FAR FINALS

The individual amounts in the accounts payable column of the purchases journal are posted to the appropriate accounts in the: * 1/1 a. Accounts payable subsidiary ledger b. Accounts receivable subsidiary ledger c. General ledger d. General journal

Accounts payable subsidiary ledger

is both a buyer and a seller; the buying activity is done before the selling activity because the merchandiser has to buy goods or merchandise first before he/she will be able to sell goods or items.

MERCHANDISER

In preparing a ten-column worksheet that uses the perpetual inventory system, * 1/1 a. Only the beginning merchandise inventory is extended to the debit side of the income statement columns. b. The beginning merchandise inventory is extended to the debit side and the ending inventory to the credit side of the income statement columns. c. Only the ending merchandise inventory is extended to the debit side of the balance sheet columns. d. The beginning merchandise inventory is extended to the debit side and the ending inventory to the credit side of the income statement columns, and also to the debit side of the balance sheet columns.

Only the ending merchandise inventory is extended to the debit side of the balance sheet columns.

A supplier offers the following discounts: Trade discount of 10% at list price and 5% cash discount if paid in full before the due date. How much will a customer pay before due date at a list price of P16,000? a. P13,680 b. P14,000 c. P15,520 d. P16,000 e. None of the above

P13,680

Cost of goods sold is a major expense of a merchandising entity. * 1/1 True False

TRUE

principles applied in accounting for service business transactions are also the same principles applied in accounting for a merchandising concern. TRUE FALSE

TRUE

A reversing entry is the exact opposite of a related adjusting entry made at the end of the period True False

True

A reversing entry may include either a credit to a revenue account or a debit to an expense account True False

True

After all closing entries have been recorded and posted, the Income Summary account will have a zero balance True False

True

All income and expense accounts must be closed first before the Income Summary account can be closed True False

True

An advantage of using the periodic inventory system is that it requires less record-keeping that the perpetual inventory system True False

True

Buying or producing and selling goods or services are example of operating activities True False

True

Closing entries result in the transfer of net profit or net loss to the owner's capital account True False

True

During the closing process, expenses are transferred to the credit side of Income Summary True False

True

During the closing process, revenues are transferred to the credit of Income Summary True False

True

Each amount in the "Other Accounts" column of the cash receipts journal must be posted individually to the appropriate general ledger account. * 1/1 True False

True

Goods bought or sold should be recorded at the list price less any trade discounts involved True False

True

Nominal accounts are reduced to zero balances by closing entries True False

True

Paying taxes to the government is an example of an operating activity True False

True

Sales Discount normally has a debit balance True False

True

Sales Return and allowances is a contra-revenue account True False

True

Taking a physical inventory refers to making a count of all merchandise on hand at a particular time True False

True

The balance Sheet is also known as the Statement of Financial Position True False

True

The balances of all the accounts that appears on the Balance Sheet as of the end of the period are the same as they are on the post-closing trial balance at the end of the same period True False

True

The perpetual inventory system requires the recording of the cost of each sales as it occurs True False

True

The post-closing trial balance tests the equality of the debits and credits after the adjusting and closing entries have been recorded and posted True False

True

The primary ledger that contains all of the balance sheet and income statement accounts is the general ledger. * 1/1 True False

True

The purchase of land is an example of an investing activity True False

True

The statement of Changes in Equity relates the Income Statement to the Balance Sheet by showing how the owner's capital account changed during the accounting period True False

True

The term "freight prepaid or freight collect" indicate who will pay the transportation cost to the common carrier True False

True

The two systems in accounting for merchandise bought and sold are the periodic and perpetual inventory methods True False

True

Under the periodic inventory system, the Purchases account is used to accumulate all items acquired primarily for resale purpose True False

True

Under the perpetual inventory system, the Merchandise Inventory account is not affected when a sales allowance is granted by the seller True False

True

When preparing closing entries under the periodic inventory system, Sales and Purchases Returns and Allowances are both closed in the same entry. * 0/1 True False

True

When there is neither profit nor loss, one of the usual closing entries need not be made True False

True

A physical count of inventory is usually taken: * 1/1 a. At the end of the accounting period b. At the peak of the busy season c. At the start of the accounting period d. In the middle of the accounting period

a. At the end of the accounting period

The payment of accounts is recorded in the: * 1/1 a. Cash payments journal b. Cash receipts journal c. Purchases journal d. Sales journal

a. Cash payments journal

If only credit sales of goods are recorded in the Sales Journal, a cash sale of merchandise should be recorded in the: * 1/1 a. Cash receipts journal b. Cash disbursements journal c. Sales journal d. General journal

a. Cash receipts journal

The collection of a P5,000 account beyond the 2% discount period would result in a: * 1/1 a. Credit to Accounts receivable for P5,000 b. Credit to Cash for P5,000 c. Debit to Cash for P4,900 d. Debit to Sales discounts for P100

a. Credit to Accounts receivable for P5,000

The total of the cash disbursements journal is posted to which side of the account, Accounts Payable? * 1/1 a. Debit b. Credit c. Neither debit nor credit side d. Both sides

a. Debit

If only goods bought on credit are recorded in the Purchases Journal, the purchase of supplies on account is recorded in the: a. General journal b. Purchases journal c. Cash disbursements journal d. Sales journal

a. General journal

Which of the following is not a reason for sales discounts to be offered to the credit customers? * 1/1 a. Increase the amount paid by the customers. b. Improve the liquidity by converting the accounts receivable into cash. c. Encourage earlier settlement of debts by debtors/customers. d. Reduce the amount of bad debts.

a. Increase the amount paid by the customers.

A sale on March 15 with terms of n/eom is due to be collected by: * 1/1 a. March 31 b. April 30 c. April 10 d. None of the above

a. March 31

Special journals are modified in practice to adapt to the specific needs of an entity. * 1/1 a. True b. False

a. True

The excess of gross profit over total operating expenses is called operating income or income from operations. * 1/1 a. True b. False

a. True

The controlling account that summarizes the individual accounts with creditors in a subsidiary ledger is: a. Accounts receivable b. Accounts payable c. Purchases d. Sales

b. Accounts payable

Which of the following statements is not correct? * 1/1 a. A schedule of accounts receivable is prepared from the balances found in the subsidiary ledgers. b. Control accounts are found in both the general ledger and subsidiary ledgers. c. The control account in the general ledger shows the sum of all the accounts in the subsidiary ledgers. d. A special journal is used to record one particular type of transaction only.

b. Control accounts are found in both the general ledger and subsidiary ledgers.

The entry to record a payment of a P15,000 account within the 2% discount period would include a: * 0/1 a. Credit to Accounts payable for P14,700 b. Credit to Cash for P14,700 c. Debit to Accounts payable for P14,700 d. Debit to Purchases discounts for P300

b. Credit to Cash for P14,700

The entry to record a sale of P7,500 with terms of 2/10, n/30 would include a: * 1/1 a. Credit to Accounts receivable for P7,500 b. Credit to Sales for P7,500 c. Debit to Sales discounts for P150 d. Debit to Sales for P7,350

b. Credit to Sales for P7,500

How is a return of goods by a credit customer recorded in the books of the seller? * 1/1 a. Dr. Accounts receivable; Cr. Sales b. Dr. Sales Returns; Cr. Accounts receivable c. Dr. Accounts Payable; Cr. Purchases Returns d. Dr. Purchases; Cr. Accounts Payable

b. Dr. Sales Returns; Cr. Accounts receivable

Under the periodic inventory method, the two Merchandise Inventory accounts appear in the closing entries made at the end of the period. * 1/1 a. True b. False

b. False

When preparing a worksheet for a merchandising entity that uses the perpetual inventory system, the merchandise inventory amount shown on the trial balance is the beginning balance that will be carried over to the income statement debit column. * 0/1 a. True b. False

b. False

The adjusting entry to record accrued income is recorded in the: a. Cash receipts journal b. General journal c. Sales journal d. Purchases journal

b. General journal

A merchandiser will earn an operating income of exactly zero when the: * 1/1 a. Cost of goods sold equals gross margin/gross profit b. Gross profit equals total operating expenses c. Net sales equals cost of goods sold d. Total operating expenses equal net sales

b. Gross profit equals total operating expenses

The perpetual inventory system is most commonly used by entities that sell: * 1/1 a. High-priced, high-volume merchandise b. High-priced, low-volume merchandise c. Low-priced, high volume merchandise d. Low-priced, low-volume merchandise

b. High-priced, low-volume merchandise

The basic differences between the financial statements of a merchandising entity and a service entity include the cost of sales section of the income statement and the: * 1/1 a. Equity section of the balance sheet b. Inclusion of merchandise inventory on the balance sheet as a current asset c. Other income section of the income statement d. Profit amount

b. Inclusion of merchandise inventory on the balance sheet as a current asset

Transportation out refers to the cost: * 1/1 a. Needed to sell the goods to the customers b. Incurred by the seller to transport the goods sold to the customers c. Incurred in advertising the goods available for sale d. Regarding the human resource needed to manufacture the products

b. Incurred by the seller to transport the goods sold to the customers

Which of the following equations correctly shows the meaning of net sales? * 1/1 a. Net sales = Gross sales - Purchases b. Net sales = Gross sales - Sales returns c. Net sales = Gross sales - Purchases returns d. Net sales = Gross sales - Sales returns - Freight in

b. Net sales = Gross sales - Sales returns

Which of the following activities is not a component of the operating cycle? * 1/1 a. Collection of accounts from credit sales of goods b. Ordering of merchandise c. Acquisition of merchandise d. Sale of goods

b. Ordering of merchandise

Assuming that net purchases was P900,000 during the year, and that the ending merchandise inventory was P20,000 less than the beginning merchandise inventory of P250,000, how much was cost of goods sold? * 1/1 a. P1,130,000 b. P 920,000 c. P 670,000 d. P1,170,000 e. None of the above

b. P 920,000

Under the perpetual inventory system, which of the following accounts would not be used? * 1/1 a. Cost of sales b. Purchases c. Merchandise inventory d. Sales

b. Purchases

The special journal in which the purchase of merchandise on account may be recorded is the: * 1/1 a. Cash disbursements journal b. Purchases journal c. General journal d. Sales journal

b. Purchases journal

Each of the following companies is a merchandising entity, except a: * 1/1 a. Candy store b. Appliance store c. Car wash d. Drugstore

c. Car wash

Sales Discount Debit is a column heading found in the: * 0/1 a. Sales journal b. Purchases journal c. Cash receipts journal d. Cash disbursements journal

c. Cash receipts journal

Which of the following is not considered an operating expense? * 1/1 a. Administrative expenses b. Advertising expense c. Cost of goods sold d. Transportation out

c. Cost of goods sold

Which of the following is not considered in computing the net cost of purchases? * 1/1 a. Purchases b. Purchases returns and allowances c. Freight paid on goods shipped to customers d. Freight paid on goods bought

c. Freight paid on goods shipped to customers

Which of the following is correct about purchases discounts? * 1/1 a. It refers to the discounts offered by a third party for some reasons. b. It refers to the discounts enjoyed by customers due to bulk purchases. c. It refers to the discounts enjoyed by customers due to the early settlement of debt. d. It refers to a reduction in list price.

c. It refers to the discounts enjoyed by customers due to the early settlement of debt.

Which of the following is not relevant to the computation of net purchases? * 1/1 a. Purchases returns and allowances b. Purchases discounts c. Sales discounts d. Freight in

c. Sales discounts

Credit sales of merchandise are recorded in the: * 1/1 a. Purchases journal b. General journal c. Sales journal d. Cash payments journal

c. Sales journal

23. Which of the following statements is true? a. There are more subsidiary accounts than control accounts. b. The number of control accounts must always be equal to the number of subsidiary accounts. c. The total of the amounts in the subsidiary ledgers must at all times be equal to the balance of the related account in the general ledger. d. Subsidiary accounts are usually maintained for accounts receivable, accounts payable, store supplies and expense accounts.

c. The total of the amounts in the subsidiary ledgers must at all times be equal to the balance of the related account in the general ledger.

Operating income will result if gross profit exceeds: * 0/1 a. Cost of goods sold b. Cost of goods sold plus operating expenses c. Total operating expenses d. Purchases

c. Total operating expenses

Which of the following should be maintained to be able to monitor the individual balances of the account customers? * 1/1 a. General ledger b. General journal c. Accounts payable subsidiary ledger d. Accounts receivable subsidiary ledger

d. Accounts receivable subsidiary ledge

Which account does a merchandiser, but not a service entity, use? a. Sales b. Inventory c. Cost of sales d. All of the above e. None of the above

d. All of the above

A special journal contained columns for cash, purchases discounts, and accounts payable. This is a: * 1/1 a. Sales journal b. Purchases journal c. Cash receipts journal d. Cash payments journal

d. Cash payments journal

Collections of accounts receivable are recorded in the: * 0/1 a. Sales journal b. General journal c. Cash disbursements journal d. Cash receipts journal

d. Cash receipts journal

The business uses special journals. The general journal is used to record: a. Cash refund for goods returned b. Purchase of supplies for cash c. Owner's cash withdrawal d. Computer invested by the owner

d. Computer invested by the owner

The collection of a P4,000 account within the 2% discount period would result in a: * 1/1 a. Credit to Accounts receivable for P3,920 b. Credit to Cash for P3,920 c. Debit to Accounts receivable for P3,920 d. Debit to Sales Discounts for P80

d. Debit to Sales Discounts for P80

10. Which of the following items can lead to a difference between values of gross profit and net profit? * 0/1 a. Sales returns b. Freight in c. Purchases returns d. Freight out

d. Freight out

Which of the following is not a benefit of using special journals? * 1/1 a. Similar transactions are recorded in one book. b. The clerical work of journalizing and posting is minimized. c. Several employees can work simultaneously. d. It eliminates the need for the general journal.

d. It eliminates the need for the general journal.

The main inventory systems are: a. Purchases and sales b. Returns and allowances c. Cash and accrual basis d. Periodic and perpetual

d. Periodic and perpetual

Freight in represents the expenses spent on carrying the goods: a. Returned from the customers b. Returned to the suppliers c. Sold to the customers d. Purchased from suppliers to the buyer entity

d. Purchased from suppliers to the buyer entity

An amount deducted from the list price for an item of merchandise is called a * 1/1 a. Customer discount b. Sales discount c. Purchases discount d. Trade discount

d. Trade discount

Which of the following are considered special journals? * 1/1 a. General journal and general ledger b. Subsidiary ledgers and general ledger c. Sales journal and cash receipts journal d. Purchases journal and cash disbursements journal e. Both a and b only f. Both c and d only

f. Both c and d only

Under the periodic inventory system, COGS is treated as an account True False

False

Under the periodic inventory system, purchases of merchandise are recorded in the Merchandise Inventory account True False

False

To which account is the debit entry for the total of the Sales Journal posted? * 1/1 a. Accounts payable b. Accounts receivable c. Sales d. Purchases

. Accounts receivable

Under a perpetual inventory system, the entry to record a purchase of P60,000 with terms of 2/10, n/30 would include a: * 1/1 a. Credit to Accounts payable for P58,800 b. Debit to Purchases for P60,000 c. Debit to Accounts payable for P58,800 d. Debit to Merchandise Inventory for P60,000

. Debit to Merchandise Inventory for P60,000

When special journals, control accounts and subsidiary ledgers are used, no posting to any ledger account is done until the end of the month. * 1/1 True False

False

After the adjusting and closing entries have been recorded and posted, the general ledger accounts that appear on the balance sheet have no more balances True False

False

An entity would more likely know the amount of inventory on hand or unsold merchandise at any time if it uses the periodic inventory method rather than the perpetual inventory method True False

False

An expense account is closed by a debit to the expense account and a credit to the Income Summary account True False

False

Closing entries deal primarily with the balances of real accounts True False

False

The adjusting entries to record Accrued Rent Income and Salaries Payable should be reversed at the start of the following accounting period True False

False

The heading for the statement of Cash Flows might include the line "As of December 31,2022" True False

False

The post-closing trial balance will have fewer accounts than the adjusted trial balance True False

False

The purchase of equipment for use in the business, not for resale, should be debited to the Purchases account True False

False

The purchase of equipment is an example of a financing activity True False

False

There is sufficient information on a post-closing trial balance to prepare an Income Statement True False

False

To simplify the recording of regular transactions in the next accounting period, all adjusting entries are reversed True False

False

Trade discount are offered to the buyer to encourage early payment of accounts True False

False