Financial Accounting Fundamentals 7th Edition By Wild – Test Bank
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Sample Questions
Financial Accounting Fundamentals, 7e (Wild)
Chapter 4 Accounting for Merchandising Operations
1) Merchandise inventory refers to products that a company owns
and plans to sell to customers.
2) A service company earns net income by buying and selling
merchandise.
3) Gross profit is also called gross margin.
4) Cost of goods sold is also called cost of sales.
5) A wholesaler buys products from manufacturers or other
wholesalers and sells them to consumers.
6) A retailer buys products from manufacturers and sells them to
wholesalers.
7) Cost of goods sold represents the expense of buying and
preparing merchandise for sale.
8) A company had sales of $350,000 and cost of goods sold of
$200,000. Its gross profit equals $150,000.
9) A company had net sales of $545,000 and cost of goods sold of
$345,000. Its gross margin equals $890,000.
10) A company had a gross profit of $300,000 based on sales of
$400,000. Its cost of goods sold equals $700,000.
11) A merchandising company’s operating cycle begins with the
purchase of merchandise and ends with the collection of cash from the sale.
12) Merchandise inventory is reported in the long-term assets
section of the balance sheet.
13) Cash sales shorten the operating cycle for a merchandiser;
credit sales lengthen operating cycles.
14) Cost of goods sold is an expense, and is reported on the
income statement.
15) A periodic inventory system requires updating of the
inventory account only at the beginning of an accounting period.
16) A perpetual inventory system continually updates accounting
records for merchandising transactions.
17) Beginning inventory plus net purchases equals merchandise
available for sale.
18) The acid-test ratio is also called the quick ratio.
19) Quick assets include cash and cash equivalents, inventory,
and current receivables.
20) The acid-test ratio is defined as current assets divided by
current liabilities.
21) A company with an acid-test ratio of 4.1 is unlikely to face
near-term liquidity problems.
22) Successful use of a just-in-time inventory system can narrow
the gap between the acid-test and the current ratio.
23) A company’s quick assets are $147,000 and its current
liabilities are $143,000. This company’s acid-test ratio is 1.03.
24) A company’s current ratio is 1.2 and its quick ratio is
0.25. This company is probably an excellent credit risk because the ratios
reveal no indication of liquidity problems.
25) The gross margin ratio is defined as gross margin divided by
net sales.
26) The profit margin ratio is the same as the gross profit
ratio.
27) A company had net sales of $340,500, its cost of goods sold
was $257,000, and its net income was $13,750. The company’s gross margin ratio
equals 24.5%.
28) The Merchandise Inventory account balance at the beginning
of the current period is equal to the amount of ending Merchandise Inventory
from the previous period.
29) Credit terms for a purchase include the amounts and timing
of payments from a buyer to a seller.
30) Purchase returns refer to merchandise a buyer purchases but
then returns to the seller.
31) Purchase allowances refer to merchandise a buyer acquires
but then returns to the seller.
32) Purchase allowances refer to a price reduction (allowance)
granted to a buyer of defective or unacceptable merchandise.
33) Under the perpetual inventory system, the cost of
merchandise purchased is recorded in the Merchandise Inventory account.
34) Credit terms of 2/10, n/30 imply that the seller offers the
purchaser a 2% cash discount if the amount is paid within 10 days of the
invoice date. Otherwise, the full amount is due in 30 days.
35) Sellers always offer a discount to buyers for prompt payment
toward purchases made on credit.
36) Purchase discounts are the same as trade discounts.
37) If a company sells merchandise with credit terms 2/10 n/60,
the credit period is 10 days and the discount period is 60 days.
38) The seller is responsible for paying shipping charges and
bears the risk of damage or loss in transit if goods are shipped FOB
destination.
39) If goods are shipped FOB destination, the seller does not
record revenue from the sale until the goods arrive at their destination
because the transaction is not complete until that point.
40) If goods are shipped FOB shipping point, the seller does not
record revenue from the sale until the goods arrive at their destination
because the transaction is not complete until that point.
41) A buyer using a perpetual inventory system records the costs
of shipping merchandise it purchases in a Delivery Expense account.
42) A buyer of $5,000 in merchandise inventory does not take
advantage of a supplier’s credit terms of 2/10, n/30, and instead pays the
invoice in full at the end of 30 days. The buyer will pay $4,900.
43) FOB shipping point means that the buyer accepts ownership
when the goods arrive at the buyer’s place of business.
44) Each sales transaction for a seller that uses a perpetual
inventory system involves recognizing both revenue and cost of merchandise
sold.
45) Offering sales discounts on credit sales can benefit a
seller by decreasing the delay in receiving cash and reducing future
collections efforts.
46) Sales Discounts is added to the Sales account when computing
a company’s net sales.
47) Sales discounts has a normal debit balance because it
decreases Sales, which has a normal credit balance.
48) Under a perpetual inventory system, when a credit customer
returns non-defective merchandise to the seller, the seller debits Sales
Returns and Allowances and credits Accounts Receivable and also debits
Merchandise Inventory and credits Cost of Goods Sold.
49) The perpetual system requires that each sale of merchandise
has two entries: the revenue side and the cost side.
50) A journal entry with a debit to cash of $980, a debit to
Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means
that a customer has taken a 10% cash discount for early payment.
51) Sales of $350,000 and net sales of $323,000 could reflect
sales discounts of $27,000.
52) A perpetual inventory system is able to directly measure and
monitor inventory shrinkage and there is no need for a physical count of
inventory.
53) Sales Discounts and Sales Returns and Allowances are contra
revenue accounts that are debited to close the accounts during the closing
process.
54) Cost of Goods Sold is debited to close the account during the
closing process.
55) In a perpetual inventory system, the Merchandise Inventory
account must be closed at the end of the accounting period.
56) The adjusting entry to reflect inventory shrinkage is a
debit to Income Summary and a credit to Inventory Shrinkage Expense.
57) A multiple-step income statement format shows detailed
computations of net sales and other costs and expenses, and reports subtotals
for various classes of items.
58) Operating expenses are classified into two categories:
selling expenses and cost of goods sold.
59) A merchandiser’s classified balance sheet reports
merchandise inventory as a current asset.
60) Expenses related to accounting, human resource management,
and financial management are known as selling expenses.
61) When a company has no reportable non-operating activities,
its income from operations is simply labeled net income.
62) A single-step income statement includes cost of goods sold
as another expense and shows only one subtotal for total expenses.
63) Under a periodic inventory system, purchases, purchases
returns and allowances, purchase discounts, and transportation-in transactions
are recorded in the Merchandise Inventory account.
64) The periodic inventory system requires updating the inventory
account only at the end of the period.
65) In a periodic inventory system, cost of goods sold is
recorded as each sale occurs.
66) Under both the periodic and perpetual inventory systems, the
temporary account Purchases Returns and Allowances is used to accumulate the
cost of all returns and allowances for a period.
67) Delivery expense is reported as part of general and
administrative expense in the seller’s income statement.
68) New revenue recognition rules require that sellers report sales
net of expected sales discounts.
69) Under new revenue recognition rules, the gross method
requires a period-end adjusting entry to estimate future sales discounts.
70) Inventory Returns Estimated, which reflects an adjustment to
inventory for expected future returns, is a liability account reported in the
balance sheet, usually under Current Liabilities.
71) Inventory Returns Estimated is a current asset account used
in a period-end adjusting entry to reflect the inventory estimated to be returned
in the future.
72) Under the net method, when a company uses a perpetual
inventory system, an invoice for $2,000 with terms of 2/10, n/30 should be
recorded with a debit to Merchandise Inventory and a credit to Accounts Payable
of $2,000.
73) When purchases are recorded at net amounts, any discounts
lost as a result of late payments are reported as an expense.
74) The net method records the invoice at its net amount (net of
any cash discount).
75) Either the gross method or net method may be used to record
sales with cash discounts, but the net method requires a period-end adjusting
entry to estimate expected future sales discounts taken.
76) Under the net method of recording purchases, the Discounts
Lost account is used when the purchaser fails to take a discount offered by the
seller.
77) A merchandiser:
1. A)
Earns net income by buying and selling merchandise.
2. B)
Receives fees only in exchange for services.
3. C)
Earns profit from commissions only.
4. D)
Earns profit from fares only.
5. E)
Buys products from consumers.
78) Cost of goods sold:
1. A) Is
another term for merchandise sales.
2. B) Is
the term used for the expense of buying and preparing merchandise for sale.
3. C) Is
another term for revenue.
4. D) Is
also called gross margin.
5. E) Is
a term only used by service firms.
79) A company has sales of $695,000 and cost of goods sold of
$278,000. Its gross profit equals:
1. A)
$(417,000).
2. B)
$695,000.
3. C)
$278,000.
4. D)
$417,000.
5. E)
$973,000.
80) A company has sales of $375,000 and its gross profit is
$157,500. Its cost of goods sold equals:
1. A)
$(217,000).
2. B)
$375,000.
3. C)
$157,500.
4. D)
$217,500.
5. E)
$532,500.
81) Which of the following statements regarding gross profit is
not true?
1. A)
Gross profit is also called gross margin.
2. B)
Gross profit less other operating expenses equals income from operations.
3. C)
Gross profit is not calculated on the multiple-step income statement.
4. D)
Gross profit must cover all operating expenses to yield a return for the
owner(s) of the business.
5. E)
Gross profit equals net sales less cost of goods sold.
82) Which of the following statements regarding merchandise
inventory is not true?
1. A)
Merchandise inventory is reported on the balance sheet as a current asset.
2. B)
Merchandise inventory refers to products a company owns and intends to sell.
3. C)
Merchandise inventory may include the costs of freight-in and making them ready
for sale.
4. D)
Merchandise inventory appears on the balance sheet of a service company.
5. E)
Purchasing merchandise inventory is part of the operating cycle for a business.
83) Which of the following statements regarding the operating
cycle of a merchandising company is not true?
1. A)
The operating cycle begins with the purchase of merchandise.
2. B)
The operating cycle is shortened by credit sales.
3. C)
The operating cycle ends with the collection of cash from the sale of
merchandise.
4. D)
The operating cycle can vary in length among different merchandising companies.
5. E)
The operating cycle sometimes involves accounts receivable.
84) Merchandise inventory:
1. A) Is
a long-term asset.
2. B) Is
a current asset.
3. C)
Includes supplies the company will use in future periods.
4. D) Is
classified with investments on the balance sheet.
5. E)
Must be sold within one month.
85) The operating cycle for a merchandiser that sells only for
cash moves from:
1. A)
Purchases of merchandise to inventory to cash sales.
2. B)
Purchases of merchandise to inventory to accounts receivable to cash sales.
3. C)
Inventory to purchases of merchandise to cash sales.
4. D)
Accounts receivable to purchases of merchandise to inventory to cash sales.
5. E)
Accounts receivable to inventory to cash sales.
86) The current period’s ending inventory is:
1. A)
The next period’s beginning inventory.
2. B)
The current period’s cost of goods sold.
3. C)
The prior period’s beginning inventory.
4. D)
The current period’s net purchases.
5. E)
The current period’s beginning inventory.
87) Beginning inventory plus net purchases is:
1. A)
Cost of goods sold.
2. B)
Merchandise (goods) available for sale.
3. C)
Ending inventory.
4. D) Sales.
5. E)
Shown on the balance sheet.
88) The acid-test ratio:
1. A) Is
also called the quick ratio.
2. B)
Measures profitability.
3. C)
Measures inventory turnover.
4. D) Is
generally greater than the current ratio.
5. E)
Measures return on assets.
89) Quick assets are defined as:
1. A)
Cash, short-term investments, and inventory.
2. B)
Cash, short-term investments, and current receivables.
3. C)
Cash, inventory, and current receivables.
4. D)
Cash, noncurrent receivables, and prepaid expenses.
5. E)
Accounts receivable, inventory, and prepaid expenses.
90) KLM Corporation’s quick assets are $5,888,000, its current
assets are $11,700,000 and its current liabilities are $8,000,000. Its
acid-test ratio equals:
1. A)
0.50.
2. B)
0.68.
3. C)
0.74.
4. D)
1.50.
5. E)
2.20.
91) A company’s current assets are $17,980, its quick assets are
$11,420 and its current liabilities are $12,190. Its quick ratio equals:
1. A)
0.94.
2. B)
1.07.
3. C)
1.48.
4. D)
1.57.
5. E)
2.40.
92) Liquidity problems are likely to exist when a company’s
acid-test ratio:
1. A) Is
less than the current ratio.
2. B)
Equals 1.
3. C) Is
higher than 1.
4. D) Is
substantially lower than 1.
5. E) Is
higher than the current ratio.
93) The acid-test ratio differs from the current ratio in that:
1. A)
Liabilities are divided by current assets.
2. B)
Prepaid expenses and inventory are excluded from the calculation of the
acid-test ratio.
3. C)
The acid-test ratio measures profitability and the current ratio does not.
4. D)
The acid-test ratio excludes short-term investments from the calculation.
5. E)
The acid-test ratio is a measure of liquidity but the current ratio is not.
94) Using the following year-end information for Calvin’s
Clothing, calculate the current ratio and acid-test ratio for the business:
|
Cash |
$ |
52,000 |
|
Short-term investments |
|
12,000 |
|
Accounts receivable |
|
54,000 |
|
Inventory |
|
325,000 |
|
Prepaid expenses |
|
17,500 |
|
Accounts payable |
|
106,500 |
|
Other current payables |
|
25,000 |
1. A)
1.80 and 1.00
2. B)
1.97 and 1.52
3. C)
2.73 and 1.52
4. D)
3.50 and 0.90
5. E)
1.80 and 0.90
95) The gross margin ratio:
1. A) Is
also called the net profit ratio.
2. B)
Indicates the percent of sales revenue remaining after covering the cost of the
goods sold.
3. C) Is
also called the profit margin.
4. D) Is
a measure of liquidity and should exceed 2.0 to be acceptable.
5. E)
Should be greater than 1 for merchandising companies.
96) A company’s gross profit (or gross margin) was $83,750 and
its net sales were $347,800. Its gross margin ratio is:
4. A)
4.2%.
5. B)
24.1%.
6. C)
75.9%.
7. D)
$83,750.
8. E)
$264,050.
97) A company’s net sales were $676,600, its cost of goods sold
was $236,810 and its net income was $33,750. Its gross margin ratio equals:
1. A)
5%.
2. B)
9.6%.
3. C)
35%.
4. D)
65%.
5. E)
285.7%.
98) A company had net sales of $752,000 and cost of goods sold
of $543,000. Its net income was $17,530. The company’s gross margin ratio
equals:
18.
A) 18.9%
19.
B) 24.5%
20.
C) 27.8%
21.
D) 34.7%
22.
E) 35.2%
99) Mega Skateboard Supplier had net sales of $2.8 million, its
cost of goods sold was $1.6 million, and its net income was $0.9 million. Its
gross margin ratio equals:
1. A)
32%.
2. B)
175%.
3. C)
43%.
4. D)
57%.
5. E)
56%.
100) The credit terms 2/10, n/30 are interpreted as:
1. A) 2%
cash discount if the amount is paid within 10 days, or the balance due in 30
days.
2. B)
10% cash discount if the amount is paid within 2 days, or the balance due in 30
days.
3. C)
30% discount if paid within 2 days.
4. D)
30% discount if paid within 10 days.
5. E) 2%
discount if paid within 30 days.
101) A trade discount is:
1. A) A
term used by a purchaser to describe a cash discount given to customers for
prompt payment.
2. B) A
reduction in selling price below the list price.
3. C) A
term used by a seller to describe a cash discount granted to customers for
prompt payment.
4. D) A
reduction in price for prompt payment.
5. E)
Also called a rebate.
102) Jasper Company is a wholesaler that buys merchandise in
large quantities. Its supplier’s catalog indicates a list price of $500 per
unit on merchandise Jasper intends to purchase, and offers a 30% trade discount
for large quantity purchases. The cost of shipping for the merchandise is $7
per unit. Jasper’s total purchase price per unit will be:
507.
A) $507.
508.
B) $350.
509.
C) $357.
510.
D) $343.
511.
E) $493.
103) Fragment Company is a wholesaler that sells merchandise in
large quantities. Its catalog indicates a list price of $300 per unit on a
particular product and a 40% trade discount is offered for quantity purchases
of 50 units or more. The cost of shipping the merchandise is $7 per unit under
terms FOB shipping point. If a customer purchases 100 units of this product,
what is the amount of sales revenue that Fragment will record from this sale?
1. A)
$18,000
2. B)
$30,000
3. C)
$18,700
4. D)
$29,300
5. E)
$30,700
104) The amount recorded for merchandise inventory includes all
of the following except:
1. A)
Purchase discounts.
2. B)
Returns and allowances.
3. C)
Freight costs paid by the buyer.
4. D)
Freight costs paid by the seller.
5. E)
Trade discounts.
105) A company uses the perpetual inventory
system and recorded the following entry:
|
Accounts Payable |
2,500 |
|
|
Merchandise Inventory |
|
50 |
|
Cash |
|
2,450 |
This entry reflects a:
1. A)
Purchase of merchandise on credit.
2. B)
Return of merchandise.
3. C)
Sale of merchandise on credit.
4. D)
Payment of the account payable less a 2% cash discount taken.
5. E)
Payment of the account payable less a 1% cash discount taken.
106) Which of the following is not included on a purchase
invoice?
1. A)
Seller’s name and address.
2. B)
Name and address of the purchaser.
3. C)
Description of items purchased.
4. D)
Arrival date of items ordered.
5. E)
Credit terms.
107) A company purchased $1,800 of merchandise on July 5 with
terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 8,
it paid the full amount due. The amount of the cash paid on July 8 equals:
200.
A) $200.
201.
B) $1,564.
202.
C) $1,568.
203.
D) $1,600.
204.
E) $1,800.
108) A company purchased $1,800 of merchandise on July 5 with
terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28,
it paid the full amount due. The amount of the cash paid on July 28 equals:
200.
A) $200.
201.
B) $1,564.
202.
C) $1,568.
203.
D) $1,600.
204.
E) $1,800.
109) A company purchased $1,800 of merchandise on July 5 with
terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28,
it paid the full amount due. Assuming the company uses a perpetual inventory
system, and records purchases using the gross method,
The correct journal entry to record the purchase on July 5 is:
600.
A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
601.
B) Debit Merchandise Inventory $1,800; credit Accounts Payable
$1,800.
602.
C) Debit Merchandise Inventory $1,800; credit Sales Returns
$200; credit Cash $1,600.
603.
D) Debit Accounts Payable $1,800; credit Merchandise Inventory
$1,800.
604.
E) Debit Accounts Payable $1,800; credit Purchase Returns $200;
credit Merchandise Inventory $1,600.
110) A company purchased $1,800 of merchandise on July 5 with
terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28,
it paid the full amount due. Assuming the company uses a perpetual inventory
system, and records purchases using the gross method,
the correct journal entry to record the merchandise return on July 7 is:
600.
A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
601.
B) Debit Merchandise Inventory $200; credit Accounts Payable
$200.
602.
C) Debit Merchandise Inventory $200; credit Sales Returns $200.
603.
D) Debit Accounts Payable $200; credit Merchandise Inventory
$200.
604.
E) Debit Accounts Payable $1,800; credit Purchase Returns $200;
credit Merchandise Inventory $1,600.
111) A company purchased $1,800 of merchandise on July 5 with
terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28,
it paid the full amount due. Assuming the company uses a perpetual inventory
system, and records purchases using the gross method,
the correct journal entry to record the payment on July 28 is:
600.
A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
601.
B) Debit Cash $1,600; credit Accounts Payable $1,600.
602.
C) Debit Accounts Payable $1,600; credit Merchandise Inventory
$32; credit Cash $1,568.
603.
D) Debit Accounts Payable $1,800; credit Cash $1,800.
604.
E) Debit Accounts Payable $1,600; credit Cash $1,600.
112) A company purchased $1,800 of merchandise on July 5 with
terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 12,
it paid the full amount due. Assuming the company uses a perpetual inventory
system, and records purchases using the gross method,
the correct journal entry to record the payment on July 12 is:
600.
A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
601.
B) Debit Cash $1,600; credit Accounts Payable $1,600.
602.
C) Debit Accounts Payable $1,600; credit Merchandise Inventory
$32; credit Cash $1,568.
603.
D) Debit Accounts Payable $1,800; credit Cash $1,800.
604.
E) Debit Accounts Payable $1,600; credit Cash $1,600.
113) A company purchased $4,000 worth of merchandise.
Transportation costs were an additional $350. The company returned $275 worth
of merchandise and then paid the invoice within the 2% cash discount period.
The total cost of this merchandise is:
725.
A) $3,725.00.
726.
B) $3,925.00.
727.
C) $3,995.00.
728.
D) $4,000.50.
729.
E) $4,075.00.
114) A buyer of $7,000 in merchandise inventory failed to take
advantage of the vendor’s credit terms of 2/15, n/45, and instead paid the
invoice in full at the end of 45 days. By not taking advantage of the cash
discount, the buyer lost the discount of:
70.
A) $70.
71.
B) $1,050.
72.
C) $700.
73.
D) $100.
74.
E) $140.
115) Sales returns:
1. A)
Refer to merchandise that customers return to the seller after the sale.
2. B)
Refer to reductions in the selling price of merchandise sold to customers.
3. C)
Represent cash discounts.
4. D)
Represent trade discounts.
5. E)
Are not recorded under the perpetual inventory system until the end of each
accounting period.
116) Which of the following statements regarding sales returns
and allowances is not true?
1. A) A
reduction in the selling price because of damaged merchandise is included in
sales returns and allowances.
2. B)
Sales returns and allowances do not have an impact on gross profit.
3. C)
Sales returns and allowances are recorded in a separate contra-revenue account.
4. D)
Sales returns and allowances are rarely disclosed in published financial
statements.
5. E)
Sales returns and allowances are closed to the Income Summary account.
117) A debit to Sales Returns and Allowances and a credit to
Accounts Receivable:
1. A)
Reflects an increase in amount due from a customer.
2. B)
Recognizes that a customer returned merchandise and/or received an allowance.
3. C)
Records the cost side of a sales return.
4. D) Is
recorded when a customer takes a discount.
5. E)
Reflects a decrease in amount due to a supplier.
118) Sales less sales discounts, less sales returns and
allowances equals:
1. A)
Net purchases.
2. B)
Cost of goods sold.
3. C)
Net sales.
4. D)
Gross profit.
5. E)
Net income.
119) Garza Company had sales of $135,000, sales discounts of
$2,000, and sales returns of $3,200. Garza Company’s net sales equals:
200.
A) $5,200.
201.
B) $129,800.
202.
C) $133,000.
203.
D) $135,000.
204.
E) $140,200.
120) On May 1, Shilling Company sold merchandise in the amount
of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items
sold is $4,000. Shilling uses the perpetual inventory
system and the gross method.
The journal entry or entries that Shilling will make on May 1 is (are):
A)
|
Sales |
5,800 |
|
|
Accounts receivable |
|
5,800 |
B)
|
Sales |
5,800 |
|
|
Accounts receivable |
|
5,800 |
|
Cost of goods sold |
4,000 |
|
|
Merchandise Inventory |
|
4,000 |
C)
|
Accounts receivable |
5,800 |
|
|
Sales |
|
5,800 |
D)
|
Accounts receivable |
5,800 |
|
|
Sales |
|
5,800 |
|
Cost of goods sold |
4,000 |
|
|
Merchandise Inventory |
|
4,000 |
E)
|
Accounts receivable |
4,000 |
|
|
Sales |
|
4,000 |
121) On May 1, Anders Company purchased merchandise in the
amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses
the perpetual inventory
system and the gross method.
The journal entry that Anders will make on May 1 is:
A)
|
Sales |
5,800 |
|
|
Accounts receivable |
|
5,800 |
B)
|
Merchandise Inventory |
5,800 |
|
|
Accounts payable |
|
5,800 |
C)
|
Accounts payable |
5,800 |
|
|
Sales |
|
5,800 |
D)
|
Merchandise Inventory |
5,800 |
|
|
Cash |
|
5,800 |
E)
|
Purchases |
5,800 |
|
|
Accounts payable |
|
5,800 |
122) On February 3, Smart Company sold merchandise in the amount
of $5,800 to Truman Company, with credit terms of 2/10, n/30. The cost of the
items sold is $4,000. Smart uses the perpetual inventory
system and the gross method.
Truman pays the invoice on February 8, and takes the appropriate discount. The
journal entry that Smart makes on February 8 is:
A)
|
Cash |
5,800 |
|
|
Accounts receivable |
|
5,800 |
B)
|
Cash |
4,000 |
|
|
Accounts receivable |
|
4,000 |
C)
|
Cash |
3,920 |
|
|
Sales discounts |
80 |
|
|
Accounts receivable |
|
4,000 |
D)
|
Cash |
5,684 |
|
|
Accounts receivable |
|
5,684 |
E)
|
Cash |
5,684 |
|
|
Sales discounts |
116 |
|
|
Accounts receivable |
|
5,800 |
123) On July 1, Ferguson Company sold merchandise in the amount
of $5,800 to Tracey Company, with credit terms of 2/10, n/30. The cost of the
items sold is $4,000. Ferguson uses the perpetual inventory
system and the gross method.
On July 5, Tracey returns some of the merchandise. The selling price of the
merchandise is $500 and the cost of the merchandise returned is $350. The entry
or entries that Ferguson must make on July 5 is (are):
A)
|
Sales returns and allowances |
500 |
|
|
Accounts receivable |
|
500 |
|
Merchandise inventory |
350 |
|
|
Cost of goods sold |
|
350 |
B)
|
Sales returns and allowances |
500 |
|
|
Accounts receivable |
|
500 |
C)
|
Accounts receivable |
500 |
|
|
Sales returns and allowances |
|
500 |
D)
|
Accounts receivable |
500 |
|
|
Sales returns and allowances |
|
500 |
|
Cost of goods sold |
350 |
|
|
Merchandise inventory |
|
350 |
E)
|
Sales returns and allowances |
350 |
|
|
Accounts receivable |
|
350 |
124) Juniper Company uses a perpetual inventory system and
the gross method
of accounting for purchases. The company purchased $9,750 of merchandise on
August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of
merchandise. On August 16, it paid the full amount due. The amount of the cash
paid on August 16 equals:
167.
A) $8,167.50.
168.
B) $9,652.50.
169.
C) $9,750.00.
170.
D) $8,250.00.
171.
E) $8,152.50.
125) Juniper Company uses a perpetual inventory system and
the gross method
of accounting for purchases. The company purchased $9,750 of merchandise on
August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of
merchandise. On August 26, it paid the full amount due. The amount of the cash
paid on August 26 equals:
167.
A) $8,167.50.
168.
B) $9,652.50.
169.
C) $9,750.00.
170.
D) $8,250.00.
171.
E) $8,152.50.
126) Juniper Company uses a perpetual inventory system and
the gross method
of accounting for purchases. The company purchased $9,750 of merchandise on
August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of
merchandise. On August 16, it paid the full amount due. The correct journal
entry to record the purchase on August 7 is:
750.
A) Debit Merchandise Inventory $9,750; credit Cash $9,750.
751.
B) Debit Accounts Payable $9,750; credit Merchandise Inventory
$9,750.
752.
C) Debit Merchandise Inventory $9,750; credit Sales Returns $1,500;
credit Cash $8,250.
753.
D) Debit Merchandise Inventory $9,750; credit Accounts Payable
$9,750.
754.
E) Debit Accounts Payable $8,250; debit Purchase Returns $1,500;
credit Merchandise Inventory $9,750.
127) Juniper Company uses a perpetual inventory system and
the gross method
of accounting for purchases. The company purchased $9,750 of merchandise on
August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of
merchandise. On August 26, it paid the full amount due. The correct journal
entry to record the merchandise return on August 11 is:
500.
A) Debit Accounts Payable $1,500; credit Cash $1,500.
501.
B) Debit Accounts Payable $1,500; credit Merchandise Inventory
$1,500.
502.
C) Debit Merchandise Inventory $1,500; credit Sales Returns
$1,500.
503.
D) Debit Merchandise Inventory $1,500; credit Cash $1,500.
504.
E) Debit Accounts Payable $1,500; credit Purchase Returns
$1,500.
128) Juniper Company uses a perpetual inventory system and
the gross method
of accounting for purchases. The company purchased $9,750 of merchandise on
August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of
merchandise. On August 16, it paid the full amount due. The correct journal
entry to record the payment on August 16 is:
250.
A) Debit Merchandise Inventory $8,250; credit Cash $8,250.
251.
B) Debit Cash $8,250; credit Accounts Payable $8,250.
252.
C) Debit Accounts Payable $8,250; credit Merchandise Inventory
$82.50; credit Cash $8,167.50.
253.
D) Debit Accounts Payable $9,750; credit Merchandise Inventory
$97.50; credit Cash $9,652.50.
254.
E) Debit Accounts Payable $8,167.50; credit Cash $8,167.50.
129) A company records the following journal entry: debit Cash
$1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This
means that a customer has taken what percentage cash discount for early
payment?
1. A) 1%
2. B) 2%
3. C) 5%
4. D)
10%
5. E)
15%
130) Which of the following statements regarding inventory
shrinkage is not true?
1. A)
Inventory shrinkage refers to the loss of inventory.
2. B)
Inventory shrinkage is determined by comparing a physical count of inventory
with recorded inventory amounts.
3. C)
Inventory shrinkage is recognized by debiting an operating expense.
4. D)
Inventory shrinkage is recognized by debiting Cost of Goods Sold.
5. E)
Inventory shrinkage can be caused by theft or deterioration.
131) Frisco Company’s Merchandise Inventory account at year-end
has a balance of $62,115, but a physical count reveals that only $61,900 of
inventory exists. The adjusting entry to record this $215 of inventory
shrinkage is:
A)
|
Merchandise Inventory |
215 |
|
|
Inventory shrinkage expense |
|
215 |
B)
|
Purchases discounts |
215 |
|
|
Cost of goods sold |
|
215 |
C)
|
Cost of goods sold |
215 |
|
|
Purchases discounts |
|
215 |
D)
|
Inventory shrinkage expense |
215 |
|
|
Cost of goods sold |
|
215 |
E)
|
Cost of goods sold |
215 |
|
|
Merchandise Inventory |
|
215 |
132) Which of the following accounts would be closed at the end
of the accounting period with a debit?
1. A)
Sales Discounts.
2. B)
Sales Returns and Allowances.
3. C)
Cost of Goods Sold.
4. D) Operating
Expenses.
5. E)
Sales.
133) An income statement that includes cost of goods sold as
another expense and shows only one subtotal for total expenses is a:
1. A)
Balanced income statement.
2. B)
Single-step income statement.
3. C)
Multiple-step income statement.
4. D)
Combined income statement.
5. E)
Simplified income statement.
134) Expenses that support the overall operations of a business
and include the expenses relating to accounting, human resource management, and
financial management are called:
1. A) Cost
of goods sold.
2. B)
Selling expenses.
3. C)
Purchasing expenses.
4. D)
General and administrative expenses.
5. E)
Non-operating activities.
135) Prentice Company had cash sales of $94,275, credit sales of
$83,450, sales returns and allowances of $1,700, and sales discounts of $3,475.
Prentice’s net sales for this period equal:
275.
A) $94,275.
276.
B) $172,550.
277.
C) $174,250.
278.
D) $176,025.
279.
E) $177,725.
136) Multiple-step income statements:
1. A)
Are required by the FASB and IASB.
2. B)
Contain more detail than a simple listing of revenues and expenses.
3. C)
Are required for the periodic inventory system.
4. D)
List cost of goods sold as an operating expense.
5. E)
Are only used in perpetual inventory systems.
137) Expenses to promote sales by displaying and advertising
merchandise, make sales, and deliver goods to customers are known as:
1. A)
General and administrative expenses.
2. B)
Cost of goods sold.
3. C)
Selling expenses.
4. D)
Purchasing expenses.
5. E)
Non-operating activities.
138) A company has net sales of $752,000 and cost of goods sold
of $543,000. Its net income is $17,530. The company’s gross margin and
operating expenses, respectively, are:
470.
A) $209,000 and $191,470.
471.
B) $191,470 and $209,000.
472.
C) $525,470 and $227,000.
473.
D) $227,000 and $525,470.
474.
E) $734,000 and $191,470.
139) Which of the following accounts is used in the periodic inventory
system but not used in the perpetual inventory
system?
1. A)
Merchandise Inventory
2. B)
Sales
3. C)
Sales Returns and Allowances
4. D)
Accounts Payable
5. E)
Purchases
140) When preparing an unadjusted trial balance using a periodic inventory
system, the amount shown for Merchandise Inventory is:
1. A)
The ending inventory amount.
2. B)
The beginning inventory amount.
3. C)
Equal to the cost of goods sold.
4. D)
Equal to the cost of goods purchased.
5. E) Equal
to the gross profit.
141) On September 12, Vander Company sold merchandise in the
amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost
of the items sold is $4,000. Vander uses the periodic inventory system and
the gross method
of accounting for sales. The journal entry or entries that Vander will make on
September 12 is (are):
A)
|
Sales |
5,800 |
|
|
Accounts receivable |
|
5,800 |
B)
|
Sales |
5,800 |
|
|
Accounts receivable |
|
5,800 |
|
Cost of goods sold |
4,000 |
|
|
Merchandise Inventory |
|
4,000 |
C)
|
Accounts receivable |
5,800 |
|
|
Sales |
|
5,800 |
D)
|
Accounts receivable |
5,800 |
|
|
Sales |
|
5,800 |
|
Cost of goods sold |
4,000 |
|
|
Merchandise Inventory |
|
4,000 |
E)
|
Accounts receivable |
4,000 |
|
|
Sales |
|
4,000 |
142) On September 12, Vander Company sold merchandise in the
amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost
of the items sold is $4,000. Jepson uses the periodic inventory system and
the gross method
of accounting for purchases. The journal entry that Jepson will make on
September 12 is:
A)
|
Purchases |
5,800 |
|
|
Accounts receivable |
|
5,800 |
B)
|
Purchases |
4,000 |
|
|
Accounts receivable |
|
4,000 |
C)
|
Purchases |
5,800 |
|
|
Accounts payable |
|
5,800 |
D)
|
Merchandise inventory |
5,800 |
|
|
Accounts payable |
|
5,800 |
E)
|
Accounts payable |
4,000 |
|
|
Merchandise inventory |
|
4,000 |
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