Quiz
Chapter 5 - Accounting for Merchandising Businesses
Questions in this quiz (33)
1Merchandise inventory is classified on the balance sheet as a
- Acurrent liability
- Bcurrent asset
- Clong-term asset
- Dlong-term liability
2What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
- Agross profit
- Bincome from operations
- Cnet income
- Dgross sales
3The inventory system employing accounting records that continuously disclose the amount of inventory is called
- Aretail
- Bperiodic
- Cphysical
- Dperpetual
4Calculate the gross profit for Jefferson Company based on the following:
- A$495,500
- B$183,500
- C$721,500
- D$226,000
5Calculate income from operations for Jonas Company based on the following data:
- A$485,500
- B$711,500
- C$173,500
- D$226,000
6Gross profit is equal to
- Asales plus cost of merchandise sold
- Bsales plus selling expenses
- Csales less selling expenses
- Dsales less cost of merchandise sold
7Dollar 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?
- A$25,500
- B$26,010
- C$24,990
- D$16,000
8The primary difference between the periodic and perpetual inventory systems is that a
- Aperiodic system determines the inventory on hand only at the end of the accounting period
- Bperiodic system keeps a record showing the inventory on hand at all times
- Cperiodic system provides an easy means to determine inventory shrinkage
- Dperiodic system records the cost of the sale on the date the sale is made
9Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a
- Acredit to Customer Refunds Payable
- Bdebit to Merchandise Inventory
- Ccredit to Merchandise Inventory
- Ddebit to Cash
10In credit terms of 3/15, n/45, the "3" represents the
- Anumber of days in the discount period
- Bfull amount of the invoice
- Cnumber of days when the entire amount is due
- Dpercent of the cash discount
11Merchandise 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
- Adebit to Cash for $5,000
- Bdebit to Sales Discounts for $100
- Ccredit to Sales for $4,900
- Ddebit to Accounts Receivable for $4,880
12Merchandise 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?
- A260
- B500
- C460
- D150
13Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a
- Adebit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
- Bdebit to Cash and a credit to Sales
- Cdebit to Cash, credit to Credit Card Expense, and a credit to Sales
- Ddebit to Sales, debit to Credit Card Expense, and a credit to Cash
14When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?
- Adebit Accounts Payable; credit Merchandise Inventory
- Bdebit Merchandise Inventory; credit Accounts Payable
- Cdebit Merchandise Inventory; credit Cash Discounts
- Ddebit Merchandise Inventory; credit Purchases
15Merchandise 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
- Acash for $6,000
- Bsales for $6,240
- Csales tax payable for $420
- Dsales for $5,580
16If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as
- AFOB shipping point
- BFOB destination
- CFOB n/30
- DFOB buyer
17If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as
- AFOB shipping point
- BFOB destination
- CFOB n/30
- DFOB seller
18If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
- An/30
- BFOB shipping point
- CFOB destination
- Dconsigned
19Who is responsible for the freight costs when the terms are FOB shipping point?
- Athe ultimate customer
- Bthe buyer
- Cthe seller
- Deither the seller or the buyer
20Who is responsible for the freight cost when the terms are FOB destination?
- Athe seller
- Bthe buyer
- Cthe customer
- Deither the buyer or the seller
21If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are
- Aconsigned
- Bn/30
- CFOB shipping point
- DFOB destination
22If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
- An/30
- BFOB shipping point
- CFOB destination
- Dconsigned
23If 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
- A3395
- B3500
- C2037
- D2100
24Under the perpetual inventory system, all purchases of merchandise are debited to the account
- AMerchandise Inventory
- BCost of Merchandise Sold
- CCost of Merchandise Available for Sale
- DPurchases
25When the perpetual inventory system is used, the inventory sold is debited to
- ASupplies Expense
- BCost of Merchandise Sold
- CMerchandise Inventory
- DSales
26Under a perpetual inventory system
- Aaccounting records continuously disclose the amount of inventory
- Bincreases in inventory resulting from purchases are debited to Purchases
- Cthere is no need for a year-end physical count
- Dthe purchase returns and allowances account is credited when goods are returned to vendors
27What is the major difference between a periodic and perpetual inventory system?
- AUnder the periodic inventory system, the purchase of inventory will be debited to the Purchases account
- BUnder the periodic inventory system, no journal entry is recorded at the time of the sale of inventory for the cost of the inventory.
- CUnder the periodic inventory system, all adjustments such as purchases returns and allowances and discounts are reconciled at the end of the month.
- DAll of the answers are correct.
28President's salaries, depreciation of office furniture, and office supplies are
- Aselling expenses
- Bmiscellaneous expenses
- Cadministrative expenses
- Dinventory expenses
29Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
- Aselling expenses
- Bgeneral expenses
- Cother expenses
- Dadministrative expenses
30Multiple-step income statements show
- Agross profit but not income from operations
- Bneither gross profit nor income from operations
- Cboth gross profit and income from operations
- Dincome from operations but not gross profit
31Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
- AMerchandise Inventory
- BAccumulated Depreciation
- CDividends
- DCost of Merchandise Sold
32Inventory shrinkage is recorded when
- Amerchandise is returned by a buyer
- Bmerchandise purchased from a seller is incomplete or short
- Cmerchandise is returned to a seller
- Dthere is a difference between a physical count of inventory and inventory records
33Where are selling and administrative expenses found on the multiple-step income statement?
- Abefore gross profit
- Bafter sales and before gross profit
- Cafter net income and before expenses
- Dafter gross profit
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- Mahmoud Hemood
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