Question 1

The credit term 2/10,n/30 means:

Accepted Answer

A) That after 10 days 2% interest is charged. 
B) That there is a 10% discount if payment is received within 30 days. 
C) That there is a 2% discount if payment is received within 10 days,otherwise,full payment is due within 30 days. 
D) There is a 10% discount if paid immediately and 2% if paid within 30 days. 
A) That after 10 days 2% interest is charged. 
B) That there is a 10% discount if payment is received within 30 days. 
C) That there is a 2% discount if payment is received within 10 days,otherwise,full payment is due within 30 days. 
D) There is a 10% discount if paid immediately and 2% if paid within 30 days.

Question 2

If a company records a purchase at the net cost and then fails to take advantage of the discount,the discount not taken is recorded in the Interest Expense account.

Accepted Answer

A) True 
 B)False

Question 3

In preparing monthly bills to be sent to individual credit customers,the billing department will use the accounts payable subsidiary ledger,rather than the general ledger.

Accepted Answer

A) True 
 B)False

Question 4

Inventory is a relatively liquid asset and usually appears above Accounts Receivable on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

If sales discounts are shown as a separate item in financial statements,they should be shown as a(n):

Accepted Answer

A) Deduction from accounts receivable. 
B) Deduction from gross sales revenue. 
C) Operating expense. 
D) Current liability. 
A) Deduction from accounts receivable. 
B) Deduction from gross sales revenue. 
C) Operating expense. 
D) Current liability.

Question 6

The gross profit margin:

Accepted Answer

A) Is the dollar amount of gross profit expressed as a percentage of cost of sales. 
B) May indicate popular products and successful marketing strategies. 
C) Must be computed for the business as a whole rather than for specific sales departments. 
D) Is equal to cost of goods sold plus gross operating expenses. 
A) Is the dollar amount of gross profit expressed as a percentage of cost of sales. 
B) May indicate popular products and successful marketing strategies. 
C) Must be computed for the business as a whole rather than for specific sales departments. 
D) Is equal to cost of goods sold plus gross operating expenses.

Question 7

At the beginning of 2015,England Dresses has an inventory of $140,000.However,management wants to reduce the amount of inventory on hand to $80,000 at December 31.If net sales for 2015 are forecast at $400,000 and the gross profit rate is expected to be 40%,compute the cost of the merchandise which management should expect to purchase during 2015.(Hint: First compute the expected cost of goods sold.)

Accepted Answer

A) $240,000. 
B) $180,000. 
C) $320,000. 
D) $220,000. 
A) $240,000. 
B) $180,000. 
C) $320,000. 
D) $220,000.

Question 8

Inventory systems
Briefly distinguish between a perpetual inventory system and a periodic inventory system.

Accepted Answer

Students' answers should address most of

Question 9

In a perpetual inventory system:

Accepted Answer

A) Merchandising transactions are recorded as they occur. 
B) No effort is made to record the Cost of Goods Sold until year-end. 
C) Entries are made in the Cost of Goods Sold account whenever merchandise is purchased or sold. 
D) The need for ever taking physical inventory is eliminated. 
A) Merchandising transactions are recorded as they occur. 
B) No effort is made to record the Cost of Goods Sold until year-end. 
C) Entries are made in the Cost of Goods Sold account whenever merchandise is purchased or sold. 
D) The need for ever taking physical inventory is eliminated.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Purchase Discounts Lost is shown as a reduction of cost of goods sold in the income statement.

Accepted Answer

A) True 
 B)False

Question 12

Parkside Pool reports net sales of $625,000,gross profit of $275,000,and net income of $15,000.The company's cost of goods sold is:

Accepted Answer

A) $335,000. 
B) $350,000. 
C) $340,000. 
D) $325,000. 
A) $335,000. 
B) $350,000. 
C) $340,000. 
D) $325,000.

Question 13

A perpetual inventory system requires the capability of recording the cost of the goods sold for individual sales transaction.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following factors would suggest the use of a periodic inventory system?

Accepted Answer

A) A small company. 
B) A high volume of sales and a manual accounting system. 
C) Neither a small company nor a high volume of sales and a manual accounting system. 
D) Both a small company and a high volume of sales and a manual accounting system. 
A) A small company. 
B) A high volume of sales and a manual accounting system. 
C) Neither a small company nor a high volume of sales and a manual accounting system. 
D) Both a small company and a high volume of sales and a manual accounting system.

Question 15

Periodic inventory system
Armstrong Creation uses a periodic inventory system.During the current year,the company purchased merchandise at a cost of $245,000.You are to compute the cost of goods sold under each of the following alternative assumptions:

Accepted Answer

The answer of Periodic inventory system
Armstrong Creation uses a periodic...

Question 16

In comparing a perpetual inventory system with a periodic inventory system,which of the following statements is not correct?

Accepted Answer

A) Most large companies use perpetual inventory systems. 
B) A periodic system does not include an inventory subsidiary ledger. 
C) The perpetual method is easier to apply in a manual accounting system. 
D) Regardless of the system in use,most businesses take a physical inventory at least once a year. 
A) Most large companies use perpetual inventory systems. 
B) A periodic system does not include an inventory subsidiary ledger. 
C) The perpetual method is easier to apply in a manual accounting system. 
D) Regardless of the system in use,most businesses take a physical inventory at least once a year.

Question 17

Today,most large merchandising companies use a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Emerald Co.uses a perpetual inventory system and records purchases of merchandise at net cost.The company recently purchased 200 compact discs at an invoice price of $6,000 and terms of 2/10,n/30.Half of these discs had been mislabeled and were returned immediately to the supplier.The journal entry to record payment of this invoice after the discount period has expired will include a:

Accepted Answer

A) Debit to Inventory for $3,000. 
B) Credit to Cash for $3,000. 
C) Debit to an expense account for $60. 
D) Credit to Cash for $2,940. 
A) Debit to Inventory for $3,000. 
B) Credit to Cash for $3,000. 
C) Debit to an expense account for $60. 
D) Credit to Cash for $2,940.

Question 20

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.

Exam 6: Merchandising Activities

The credit term 2/10,n/30 means:

If a company records a purchase at the net cost and then fails to take advantage of the discount,the discount not taken is recorded in the Interest Expense account.

In preparing monthly bills to be sent to individual credit customers,the billing department will use the accounts payable subsidiary ledger,rather than the general ledger.

Inventory is a relatively liquid asset and usually appears above Accounts Receivable on the balance sheet.

If sales discounts are shown as a separate item in financial statements,they should be shown as a(n):

The gross profit margin:

Inventory systems Briefly distinguish between a perpetual inventory system and a periodic inventory system.

In a perpetual inventory system:

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

Purchase Discounts Lost is shown as a reduction of cost of goods sold in the income statement.

Parkside Pool reports net sales of $625,000,gross profit of $275,000,and net income of $15,000.The company's cost of goods sold is:

A perpetual inventory system requires the capability of recording the cost of the goods sold for individual sales transaction.

Which of the following factors would suggest the use of a periodic inventory system?

Periodic inventory system Armstrong Creation uses a periodic inventory system.During the current year,the company purchased merchandise at a cost of $245,000.You are to compute the cost of goods sold under each of the following alternative assumptions:

In comparing a perpetual inventory system with a periodic inventory system,which of the following statements is not correct?

Today,most large merchandising companies use a perpetual inventory system.

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?

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:

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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