Question 1

What is the cost of goods sold?

Accepted Answer

A)  $9,800. 
B)  $33,600. 
C)  $32,200. 
D)  $43,400. 
A)  $9,800. 
B)  $33,600. 
C)  $32,200. 
D)  $43,400.

Question 2

If management wants to know the cost and quantity of merchandise on hand at all times, the business will probably:

Accepted Answer

A)  Use a periodic inventory system. 
B)  Maintain an inventory subsidiary ledger. 
C)  Take a complete physical inventory each day. 
D)  Debit all purchases of merchandise directly to the Cost of Goods Sold account. 
A)  Use a periodic inventory system. 
B)  Maintain an inventory subsidiary ledger. 
C)  Take a complete physical inventory each day. 
D)  Debit all purchases of merchandise directly to the Cost of Goods Sold account.

Question 3

Under the perpetual inventory system which journal entry would indicate a purchase of merchandise?

Accepted Answer

A)  Debit, Inventory and credit, Cash. 
B)  Debit, Purchases and credit, Cash. 
C)  Debit, Costs of Goods Sold and credit, Inventory. 
D)  Debit, Inventory and credit, Cost of Goods Sold. 
A)  Debit, Inventory and credit, Cash. 
B)  Debit, Purchases and credit, Cash. 
C)  Debit, Costs of Goods Sold and credit, Inventory. 
D)  Debit, Inventory and credit, Cost of Goods Sold.

Question 4

If ending inventory and cost of goods sold are added together, they should equal cost of goods available for sale.

Accepted Answer

A) True 
 B)False

Question 5

In a periodic inventory system, the formula used in computing the cost of goods sold may be summarized as follows:

Accepted Answer

A)  Beginning inventory + purchases - ending inventory. 
B)  Beginning inventory + purchases - net sales. 
C)  Ending inventory + purchases - net sales. 
D)  Balance in the Cost of Goods Sold account, less the balance in the Inventory Shrinkage account. 
A)  Beginning inventory + purchases - ending inventory. 
B)  Beginning inventory + purchases - net sales. 
C)  Ending inventory + purchases - net sales. 
D)  Balance in the Cost of Goods Sold account, less the balance in the Inventory Shrinkage account.

Question 6

Refer to the information above. Washington maintains a subsidiary ledger account for each type of TV carried in the store. An examination of the account for the Flat TV model at the end of February would show:

Accepted Answer

A)  4 units on hand with a total value of $1,400. 
B)  4 units on hand with a total value of $5,600. 
C)  13 units on hand with a total value of $18,200. 
D)  The amount that Washington owes to Bass. 
A)  4 units on hand with a total value of $1,400. 
B)  4 units on hand with a total value of $5,600. 
C)  13 units on hand with a total value of $18,200. 
D)  The amount that Washington owes to Bass.

Question 7

The contra-revenue accounts, Sales Returns and Allowances and Sales Discounts, should be closed by crediting these accounts and debiting Income Summary for each account.

Accepted Answer

A) True 
 B)False

Question 8

Regal Artworks Co. records purchases net of all available purchase discounts. If the company makes payment after the discount has expired, the entry to record the payment should include a:

Accepted Answer

A)  Debit to Purchase Discounts Lost. 
B)  Credit to Purchase Discounts Lost. 
C)  Debit to Sales Discounts. 
D)  Credit to Sales Discounts. 
A)  Debit to Purchase Discounts Lost. 
B)  Credit to Purchase Discounts Lost. 
C)  Debit to Sales Discounts. 
D)  Credit to Sales Discounts.

Question 9

Sutton Supplies reports net sales of $3,750,000, net income of $375,000, and gross profit of $900,000. The company's cost of goods sold is:

Accepted Answer

A)  $1,700,000. 
B)  $1,900,000. 
C)  $3,375,000. 
D)  $2,850,000. 
A)  $1,700,000. 
B)  $1,900,000. 
C)  $3,375,000. 
D)  $2,850,000.

Question 10

The total debited to the Inventory 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 11

Operating income is:

Accepted Answer

A)  A measure of profitability after deducting cost of sales from net sales. 
B)  A measure of profitability after deducting cost of sales and all expenses incurred in operating the business from net sales. 
C)  A measure of liquidity after deducting cost of sales from net sales. 
D)  The equivalent of net sales. 
A)  A measure of profitability after deducting cost of sales from net sales. 
B)  A measure of profitability after deducting cost of sales and all expenses incurred in operating the business from net sales. 
C)  A measure of liquidity after deducting cost of sales from net sales. 
D)  The equivalent of net sales.

Question 12

VanRoy Supplies reports net sales of $1,750,000, net income of $175,000, and gross profit of $300,000. The company's cost of goods sold is:

Accepted Answer

A)  $1,400,000. 
B)  $475,000. 
C)  $1,575,000. 
D)  $1,450,000. 
A)  $1,400,000. 
B)  $475,000. 
C)  $1,575,000. 
D)  $1,450,000.

Question 13

Berg Tooling reports net sales of $325,000, gross profit of $175,000, and net income of $15,000. The company's cost of goods sold is:

Accepted Answer

A)  $135,000. 
B)  $150,000. 
C)  $140,000. 
D)  $125,000. 
A)  $135,000. 
B)  $150,000. 
C)  $140,000. 
D)  $125,000.

Question 14

Inventory systems
Bookmarks, Inc. sells used books at its store in the resort community of Lake Bryn Mawr. The owner maintains a large inventory of used books purchased from estate sales, flea markets, and customers. During the tourist seasons of summer and winter, the store is exceptionally busy with customers. Each customer usually makes small purchases ranging in amount from one to twenty dollars. What type of inventory system would you recommend to the owner of Bookmarks, Inc.? Explain the reasoning behind your advice.

Accepted Answer

The owner would be well advised to use a

Question 15

A customer purchased merchandise for $450 which cost the seller $200. The customer was dissatisfied with some of the goods and thus returned $100 worth and received a cash refund.
(a) What journal entries should the seller make when the merchandise is sold and at the time of the return? Assume that the seller uses a perpetual inventory system.
(b) If the seller uses a periodic inventory system, what entries would be made?

Accepted Answer

The answer of A customer purchased merchandise for $450 which...

Question 16

Merchandising companies that are small and do not use a perpetual inventory system may elect to use:

Accepted Answer

A)  A physical inventory system. 
B)  A periodic inventory system. 
C)  An inventory shrinkage method. 
D)  An inventory subsidiary ledger system. 
A)  A physical inventory system. 
B)  A periodic inventory system. 
C)  An inventory shrinkage method. 
D)  An inventory subsidiary ledger system.

Question 17

Two of the lawn mowers sold by Garden Products Co. are the Lawn Master and the Mark 5. Lawn Masters sell for $250 apiece, which results in a 35% profit margin. Each Mark 5 costs Garden Products $300 and sells for $400. Indicate all correct answers.

Accepted Answer

A)  The dollar amount of gross profit is greater on the sale of a Mark 5 than a LawnMaster. 
B)  The gross profit margin is higher on Mark 5s than on LawnMasters. 
C)  Garden profits relatively more by selling one Mark 5 than one LawnMaster. 
D)  Garden profits more by selling $2,000 worth of Mark 5s than $2,000 worth of LawnMasters. 
A)  The dollar amount of gross profit is greater on the sale of a Mark 5 than a LawnMaster. 
B)  The gross profit margin is higher on Mark 5s than on LawnMasters. 
C)  Garden profits relatively more by selling one Mark 5 than one LawnMaster. 
D)  Garden profits more by selling $2,000 worth of Mark 5s than $2,000 worth of LawnMasters.

Question 18

Perpetual inventory system: basic entries Renato Company uses a perpetual inventory system. A partial chart of accounts is shown below, followed by a series of merchandising transactions. Indicate the accounts that should be debited and credited in recording each transaction. (Ignore sales taxes.)
 $$\begin{array} { | l | l | l | l | } 
\hline 1 & \text { Cash } & 50 & \text { Sales } \
\hline 2 & \text { Accounts Receivable } & 60 & \text { Cost of Goods Sold } \
\hline 5 & \text { Inventory } & \mathrm { XX } & \text { All other expense accounts } \
\hline 30 & \text { Accounts Payable } & & \
\hline
\end{array}$$ $$\begin{array} { | l | l | c | c | } 
\hline & \text { Transactions } & \text { Account(s) } & \text { Account(s) } \
\hline & \text { Example: Sold merchandise for cash } & \text { Debited } & \text { Credited } \
\hline \text { A } & \text { Purchased merchandise on account } & 1,60 & 50,5 \
\hline \text { B } & \text { Sold merchandise on account } & & \
\hline \text { C } & \text { Paid the supplier for the merchandise in transaction a } & & \
\hline \text { D } & \text { Collected cash from the customer in transaction b } & & \
\hline \text { E } & \begin{array} { l } 
\text { The physical inventory at year-end disclosed a } \
\text { normal amount of inventory shrinkage }
\end{array} & & \
\hline & & & \
\hline
\end{array}$$

Accepted Answer

The answer of Perpetual inventory system: basic entries Renato Company...

Question 19

In a periodic inventory system, the Inventory and Cost of Goods Sold accounts are kept up-to-date throughout the accounting period.

Accepted Answer

A) True 
 B)False

Question 20

In a periodic inventory system, which of the following accounts may be closed by debiting Cost of Goods Sold?

Accepted Answer

A)  Sales, Inventory (beginning), and Gross Profit. 
B)  Inventory (beginning) and Purchases. 
C)  Purchases and Inventory (ending). 
D)  Sales, Inventory (beginning), and Cost of Goods Available for Sale. 
A)  Sales, Inventory (beginning), and Gross Profit. 
B)  Inventory (beginning) and Purchases. 
C)  Purchases and Inventory (ending). 
D)  Sales, Inventory (beginning), and Cost of Goods Available for Sale.

Exam 6: Merchandising Activities

What is the cost of goods sold?

If management wants to know the cost and quantity of merchandise on hand at all times, the business will probably:

Under the perpetual inventory system which journal entry would indicate a purchase of merchandise?

If ending inventory and cost of goods sold are added together, they should equal cost of goods available for sale.

In a periodic inventory system, the formula used in computing the cost of goods sold may be summarized as follows:

Refer to the information above. Washington maintains a subsidiary ledger account for each type of TV carried in the store. An examination of the account for the Flat TV model at the end of February would show:

The contra-revenue accounts, Sales Returns and Allowances and Sales Discounts, should be closed by crediting these accounts and debiting Income Summary for each account.

Regal Artworks Co. records purchases net of all available purchase discounts. If the company makes payment after the discount has expired, the entry to record the payment should include a:

Sutton Supplies reports net sales of $3,750,000, net income of $375,000, and gross profit of $900,000. The company's cost of goods sold is:

The total debited to the Inventory account during January was:

Operating income is:

VanRoy Supplies reports net sales of $1,750,000, net income of $175,000, and gross profit of $300,000. The company's cost of goods sold is:

Berg Tooling reports net sales of $325,000, gross profit of $175,000, and net income of $15,000. The company's cost of goods sold is:

Merchandising companies that are small and do not use a perpetual inventory system may elect to use:

Two of the lawn mowers sold by Garden Products Co. are the Lawn Master and the Mark 5. Lawn Masters sell for $250 apiece, which results in a 35% profit margin. Each Mark 5 costs Garden Products $300 and sells for $400. Indicate all correct answers.

In a periodic inventory system, the Inventory and Cost of Goods Sold accounts are kept up-to-date throughout the accounting period.

In a periodic inventory system, which of the following accounts may be closed by debiting Cost of Goods Sold?

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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