Question 1

In a periodic inventory system ________.

Accepted Answer

A)  quantities of merchandise inventory on hand are updated after each sale and each purchase 
B)  the cost to invest in the system is greater than the cost to invest in a perpetual inventory system 
C)  the business is in violation of U.S. GAAP 
D)  businesses must obtain a physical count of inventory to determine quantities on hand

Question 2

FOB destination represents a situation in which the buyer takes title to the goods after the goods leave the seller's place of business.

Accepted Answer

A) True 
 B)False

Question 3

Landon Jewelers uses the perpetual inventory system.On April 2,Landon sold merchandise with a cost of $1,500 for $7,000 to a customer on account with terms of 1/15,n/30.The journal entry to record the cost of goods sold would be:

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cost of Goods Sold } & 1,500 & \
\hline \text { Accounts Receivable } & & 1,500 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Sales Revenue } & 1,500 & \
\hline \text { Cost of Goods Sold } & & 1,500 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cost of Goods Sold } & 1,500 & \
\hline \text { Merchandise Inventory } & & 1,500 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Merchandise Inventory } & 1,500 & \
\hline \text { Cost of Goods Sold } & & 1,500 \
\hline
\end{array}$$

Question 4

For a merchandiser,the term "inventory" refers to ________.

Accepted Answer

A)  raw materials that are used for production 
B)  equipment that are used in production process 
C)  the cost of goods sold 
D)  goods held for sale to customers

Question 5

Robin Company uses a periodic inventory system.Use the following details to calculate the cost of goods sold. $$\begin{array} { | l | r | } 
\hline \text { Beginning merchandise } & \
\text { inventory } & \$ 2,000 \
\hline \text { Ending merchandise inventory } & 2,200 \
\hline \text { Purchases } & 24,000 \
\hline \text { Purchase Discounts } & 800 \
\hline \text { Purchase Returns and } & \
\text { Allowances } & 1,200  \ 
\hline \text { Freight In } &4,400\
\hline
\end{array}$$

Accepted Answer

A)  $26,000 
B)  $22,000 
C)  $26,200 
D)  $28,400

Question 6

A company purchased inventory for $2,000 from a vendor on account,FOB shipping point,with terms of 2/10,n/30.The company paid $100 cash for freight in.Prepare the journal entry to record payment of the invoice,within 10 days of the invoice date,by the purchaser.(Assume a perpetual inventory system.)Omit explanation.

Accepted Answer

The answer of A company purchased inventory for $2,000 from...

Question 7

In a periodic inventory system,the Cost of Goods Sold account is continuously updated as and when sales occur.

Accepted Answer

A) True 
 B)False

Question 8

The following information relates to Sports Bikes Company. $$\begin{array} { | l | r | } 
\hline \text { Net Sales Revenue } & \$ 203,000 \
\hline \text { Cost of Goods Sold } & 160,000 \
\hline \text { Interest Revenue } & 10,000 \
\hline \text { Operating Expenses } & 40,000 \
\hline
\end{array}$$ Calculate the operating income.

Accepted Answer

A)  $3,000 
B)  $60,000 
C)  $230,000 
D)  $13,000

Question 9

Which of the following is an account that is shown on the balance sheet for a merchandiser but not on the balance sheet of a service business?

Accepted Answer

A)  Unearned Revenue 
B)  Sales Discounts Forfeited 
C)  Estimated Returns Inventory 
D)  Cost of Goods Sold

Question 10

The Sales Revenue,Delivery Expense,and Sales Discounts Forfeited accounts will be closed via the ________ account.

Accepted Answer

A)  Income Summary 
B)  Owner, Capital 
C)  Owner, Withdrawals 
D)  Cost of Goods Sold

Question 11

When recording the sale of merchandise inventory,using a periodic inventory system,________.

Accepted Answer

A)  a running record of merchandise inventory is maintained during the accounting period 
B)  the Sales Revenue account is credited only as an adjusting entry because sales information is not needed during the accounting period 
C)  sales discounts are not recorded 
D)  there is no need to record an entry to the Merchandise Inventory and the Cost of Goods Sold accounts

Question 12

Dublin Company uses the periodic inventory system.On February 1,the company purchased inventory on account for $11,000.The terms were 4/10,n/30.On February 2,it returned damaged goods worth $500 to the supplier.Give the journal entry for the payment if the invoice is paid after the discount period.(Round your answers to the nearest dollar.)

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Payable } & 11,000 & \
\hline \text { Cash } & & 10,560 \
\hline \text { Purchase Discounts } & & 440 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 11,000 & \
\hline \text { Accounts Payable } & & 11,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 10,500 & \
\hline \text { Cash } & & 10,500 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 10,560 & \
\hline \text { Purchase Discounts } & 440 & \
\hline \text { Accounts Payable } & & 11,000 \
\hline
\end{array}$$

Question 13

A merchandiser has sales discounts forfeited of $600,cost of goods sold of $13,000,and other expenses of $4,100.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 $17,100 
B)  a credit to Income Summary for $17,700 
C)  a debit to Income Summary for $17,700 
D)  a debit to Income Summary for $4,700

Question 14

Which of the following statements is NOT correct?

Accepted Answer

A)  In a perpetual inventory system, the "cash register" at the store is a computer terminal that records sales and updates inventory records. 
B)  Even in a perpetual inventory system, a business must count inventory at least one a year. 
C)  Restaurants and small retail stores often use the periodic inventory system. 
D)  In a periodic inventory system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Question 15

A merchandiser adjusts and closes accounts differently than a service entity does.

Accepted Answer

A) True 
 B)False

Question 16

A reduction in the amount of revenue earned on sales for early payment is known as a sales discount.

Accepted Answer

A) True 
 B)False

Question 17

A company that uses the perpetual inventory system purchases inventory for $64,000 on account,with terms of 2/10,n/30.Which of the following is the journal entry to record the payment made within 10 days?

Accepted Answer

A)  a debit to Accounts Payable for $64,000, a credit to Cash for $1,280, and a credit to Merchandise Inventory for $62,720 
B)  a debit to Accounts Payable for $64,000, a credit to Merchandise Inventory for $1,280, and a credit to Cash for $62,720 
C)  a debit to Merchandise Inventory for $1,280, a debit to Accounts Payable for $64,000, and a credit to Cash for $65,280 
D)  a debit to Accounts Payable for $62,720, a debit to Merchandise Inventory for $1,280, and a credit to Cash for $64,000

Question 18

Freight in is a delivery expense to the seller.

Accepted Answer

A) True 
 B)False

Question 19

Net sales revenue is calculated by ________.

Accepted Answer

A)  subtracting cost of goods sold from sales revenue 
B)  subtracting sales discounts and selling expenses from sales revenue 
C)  adding sales discounts and sales returns and allowances to sales revenue 
D)  subtracting sales discounts and estimated sales returns and allowances from sales revenue

Question 20

Which of the following is the correct order of subtotals that appear on a multi-step income statement?

Accepted Answer

A)  Operating income, Gross profit, Net income 
B)  Gross profit, Net sales revenue, Net income 
C)  Net income, Operating income, Net income 
D)  Gross profit, Operating income, Net income

Exam 5: Merchandising Operations

In a periodic inventory system ________.

FOB destination represents a situation in which the buyer takes title to the goods after the goods leave the seller's place of business.

Landon Jewelers uses the perpetual inventory system.On April 2,Landon sold merchandise with a cost of $1,500 for $7,000 to a customer on account with terms of 1/15,n/30.The journal entry to record the cost of goods sold would be:

For a merchandiser,the term "inventory" refers to ________.

In a periodic inventory system,the Cost of Goods Sold account is continuously updated as and when sales occur.

Which of the following is an account that is shown on the balance sheet for a merchandiser but not on the balance sheet of a service business?

The Sales Revenue,Delivery Expense,and Sales Discounts Forfeited accounts will be closed via the ________ account.

When recording the sale of merchandise inventory,using a periodic inventory system,________.

A merchandiser has sales discounts forfeited of $600,cost of goods sold of $13,000,and other expenses of $4,100.The merchandiser uses a perpetual inventory system.The second entry in the closing process would include ________.

Which of the following statements is NOT correct?

A merchandiser adjusts and closes accounts differently than a service entity does.

A reduction in the amount of revenue earned on sales for early payment is known as a sales discount.

A company that uses the perpetual inventory system purchases inventory for $64,000 on account,with terms of 2/10,n/30.Which of the following is the journal entry to record the payment made within 10 days?

Freight in is a delivery expense to the seller.

Net sales revenue is calculated by ________.

Which of the following is the correct order of subtotals that appear on a multi-step income statement?