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| 1 | |
Which of the following costs, paid for by the purchaser, are included in the Merchandise Inventory account of the purchaser? |
| | A) | Purchase cost |
| | B) | Shipping fees and taxes |
| | C) | Other costs necessary to make the merchandise inventory ready for sale |
| | D) | All of the above |
| | E) | None of the above |
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| 2 | |
Which type of inventory system continually updates accounting records for merchandise transactions? |
| | A) | Wholesaler inventory system |
| | B) | Periodic inventory system |
| | C) | Perpetual inventory system |
| | D) | Permanent inventory system |
| | E) | Both periodic and perpetual inventory systems |
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| 3 | |
Which of the following statements is correct? |
| | A) | The beginning inventory plus the net cost of purchases is equal to the merchandise available for sale. |
| | B) | The ending inventory plus the cost of goods sold is equal to the merchandise available for sale. |
| | C) | The merchandise available for sale less the ending inventory is equal to the cost of goods sold. |
| | D) | All of the above. |
| | E) | None of the above. |
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| 4 | |
Which of the following statements is correct regarding a merchandiser's financial statements? |
| | A) | Ending merchandise inventory is reported in the balance sheet as a current asset. |
| | B) | As merchandise inventory is sold, its cost is reported as cost of goods sold in an income statement. |
| | C) | One period's ending merchandise inventory becomes the next period's beginning merchandise inventory. |
| | D) | Cost of Goods Sold is often the largest expense for a merchandiser. |
| | E) | All of the above. |
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| 5 | |
The records for Betty's Floral Shoppe showed the following: cash of $125,000, current liabilities of $50,000, accounts receivable of $25,000, revenues of $180,000, merchandise inventory of $100,000, operating expenses of $112,000, and short-term investments of $50,000. What is the acid-test ratio? |
| | A) | 4.0:1 |
| | B) | 2.5:1 |
| | C) | 6.0:1 |
| | D) | 3.0:1 |
| | E) | None of the above |
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| 6 | |
If net sales are $75,000 and the cost of goods sold was $52,500, what is the gross margin (or gross profit) ratio? |
| | A) | 70% |
| | B) | 30% |
| | C) | 43% |
| | D) | 57% |
| | E) | None of the above |
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| 7 | |
An item of merchandise was purchased for $60 with credit terms of 2/10, n/30. The vendor was paid within the discount period. Assuming that a perpetual inventory system is in use, which of the following is the correct journal entry to record the payment of the related invoice? |
| | A) | Debit Purchases $60; credit Cash $60. |
| | B) | Debit Purchases $58.80; credit Cash $58.80. |
| | C) | Debit Accounts Payable $60; credit Purchases Discount $12; credit Cash $48. |
| | D) | Debit Accounts Payable $60; credit Purchases Discount $1.20; credit Cash $58.80. |
| | E) | Debit Cash $58.80; debit Sales Discounts $1.20; credit Accounts Receivable $58.80. |
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| 8 | |
Merchandise costing $200 was purchased on account and paid for at an earlier time has been returned for credit. The credit terms were 2/10, n/30 and the invoice was paid within the discount period. The supplier has issued a refund check for the return. Which of the following is the correct journal entry for the purchaser to record the return, assuming a perpetual inventory system is used? |
| | A) | Debit Accounts Payable $200; credit Merchandise Inventory $200. |
| | B) | Debit Accounts Payable $204; credit Merchandise Inventory $204. |
| | C) | Debit Cash $196; credit Merchandise Inventory $196. |
| | D) | Debit Accounts Receivable $200; credit Merchandise Inventory $200. |
| | E) | Debit Purchases Returns and Allowances $196; credit Merchandise Inventory $196. |
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| 9 | |
Which of the following is a correct statement regarding the shipping term of FOB destination? |
| | A) | The buyer pays the freight. |
| | B) | The ownership transfers when the goods are passed to the carrier. |
| | C) | The buyer bears the risk of damage of loss in transit. |
| | D) | All of the above. |
| | E) | None of the above. |
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| 10 | |
If a perpetual inventory system is in use and goods are shipped FOB shipping point to the purchaser, which account would be debited by the purchaser to record the payment of the shipping costs? |
| | A) | Transportation-in |
| | B) | Delivery Expense |
| | C) | Merchandise Inventory |
| | D) | Cost of Goods Sold |
| | E) | None of the above |
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| 11 | |
An item of merchandise was sold with an invoice price of $400 and credit terms of 2/10, n/30. The entry to record the sale would include a credit to the Sales account of what amount? |
| | A) | $400 |
| | B) | $396 |
| | C) | $408 |
| | D) | $392 |
| | E) | $404 |
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| 12 | |
How does a merchandiser calculate net sales? |
| | A) | Sales plus sales discount plus sales return and allowances |
| | B) | Sales minus cost of goods sold |
| | C) | Sales minus sales discounts minus sales returns and allowances |
| | D) | Sales minus purchase discounts minus purchase returns |
| | E) | Sales minus sales discounts plus sales returns and allowances |
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| 13 | |
A gift shop ended the year with a balance of $20,000 in the Merchandise Inventory account. A physical count of the inventory revealed that only $19,500 of inventory was on hand at year-end. What adjusting entry is needed to adjust the Merchandise Inventory account? |
| | A) | Debit Shrinkage and credit Merchandise Inventory for $500. |
| | B) | Debit Cost of Goods Sold and credit Merchandise Inventory for $500. |
| | C) | Debit Merchandise Inventory and credit Cost of Goods Sold for $500. |
| | D) | Debit Merchandise Inventory and credit Shrinkage for $500. |
| | E) | No entry is required. |
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| 14 | |
How would interest expense be reported in a multiple-step income statement? |
| | A) | As a selling expense |
| | B) | As a general and administrative expense |
| | C) | As other revenue |
| | D) | As other expense |
| | E) | None of the above |
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| 15 | |
Which of the following statements is a true statement? |
| | A) | The closing process is very different for U.S. GAAP and IFRS. |
| | B) | Both U.S. GAAP and IFRS do not require separate disclosure of items in the Income Statement. |
| | C) | IFRS permits expenses to be presented by their function or their nature. U.S. GAAP provides no direction but the SEC requires presentation by function. |
| | D) | All of the above. |
| | E) | None of the above. |
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