ACC TEST 3

The net cost of purchases is found by adding freight-in to net purchases. a. True b. False

A. TRUE

When the buyer bears the transportation charge, it is called freight-out. a. True b. False

B. FALSE

Under the perpetual inventory system, which of the following accounts would not be used? a. Cost of Goods Sold b. Merchandise Inventory c. Sales d. Purchases

D. PURCHASES

Under the periodic inventory system WONT BE ON TEST a. The cost of each item is recorded in the Merchandise Inventory account when it is purchased. b. When an inventory item is sold, its cost is transferred to the Cost of Goods Sold account. c. The balance of the Merchandise Inventory account equals the cost of goods on hand. d. The balance of the Merchandise Inventory account is only accurate on the balance sheet date.

D. THE BALANCE OF THE MERCHANDISE INVENTORY ACCOUNT IS ONLY ACCURATE ON THE BALANCE SHEET DATE

Gross margin is the difference between net sales and a. Net income. b. Cost of goods sold plus operating expenses. c. Operating expenses. d. Cost of goods sold.

D. COST OF GOODS SOLD

Sales Discounts and Sales Returns and Allowances have normal credit balances. a. True b. False

FALSE

A merchandiser will earn an operating income of exactly $0 when a. Gross margin equals operating expenses. b. Net sales equals cost of goods sold. c. Cost of goods sold equals gross margin. d. Operating expenses equal net sales

A. GROSS MARGIN EQUALS OPERATING EXPENSES

Under the perpetual inventory system, when merchandise is sold, its cost is transferred from the Merchandise Inventory account to the Sales account. a. True b. False

B. FALSE

Which of the following is not classified as a selling expense on the income statement? a. Sales salaries expense. b. Interest expense. c. Freight-out expense. d. Advertising expense.

B. INTEREST EXPENSE

Which type of account is Cost of Goods Sold? a. An asset account. b. A liability account. c. An expense account. d. An income account.

C. AN EXPENSE account

The entry to record the purchase on account of merchandise for resale under the periodic inventory system includes WONT BE ON TEST a. Debiting Purchases and crediting Cash. b. Debiting Purchases and crediting Accounts Payable. c. Debiting Merchandise Inventory and crediting Cash. d. Debiting Merchandise Inventory and crediting Accounts Payable.

B. DEBITING PURCHASES AND CREDITING ACCOUNTS PAYABLE

Which of the following is not considered an operating expense? a. General office expenses. b. Freight-In c. Freight-out expense. d. Advertising expense.

B. FREIGHT-IN

1. Cost of goods sold is a type of expense. a. True b. False

TRUE

1. The entry to record a purchase of $12,000 in merchandise assuming terms of 2/10, n/30 and a periodic inventory system would include a(n) WONT BE ON TEST a. Increase to Accounts Payable for $12,000. b. Increase to Purchases Discounts for $240. c. Decrease to Purchases for $12,000. d. Decrease to Accounts Payable for $11,760.

A. INCREASE TO ACCOUNTS PAYABLE FOR 12,0OO

Under the perpetual inventory system, the entry to record a purchase return would include a credit to which account? a. Merchandise Inventory b. Purchases Returns and Allowances c. Accounts Payable d. Sales

A. MERCHANDISE INVENTORY

1. Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500, how much was cost of goods sold? a. $50,500 b. $52,500 c. $40,000 d. $38,000

C. 40,000

1. Liberty Industries purchased merchandise worth $1,800 on credit, terms n/30. What is the required journal entry to record the transaction under the perpetual inventory system? a. Accounts Receivable 1,800 Purchases 1,800 b. Purchases 1,800 Inventory 1,800 c. Inventory 1,800 Accounts Payable 1,800 d. Accounts Payable 1,800 Inventory 1,800

C. INVENTORY 1,80O ACC PAYABLE 1,800

Which of the following goods would not be included in merchandise inventory for a purchasing company? a. Goods in transit shipped FOB shipping point b. Goods on hand in the showroom. c. Goods in transit shipped FOB destination d. Goods ordered and received from the supplier

C. GOODS IN TRANSIT SHIPPED FOB DESTINATION

1. The collection of a $800 account within the 2 percent discount period would result in a(n) a. Increase to Accounts Receivable for $784. b. Decrease to Cash for $784. c. Increase to Sales Discounts for $16. d. Decrease to Accounts Receivable for $784.

C. INCREASE TO SALES DISCOUNTS FOR 16

The entry to record a sales return from a customer would require a(n) a. Decrease to Sales. b. Increase to Sales. c. Decrease to Sales Returns and Allowances. d. Increase to Sales Returns and Allowances.

D. INCREASE TO SALES RETURNS AND ALLOWANCES

1. Liberty Industries purchased merchandise worth $1,800 on credit, terms n/30 and returned merchandise worth $200 on the next day. What is the required journal entry to record the merchandise returns under the perpetual inventory system? a. Accounts Payable 200 Purchases Returns & Allowances 200 b. Accounts Payable 200 Inventory 200 c. Inventory 200 Purchases Returns and Allowances 200 d. Purchases Returns and Allowances 200 Inventory 200

b.Accounts Payable 200 Inventory 200