory shrinkage refers to unrecorded decreases in inventory resulting from breakage, theft, and sales of inventory.

Accepted Answer

A) True 
 B)False

Question 10

Big Brother, a retail store, purchased 100 television sets from Krueger Electronics on account at a cost of $200 each. Kruger offers credit terms of 2/10, n/30; Big Brother uses a perpetual inventory system and records purchases at net cost. Big Brother determines that 10 of these television sets are defective and returns them to Krueger for full credit. In recording this return, Big Brother will:

Accepted Answer

A)  Debit Sales Returns and Allowances, $1,960. 
B)  Debit Accounts Payable, $1,960. 
C)  Debit Cost of Goods Sold, $1,960. 
D)  Credit Inventory, $2,000. 
A)  Debit Sales Returns and Allowances, $1,960. 
B)  Debit Accounts Payable, $1,960. 
C)  Debit Cost of Goods Sold, $1,960. 
D)  Credit Inventory, $2,000.

Question 11

Marietta Corporation uses a perpetual inventory system. All of its sales are made on account. The company sells merchandise costing $3,000 at a sales price of $4,300. In recording this transaction, Marietta will make all of the following entries except:

Accepted Answer

A)  Credit Sales, $4,300. 
B)  Credit Inventory, $3,000. 
C)  Debit Cost of Goods Sold, $3,000. 
D)  Debit one or more accounts in the inventory subsidiary ledger for amounts totaling $3,000. 
A)  Credit Sales, $4,300. 
B)  Credit Inventory, $3,000. 
C)  Debit Cost of Goods Sold, $3,000. 
D)  Debit one or more accounts in the inventory subsidiary ledger for amounts totaling $3,000.

Question 12

The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was:

Accepted Answer

A)  $0. 
B)  $35,000. 
C)  $55,000. 
D)  Some other answer. 
A)  $0. 
B)  $35,000. 
C)  $55,000. 
D)  Some other answer.

Question 13

In a periodic inventory system, the ending inventory can be determined from the accounting records, and a physical count of the merchandise on hand will confirm the amount.

Accepted Answer

A) True 
 B)False

Question 14

The Cost of Goods Sold account is closed by:

Accepted Answer

A)  Debiting Cost of Goods Sold and crediting Income Summary. 
B)  Debiting Cost of Goods Sold and crediting Retained Earnings. 
C)  Debiting Income Summary and crediting Cost of Goods Sold. 
D)  Debiting Retained Earnings and crediting Cost of Goods Sold. 
A)  Debiting Cost of Goods Sold and crediting Income Summary. 
B)  Debiting Cost of Goods Sold and crediting Retained Earnings. 
C)  Debiting Income Summary and crediting Cost of Goods Sold. 
D)  Debiting Retained Earnings and crediting Cost of Goods Sold.

Question 15

If Bounder Dog Supplies, Inc purchased inventory at $2,200 list price and the terms were 3/10 n/30, what would be the value associated with the inventory if payment was made within 10 days?

Accepted Answer

A)  $2,268. 
B)  $2,334. 
C)  $2,200. 
D)  $2,134. 
A)  $2,268. 
B)  $2,334. 
C)  $2,200. 
D)  $2,134.

Question 16

When making sales, the sales taxes received are:

Accepted Answer

A)  Revenue. 
B)  A liability. 
C)  An expense if incurred. 
D)  A reduction in inventory value. 
A)  Revenue. 
B)  A liability. 
C)  An expense if incurred. 
D)  A reduction in inventory value.

Question 17

If ending inventory and cost of goods sold are added together, they should equal gross profit.

Accepted Answer

A) True 
 B)False

Question 18

At the end of last year, Baron's Bazaar had merchandise costing $381,000 in inventory.
During January of the current year, the company purchased merchandise costing $133,500, and sold merchandise which it had purchased at a total cost of $109,300.
a. Assume that Baron's Bazaar uses a perpetual inventory system.
(1) The total amount debited to the Inventory account during January was:
$________________
(2) The balance in the Inventory account at January 31 was:
$________________
(3) The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was:
$________________
b. Assume that Baron's Bazaar uses a periodic inventory system and takes a physical inventory only at year-end (December 31). (Note: $0 may be an appropriate answer to one or more of the following questions.)
(1) The total amount debited to the Inventory account during January was:
$________________
(2) The balance in the Inventory account at January 31 was:
$________________
(3) The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was:
$________________

Accepted Answer

a. (1) $133,500 (The merchandise purchas

Question 19

On July 1, the inventory of at Barnett Shoes was $60,000. Because of anticipated back-to-school sales, the owner wants to have an inventory of $105,000 on hand at the beginning of August. Net sales during July are expected to total $70,000, with a gross profit rate of 45%. During July, the company should purchase merchandise costing:

Accepted Answer

A)  $38,500. 
B)  $143,500. 
C)  $83,500. 
D)  $105,000. 
A)  $38,500. 
B)  $143,500. 
C)  $83,500. 
D)  $105,000.

Question 20

The basic purpose of offering customers cash discounts such as 2/10, n/30 is to:

Accepted Answer

A)  Increase sales. 
B)  Reduce net sales. 
C)  Speed up the collection of accounts receivable. 
D)  Focus management's attention upon customers that fail to take advantage of all available cash discounts. 
A)  Increase sales. 
B)  Reduce net sales. 
C)  Speed up the collection of accounts receivable. 
D)  Focus management's attention upon customers that fail to take advantage of all available cash discounts.

Exam 6: Merchandising Activities

If cost of goods sold is $360,000 and the gross profit rate is 40%, what is the gross profit?

Sales revenue is recognized in the period in which:

Which of the following businesses is most likely to use a periodic inventory system?

Bernice Beverages is not satisfied with the quality of merchandise purchased from Reade Supplies. If American Supplies agrees to settle this matter by granting Bernice Beverages a sales allowance, Bernice Beverages will:

Subsidiary ledgers Explain the nature of subsidiary ledgers, and give two specific examples. For each of these examples, explain (1) the unit of organization within this ledger, and (2) the usefulness of this ledger in business operations.

Under the periodic inventory system, no effort is made to keep up-to-date records of either Inventory or Cost of Goods Sold as transactions occur.

A perpetual inventory system requires the capability of recording the cost of the goods sold in individual sales transactions.

In a periodic inventory system, the cost of goods sold is determined by the following end-of-period computation: Beginning Inventory + Purchases - Ending inventory = Cost of Goods Sold.

Inventory shrinkage refers to unrecorded decreases in inventory resulting from breakage, theft, and sales of inventory.

Marietta Corporation uses a perpetual inventory system. All of its sales are made on account. The company sells merchandise costing $3,000 at a sales price of $4,300. In recording this transaction, Marietta will make all of the following entries except:

The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was:

In a periodic inventory system, the ending inventory can be determined from the accounting records, and a physical count of the merchandise on hand will confirm the amount.

The Cost of Goods Sold account is closed by:

If Bounder Dog Supplies, Inc purchased inventory at $2,200 list price and the terms were 3/10 n/30, what would be the value associated with the inventory if payment was made within 10 days?

When making sales, the sales taxes received are:

If ending inventory and cost of goods sold are added together, they should equal gross profit.

The basic purpose of offering customers cash discounts such as 2/10, n/30 is to:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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