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Chapter 5 - Accounting for Merchandising Businesses

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Mahmoud Hemood
Quiz by Mahmoud Hemood, updated more than 1 year ago
Mahmoud Hemood
Created by Mahmoud Hemood about 6 years ago
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Question 1

Question
Merchandise inventory is classified on the balance sheet as a
Answer
  • current liability
  • current asset
  • long-term asset
  • long-term liability

Question 2

Question
What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
Answer
  • gross profit
  • income from operations
  • net income
  • gross sales

Question 3

Question
The inventory system employing accounting records that continuously disclose the amount of inventory is called
Answer
  • retail
  • periodic
  • physical
  • perpetual

Question 4

Question
Calculate the gross profit for Jefferson Company based on the following:
Image:
Capture (binary/octet-stream)
Answer
  • $495,500
  • $183,500
  • $721,500
  • $226,000

Question 5

Question
Calculate income from operations for Jonas Company based on the following data:
Image:
Capture222 (binary/octet-stream)
Answer
  • $485,500
  • $711,500
  • $173,500
  • $226,000

Question 6

Question
Gross profit is equal to
Answer
  • sales plus cost of merchandise sold
  • sales plus selling expenses
  • sales less selling expenses
  • sales less cost of merchandise sold

Question 7

Question
Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. The Pound Co. paid the invoice within the discount period. What is the sales amount to be recorded in the above transactions?
Answer
  • $25,500
  • $26,010
  • $24,990
  • $16,000

Question 8

Question
The primary difference between the periodic and perpetual inventory systems is that a
Answer
  • periodic system determines the inventory on hand only at the end of the accounting period
  • periodic system keeps a record showing the inventory on hand at all times
  • periodic system provides an easy means to determine inventory shrinkage
  • periodic system records the cost of the sale on the date the sale is made

Question 9

Question
Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a
Answer
  • credit to Customer Refunds Payable
  • debit to Merchandise Inventory
  • credit to Merchandise Inventory
  • debit to Cash

Question 10

Question
In credit terms of 3/15, n/45, the "3" represents the
Answer
  • number of days in the discount period
  • full amount of the invoice
  • number of days when the entire amount is due
  • percent of the cash discount

Question 11

Question
Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would include a
Answer
  • debit to Cash for $5,000
  • debit to Sales Discounts for $100
  • credit to Sales for $4,900
  • debit to Accounts Receivable for $4,880

Question 12

Question
Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of the sales discount allowable?
Answer
  • 260
  • 500
  • 460
  • 150

Question 13

Question
Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a
Answer
  • debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
  • debit to Cash and a credit to Sales
  • debit to Cash, credit to Credit Card Expense, and a credit to Sales
  • debit to Sales, debit to Credit Card Expense, and a credit to Cash

Question 14

Question
When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?
Answer
  • debit Accounts Payable; credit Merchandise Inventory
  • debit Merchandise Inventory; credit Accounts Payable
  • debit Merchandise Inventory; credit Cash Discounts
  • debit Merchandise Inventory; credit Purchases

Question 15

Question
Merchandise is sold for cash. The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include a credit to
Answer
  • cash for $6,000
  • sales for $6,240
  • sales tax payable for $420
  • sales for $5,580

Question 16

Question
If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as
Answer
  • FOB shipping point
  • FOB destination
  • FOB n/30
  • FOB buyer

Question 17

Question
If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as
Answer
  • FOB shipping point
  • FOB destination
  • FOB n/30
  • FOB seller

Question 18

Question
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
Answer
  • n/30
  • FOB shipping point
  • FOB destination
  • consigned

Question 19

Question
Who is responsible for the freight costs when the terms are FOB shipping point?
Answer
  • the ultimate customer
  • the buyer
  • the seller
  • either the seller or the buyer

Question 20

Question
Who is responsible for the freight cost when the terms are FOB destination?
Answer
  • the seller
  • the buyer
  • the customer
  • either the buyer or the seller

Question 21

Question
If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are
Answer
  • consigned
  • n/30
  • FOB shipping point
  • FOB destination

Question 22

Question
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
Answer
  • n/30
  • FOB shipping point
  • FOB destination
  • consigned

Question 23

Question
If merchandise sells for $3,500, with terms of 3/15, n/45 and the cost of the inventory sold is $2,100, the amount charged to sales is
Answer
  • 3395
  • 3500
  • 2037
  • 2100

Question 24

Question
Under the perpetual inventory system, all purchases of merchandise are debited to the account
Answer
  • Merchandise Inventory
  • Cost of Merchandise Sold
  • Cost of Merchandise Available for Sale
  • Purchases

Question 25

Question
When the perpetual inventory system is used, the inventory sold is debited to
Answer
  • Supplies Expense
  • Cost of Merchandise Sold
  • Merchandise Inventory
  • Sales

Question 26

Question
Under a perpetual inventory system
Answer
  • accounting records continuously disclose the amount of inventory
  • increases in inventory resulting from purchases are debited to Purchases
  • there is no need for a year-end physical count
  • the purchase returns and allowances account is credited when goods are returned to vendors

Question 27

Question
What is the major difference between a periodic and perpetual inventory system?
Answer
  • Under the periodic inventory system, the purchase of inventory will be debited to the Purchases account
  • Under the periodic inventory system, no journal entry is recorded at the time of the sale of inventory for the cost of the inventory.
  • Under the periodic inventory system, all adjustments such as purchases returns and allowances and discounts are reconciled at the end of the month.
  • All of the answers are correct.

Question 28

Question
President's salaries, depreciation of office furniture, and office supplies are
Answer
  • selling expenses
  • miscellaneous expenses
  • administrative expenses
  • inventory expenses

Question 29

Question
Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
Answer
  • selling expenses
  • general expenses
  • other expenses
  • administrative expenses

Question 30

Question
Multiple-step income statements show
Answer
  • gross profit but not income from operations
  • neither gross profit nor income from operations
  • both gross profit and income from operations
  • income from operations but not gross profit

Question 31

Question
Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
Answer
  • Merchandise Inventory
  • Accumulated Depreciation
  • Dividends
  • Cost of Merchandise Sold

Question 32

Question
Inventory shrinkage is recorded when
Answer
  • merchandise is returned by a buyer
  • merchandise purchased from a seller is incomplete or short
  • merchandise is returned to a seller
  • there is a difference between a physical count of inventory and inventory records

Question 33

Question
Where are selling and administrative expenses found on the multiple-step income statement?
Answer
  • before gross profit
  • after sales and before gross profit
  • after net income and before expenses
  • after gross profit
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