Question 1

Freight in is recorded in the Merchandise Inventory account if the purchaser uses the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 2

Neighborhood Lawn Equipment uses a perpetual inventory system.Journalize the following sales transactions for this company.Explanations are not required.
May 18: Sold $26,000 of merchandise on account,credit terms are 1/10,n/30,FOB destination.Cost of goods is $15,600.
May 22: Neighborhood negotiated a $600 allowance on the goods sold on May 18.
May 24: Neighborhood paid freight of $450 on the goods sold on May 18.

Accepted Answer

The answer of Neighborhood Lawn Equipment uses a perpetual inventory...

Question 3

Both wholesalers and retailers are merchandisers.

Accepted Answer

A) True 
 B)False

Question 4

A company purchased inventory for $2,000 from a vendor on account,FOB shipping point,with terms of 3/10,n/30.The company paid the shipper $300 cash for freight in.The company then returned damaged goods worth $400.The invoice was then paid eight days after the invoice date.Assuming that there was no beginning inventory balance,the cost of inventory would be ________.(Assume a perpetual inventory system.)

Accepted Answer

A)  $1,552 
B)  $1,852 
C)  $1,700 
D)  $1,940

Question 5

The balance sheet of a merchandiser looks the same as the balance sheet of a retailer,except merchandisers have the following additional current liability accounts: Estimated Returns Inventory and Refunds Payable.

Accepted Answer

A) True 
 B)False

Question 6

Regarding the four-step closing process under the periodic inventory system,________.

Accepted Answer

A)  Purchase Returns and Allowances and Purchase Discounts accounts are closed with a credit via the Income Summary account 
B)  Sales Revenue is closed with a credit via the Income Summary account 
C)  the beginning Merchandise Inventory, Purchases, and Freight In are closed with a debit via the Income Summary account 
D)  the ending merchandise inventory balance must be recorded as a debit via the Income Summary account

Question 7

Purchase discounts are calculated on the amount of the merchandise purchased including freight costs.

Accepted Answer

A) True 
 B)False

Question 8

The trial balance for a merchandiser,before the journal entries below,is as follows.A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand.(Assume a perpetual inventory system.)
 $$\begin{array} { | l | r | r | } 
\hline &  { \text { Debit } } & { \text { Credit } } \
\hline \text { Cash } & \$ 12,600 & \
\hline \text { Accounts Receivable } & 2,400 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 30,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,000 \
\hline \text { Notes Payable } & & 800 \
\hline \text { Yung, Capital } &&13,800 \
\hline \text { Yung, Withdrawals } & 1,000  &  \
\hline \text { Sales Revenue } &  &96,000\
\hline \text { Cost of Goods Sold } &23,000& \
\hline \text { Delivery Expense } &  2,000 & \
\hline \text { Salaries Expense } & 21,000 & \
\hline \text { Rent Expense } & 14,000 & \
\hline \text { Selling Expense } &8,500  \
\hline \text { Supplies Expense }& \underline { 500 }  \
\hline \text {Total} & \$ 115,800 & \$ 115,800\
\hline
\end{array}$$ Prepare the journal entry to record the inventory shrinkage and prepare all closing entries.Omit explanations.

Accepted Answer

The answer of The trial balance for a merchandiser,before the...

Question 9

A merchandiser sold goods on account to Customer A for $8,000 with terms of 2/10,n/30.If the payment is received after the discount period,Accounts Receivable is decreased by $8,000.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following entries would be made to record the purchase of inventory on account,if a company uses the perpetual inventory system?

Accepted Answer

A)  a debit to Purchases and a credit to Accounts Payable 
B)  a debit to Accounts Payable and a credit to Purchases 
C)  a debit to Merchandise Inventory and a credit to Accounts Payable 
D)  a debit to Accounts Payable and a credit to Merchandise Inventory

Question 11

The Merchandise Inventory account is an expense account that is used only for goods purchased that the business owns and intends to resell to customers.

Accepted Answer

A) True 
 B)False

Question 12

Cost of goods available for sale represents beginning merchandise inventory plus net purchases less freight in.

Accepted Answer

A) True 
 B)False

Question 13

The purchase discount amount is calculated on the amount of the invoice minus the returns and allowances.

Accepted Answer

A) True 
 B)False

Question 14

An adjusted trial balance for a merchandiser is given below.
  Prepare the journal entry to close the revenue and other income accounts.Omit explanation.

Accepted Answer

The answer of An adjusted trial balance for a merchandiser...

Question 15

Complete Electronics Company sells a point-of-sale computer with a two-year service contract.Complete collects $2,000 cash for the selling price of the computer and $504 for the two-year service contract.How is revenue recognized?

Accepted Answer

A)  Complete will record Sales Revenue of $2,504 when the computer is delivered to the customer. 
B)  Complete will record Sales Revenue of $1,252 per year for two years. 
C)  Complete will record Sales Revenue of $2,000 when the computer is delivered and Service Revenue of $21 per month for 24 months. 
D)  Complete will record Sales Revenue of $2,000 when the computer is delivered and will record revenue for the service contract as service calls are made.

Question 16

On the income statement,a service company reports the cost of merchandise inventory that has been sold to customers.

Accepted Answer

A) True 
 B)False

Question 17

An adjusted trial balance of Meadows Company as of December 31,2019 is given below.Prepare a multi-step income statement for the year for the company.
 $$\begin{array} { | l | r | r | } 
\hline &  { \text { Debit } } & \text { Credit } \
\hline \text { Cash } & \$ 15,000 & \
\hline \text { Accounts Receivable } & 42,000 & \
\hline \text { Merchandise Inventory } & 60,000 & \
\hline \text { Supplies } & 15,000 & \
\hline \text { Land } & 300,000 & \
\hline \text { Accounts Payable } & & \$ 3,000 \
\hline \text { Notes Payable } & & 25,000 \
\hline \text { Meadows, Capital } &  & 326,000\
\hline \text { Meadows, Withdrawals } &3,000 & \
\hline \text { Sales Revenue } &  & 465,000 \
\hline \text { Cost of Goods Sold } &240,000& \
\hline \text { Salaries Expense } & 15,000 & \
\hline \text { Utilities Expense } &  69,000 & \
\hline \text { Rent Expense } & 54,000 & \
\hline \text { Interest Expense } &  \underline { 6,000 }\
\hline \text { Totals } & \$ 819,000 & \$ 819,000\
\hline
\end{array}$$

Accepted Answer

The answer of An adjusted trial balance of Meadows Company...

Question 18

Expenses that fall outside the regular operations of a business are ________.

Accepted Answer

A)  generally a substantial part of net income 
B)  recorded in the Owner, Capital account 
C)  included under the other income and expenses section of the income statement 
D)  not considered for the calculation of net income

Question 19

An amount that a business earns from selling merchandise inventory is known as sales revenue or sales.

Accepted Answer

A) True 
 B)False

Question 20

FOB destination refers to a situation where title to goods while in transit belongs to the ________.

Accepted Answer

A)  buyer 
B)  seller 
C)  transport agency 
D)  insurance agency

Exam 5: Merchandising Operations

Freight in is recorded in the Merchandise Inventory account if the purchaser uses the perpetual inventory system.

Both wholesalers and retailers are merchandisers.

The balance sheet of a merchandiser looks the same as the balance sheet of a retailer,except merchandisers have the following additional current liability accounts: Estimated Returns Inventory and Refunds Payable.

Regarding the four-step closing process under the periodic inventory system,________.

Purchase discounts are calculated on the amount of the merchandise purchased including freight costs.

A merchandiser sold goods on account to Customer A for $8,000 with terms of 2/10,n/30.If the payment is received after the discount period,Accounts Receivable is decreased by $8,000.

Which of the following entries would be made to record the purchase of inventory on account,if a company uses the perpetual inventory system?

The Merchandise Inventory account is an expense account that is used only for goods purchased that the business owns and intends to resell to customers.

Cost of goods available for sale represents beginning merchandise inventory plus net purchases less freight in.

The purchase discount amount is calculated on the amount of the invoice minus the returns and allowances.

An adjusted trial balance for a merchandiser is given below. Prepare the journal entry to close the revenue and other income accounts.Omit explanation.

Complete Electronics Company sells a point-of-sale computer with a two-year service contract.Complete collects $2,000 cash for the selling price of the computer and $504 for the two-year service contract.How is revenue recognized?

On the income statement,a service company reports the cost of merchandise inventory that has been sold to customers.

Expenses that fall outside the regular operations of a business are ________.

An amount that a business earns from selling merchandise inventory is known as sales revenue or sales.

FOB destination refers to a situation where title to goods while in transit belongs to the ________.