Accounting Test 5

Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as a. sales on account b. sales returns c. cash sales d. sales when the credit card company remits the cash

C

The journal entry for the return of merchandise from a customer would include a a. debit to Sales b. credit to Sales c. debit to Customer Refunds Payable d. debit to Estimated Returns Inventor

C

Using a perpetual inventory system, the journal entry for the sale of merchandise on account includes a a. debit to Sales b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. credit to Accounts Receivable

C

When comparing a retail business to a service business, the financial statement that changes the least is the a. balance sheet b. income statement c. statement of owner's equity d. statement of cash flows

C

A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom, FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for merchandise returned of $500 (before discount) is granted prior to payment and the invoice is paid within the discount period, what amount of cash should be received by the seller? a. $12,285 b. $11,500 c. $10,480 d. $11,385

A

Generally, the revenue account for a merchandising business is entitled a. Sales b. Fees Earned c. Gross Sales d. Gross Profit

A

The arrangements between buyer and seller as to when payments for merchandise are to be made are called a. credit terms b. net cash c. cash on demand d. gross cash

A

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

A

Under a perpetual inventory system, a. accounting records continuously disclose the amount of inventory b. increases in inventory resulting from purchases are debited to Purchases c. a physical count is required to determine cost of merchandise on hand d. the purchases returns and allowances account is credited when goods are returned to vendors

A

Under the perpetual inventory system, all purchases of merchandise are debited to the account a. Merchandise Inventory b. Cost of Merchandise Sold c. Cost of Merchandise Available for Sale d. Purchases

A

Who is responsible for the freight cost when the terms are FOB destination? a. the seller b. the buyer c. the customer d. either the buyer or the seller

A

A chart of accounts for a merchandising business a. usually is the same as the chart of accounts for a service business b. usually requires more accounts than does the chart of accounts for a service business c. usually is standardized by the FASB for all merchandising businesses d. always uses a three-digit numbering system

B

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to a. $12,670 b. $9,070 c. $8,420 d. $17,230

B

Bountiful Company had sales of $650,000 and cost of merchandise sold of $200,000 during the year. The total assets balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Compute the asset turnover. a. 3.00 b. 3.80 c. 0.29 d. 0.26

B

Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make for the payment for the merchandise if Isabella Co. pays within the discount period? a. Accounts Payable—Emma Co., debit $15,000; Cash, credit $15,000 b. Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450 c. Accounts Payable—Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750 d. Accounts Payable—Emma Co., debit $15,750; Merchandise Inventory, debit $300; Cash, credit $16,050

B

If merchandise sells for $3,500 on account, with terms of 3/15, n/45, and the cost of the inventory sold is $2,100, the amount charged to sales under the gross method is a. $3,395 b. $3,500 c. $2,037 d. $2,100

B

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as a. FOB shipping point b. FOB destination c. FOB n/30 d. FOB seller

B

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. n/30 b. FOB shipping point c. FOB destination d. consigned

B

Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 13; the merchandise is received by the buyer on November 18; and the entry is made in the buyer's accounts on November 20. The credit period begins with what date? a. November 10 b. November 13 c. November 18 d. November 20

B

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? a. $260 b. $500 c. $460 d. $150

B

Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the merchandise inventory account? a. $21,000 b. $20,580 c. $30,000 d. $29,400

B

Pierce Company sold merchandise to Stanton Company on account FOB shipping point, 2/10, net 30, for $20,000. Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make for this sale? a. Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000 b. Accounts Receivable—Stanton, debit $19,600; Sales, credit $19,600, and Accounts Receivable—Stanton, debit $500; Cash, credit $500 c. Accounts Receivable—Stanton, debit $20,100; Sales, credit $20,100 d. Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000, and Delivery Expense, debit $500; Cash, credit $500

B

Sales to customers who use bank credit cards such as MasterCard and VISA are usually journalized by a a. debit to Bank Credit Card Sales, a debit to Credit Card Expense, and a credit to Sales b. debit to Cash and a credit to Sales c. debit to Cash, a credit to Credit Card Expense, and a credit to Sales d. debit to Sales, a debit to Credit Card Expense, and a credit to Cash

B

Under the periodic inventory system, the journal entry for the purchase of merchandise inventory will include a debit to a. Merchandise Inventory b. Purchases c. Accounts Payable d. Cost of Merchandise Purchased

B

Using a perpetual inventory system, the journal entry for the return from a customer of merchandise sold on account includes a a. credit to Customer Refunds Payable b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. debit to Cash

B

Using the following information, what is the amount of gross profit? Purchases $32,000 Selling expenses $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expenses 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a. $25,300 b. $31,670 c. $30,600 d. $62,840

B

When comparing a merchandising business to a service business, the financial statement that changes the most is the a. balance sheet b. income statement c. statement of owner's equity d. statement of cash flows

B

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is journalized with which entry? a. debit Accounts Payable; credit Merchandise Inventory b. debit Merchandise Inventory; credit Accounts Payable c. debit Merchandise Inventory; credit Cash Discounts d. debit Merchandise Inventory; credit Purchases

B

For a buyer using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a a. debit to Cost of Merchandise Sold b. credit to Accounts Payable c. credit to Merchandise Inventory d. credit to Sales

C

If merchandise sold on account is damaged in shipment, the seller may inform the customer of a reduction to the customer's account by issuing a a. sales invoice b. purchase invoice c. credit memo d. debit memo

C

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

C

Which of the following accounts will not be found in the Cost of Merchandise Sold section of the income statement for a company using the periodic inventory method? a. Purchases b. Freight In c. Selling Expense d. Merchandise Inventory

C

Which of the following is not a difference between a retail business and a service business? a. what is sold by the business b. the inclusion of gross profit on the income statement c. elements of the accounting equation d. the inclusion of merchandise inventory on the balance sheet

C

A retailer purchases merchandise with a catalog list price of $30,000. The retailer receives a 15% trade discount and has credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period? a. $30,000 b. $24,900 c. $29,400 d. $24,990

D

Gross profit is equal to a. sales plus cost of merchandise sold b. sales plus selling expenses c. sales less selling expenses d. sales less cost of merchandise sold

D

In credit terms of 3/15, n/45, the "3" represents the a. number of days in the discount period b. full amount of the invoice c. number of days when the entire amount is due d. percent of the available discount for early payment

D

Merchandise is purchased for $6,000 on September 2 subject to terms of 2/10, n/30, FOB destination. What is the cost of the merchandise if paid on September 12, assuming the discount is taken? a. $6,120 b. $5,940 c. $6,090 d. $5,880

D

Taking advantage of a 2/10, n/30 purchases discount is equal to a yearly savings rate of approximately a. 2% b. 24% c. 20% d. 36%

D

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a a. multiple-step income statement b. revenue statement c. report-form income statement d. single-step income statement

D

The inventory system employing accounting records that continuously disclose the amount of inventory is called a. retail b. periodic c. physical d. perpetual

D

The statement of owner's equity shows a. only net income and beginning and ending capital b. only total assets and beginning and ending capital c. only net income, beginning capital, and withdrawals d. beginning and ending capital, all the changes in the owner's capital as a result of net income (loss), and withdrawals

D

Using the following information, what is the amount of income from operations? Purchases $32,000 Selling expenses $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expenses 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a. $32,870 b. $31,910 c. $30,710 d. $29,800

D

When goods are shipped FOB destination and the seller pays the freight charges, the buyer a. journalizes a reduction for the cost of the merchandise b. journalizes a reimbursement to the seller c. does not take a discount d. makes no journal entry for the freight

D

Which of the following accounts should be closed at the end of the fiscal year? a. Merchandise Inventory b. Accumulated Depreciation c. Owner's Capital d. Cost of Merchandise Sold

D

Which of the following items would not affect the cost of merchandise inventory acquired during the period? a. quantity discounts b. purchases discounts c. freight in d. sales commissions

D