Question 1

Which of the following statements about a periodic inventory system is not correct?

Accepted Answer

A) These systems are used primarily by small businesses with manual accounting systems. 
B) The system does not include an up-to-date inventory ledger. 
C) The balance in the Inventory account remains unchanged until the end of the period. 
D) The Cost of Goods Sold account is updated as sales transactions occur. 
A) These systems are used primarily by small businesses with manual accounting systems. 
B) The system does not include an up-to-date inventory ledger. 
C) The balance in the Inventory account remains unchanged until the end of the period. 
D) The Cost of Goods Sold account is updated as sales transactions occur. D

Question 2

In a periodic inventory system,the cost of goods sold is:

Accepted Answer

A) Recorded as sales transactions occur. 
B) Determined by a computation which is performed at year-end,after the taking of a complete physical inventory. 
C) Equal to the beginning inventory,plus purchases made during the period,less sales revenue for the period. 
D) Determined by subtracting the balance in the Gross Profit account from the amount of net sales. 
A) Recorded as sales transactions occur. 
B) Determined by a computation which is performed at year-end,after the taking of a complete physical inventory. 
C) Equal to the beginning inventory,plus purchases made during the period,less sales revenue for the period. 
D) Determined by subtracting the balance in the Gross Profit account from the amount of net sales. B

Question 3

Prepare journals entries for the following,assuming the company uses a perpetual inventory method and records purchases at their net amounts.

Accepted Answer

The answer of Prepare journals entries for the following,assuming the...

Question 4

Inventory systems
Indicate whether you would expect each of the following businesses to maintain a perpetual or a periodic inventory system.Explain the reasoning behind your answers:
(a)A jewelry store.
(b)A roadside vegetable stand.

Accepted Answer

Students' answers should address most of

Question 5

In a perpetual inventory system,when merchandise is purchased,it is debited to an account called Purchases.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Hicksville's Department Store uses a perpetual inventory system.At year-end,the balance in the Inventory control account is $1,200,000.Assuming that the inventory records have been maintained properly,a year-end physical inventory:

Accepted Answer

A) Is unnecessary. 
B) Is needed to establish the ending inventory,as the $1,200,000 balance in the Inventory control account represents the beginning inventory. 
C) Probably will indicate more than $1,200,000 in merchandise on hand. 
D) Probably will indicate less than $1,200,000 in merchandise on hand. 
A) Is unnecessary. 
B) Is needed to establish the ending inventory,as the $1,200,000 balance in the Inventory control account represents the beginning inventory. 
C) Probably will indicate more than $1,200,000 in merchandise on hand. 
D) Probably will indicate less than $1,200,000 in merchandise on hand.

Question 8

In a perpetual inventory system,two entries usually are made to record each sales transaction.The purposes of these entries are best described as follows:

Accepted Answer

A) One entry recognizes the sales revenue,and the other recognizes the cost of goods sold. 
B) One entry records the purchase of the merchandise,and the other records the sale. 
C) One entry records the cost of goods sold,and the other reduces the balance in the Inventory account. 
D) One entry updates the general ledger,and the other updates the subsidiary ledgers. 
A) One entry recognizes the sales revenue,and the other recognizes the cost of goods sold. 
B) One entry records the purchase of the merchandise,and the other records the sale. 
C) One entry records the cost of goods sold,and the other reduces the balance in the Inventory account. 
D) One entry updates the general ledger,and the other updates the subsidiary ledgers.

Question 9

Using gross profit rates
Explain how the gross profit rate for a particular product is determined.How would you expect the manager of a large department store to use these gross profit rates in deciding which products to feature in the store's window displays and in determining the location of various types of merchandise within the store? Explain.

Accepted Answer

The gross profit rate of a particular pr

Question 10

Sales returns and allowances is an expense account,and on the income statement it is added to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 11

In a retail department store with an efficient perpetual inventory system,the quantities of goods actually on hand are probably somewhat more than the quantities indicated in the accounting records.

Accepted Answer

A) True 
 B)False

Question 12

General ledgers contain information about specific control accounts in the company's subsidiary ledger.

Accepted Answer

A) True 
 B)False

Question 13

In a periodic inventory system,cost of goods sold is the cost of goods available for sale less ending inventory.

Accepted Answer

A) True 
 B)False

Question 14

In a perpetual 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 15

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 16

Gross profit margin is the dollar amount of gross profit expressed as a percentage of gross sales.

Accepted Answer

A) True 
 B)False

Question 17

The Sales Returns and Allowances account is debited when:

Accepted Answer

A) Merchandise is returned to a supplier. 
B) Merchandise is returned by a customer. 
C) Payment is made to a supplier within the discount period. 
D) An account receivable is collected within the discount period. 
A) Merchandise is returned to a supplier. 
B) Merchandise is returned by a customer. 
C) Payment is made to a supplier within the discount period. 
D) An account receivable is collected within the discount period.

Question 18

At the beginning of 2015,Midway Hardware has an inventory of $400,000.Because sales growth was strong during 2015,the owner wants to increase inventory on hand to $450,000 at December 31,2015.If net sales for 2015 are expected to be $1,600,000,and the gross profit rate is expected to be 35%,compute the cost of the merchandise the owner should expect to purchase during 2015.

Accepted Answer

A) $1,490,000. 
B) $1,040,000. 
C) $1,090,000. 
D) $1,600,000. 
A) $1,490,000. 
B) $1,040,000. 
C) $1,090,000. 
D) $1,600,000.

Question 19

Journal entries for merchandising transactions
Shown below is a partial chart of accounts for Main Street Markets,followed by a series of merchandising transactions.The company uses a perpetual inventory system,records purchases at net cost,and records sales at the full invoice price.Sales taxes are collected on all sales,and the sales tax liability is recorded immediately.Freight charges on inbound shipments are recorded in the Inventory account.   Indicate the accounts that should be credited in recording each transaction by placing the appropriate account number(s)in the space provided.

Accepted Answer

The answer of Journal entries for merchandising transactions
Shown below is...

Question 20

Periodic inventory system
Soundview Centre uses a periodic inventory system.At the end of 2015,the accounting records include the following information:   Compute the following for 2015:

Accepted Answer

(a)Cost of goods sol

Exam 6: Merchandising Activities

Which of the following statements about a periodic inventory system is not correct?

In a periodic inventory system,the cost of goods sold is:

Prepare journals entries for the following,assuming the company uses a perpetual inventory method and records purchases at their net amounts.

Inventory systems Indicate whether you would expect each of the following businesses to maintain a perpetual or a periodic inventory system.Explain the reasoning behind your answers: (a)A jewelry store. (b)A roadside vegetable stand.

In a perpetual inventory system,when merchandise is purchased,it is debited to an account called Purchases.

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:

Hicksville's Department Store uses a perpetual inventory system.At year-end,the balance in the Inventory control account is $1,200,000.Assuming that the inventory records have been maintained properly,a year-end physical inventory:

In a perpetual inventory system,two entries usually are made to record each sales transaction.The purposes of these entries are best described as follows:

Sales returns and allowances is an expense account,and on the income statement it is added to cost of goods sold.

In a retail department store with an efficient perpetual inventory system,the quantities of goods actually on hand are probably somewhat more than the quantities indicated in the accounting records.

General ledgers contain information about specific control accounts in the company's subsidiary ledger.

In a periodic inventory system,cost of goods sold is the cost of goods available for sale less ending inventory.

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

Gross profit margin is the dollar amount of gross profit expressed as a percentage of gross sales.

The Sales Returns and Allowances account is debited when:

Periodic inventory system Soundview Centre uses a periodic inventory system.At the end of 2015,the accounting records include the following information: Compute the following for 2015:

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

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