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1 | |
Merchandise intended for resale to customers is called inventory. |
| | A) | True |
| | B) | False |
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2 | |
The repeating sequence of transactions by which a business generates its revenue and cash receipts from customers is called the operating cycle. |
| | A) | True |
| | B) | False |
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3 | |
A retailer is a business that sells merchandise directly to the public. |
| | A) | True |
| | B) | False |
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4 | |
The cost of goods sold is the cost to a merchandising company of the goods it has sold to its customers during the period. |
| | A) | True |
| | B) | False |
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5 | |
Net sales revenue minus the cost of goods sold equal gross profit. |
| | A) | True |
| | B) | False |
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6 | |
A subsidiary ledger contains separate accounts for each of the items making up the balance of a controlling account. |
| | A) | True |
| | B) | False |
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7 | |
A general ledger account that summarizes the content of a specific subsidiary ledger is called a contra-asset account. |
| | A) | True |
| | B) | False |
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8 | |
In a periodic inventory system the Inventory and Cost of Goods Sold accounts are continually updated as merchandise inventory is purchased and sold. |
| | A) | True |
| | B) | False |
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9 | |
Under the perpetual inventory system the purchases of merchandise are recorded at their sales prices. |
| | A) | True |
| | B) | False |
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10 | |
Under the perpetual inventory system, the recording of a sale is followed by a second journal entry in which the cost of goods sold is recognized. This second journal entry is required to fulfill the realization principle. |
| | A) | True |
| | B) | False |
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11 | |
Inventory shrinkage does not include the loss of merchandise through shoplifting. |
| | A) | True |
| | B) | False |
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12 | |
Inventory shrinkage, under a perpetual inventory system, is recognized by a journal entry in which Inventory is credited and Gross Profit is debited. |
| | A) | True |
| | B) | False |
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13 | |
When closing the accounts under a perpetual inventory system, the Cost of Goods Sold account is closed to the Income Summary account. |
| | A) | True |
| | B) | False |
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14 | |
The periodic inventory system eliminates the need for recording the cost of goods sold as sales occur. |
| | A) | True |
| | B) | False |
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15 | |
Only under the periodic inventory system is a physical count of the inventory necessary. |
| | A) | True |
| | B) | False |
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16 | |
Under a periodic inventory system the purchases of merchandise inventory is debited to the Inventory account. |
| | A) | True |
| | B) | False |
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17 | |
Under a periodic inventory system, one approach to eliminating the beginning inventory balance from the Inventory account and putting the ending inventory balance in the Inventory account is to create a Cost of Goods Sold account. |
| | A) | True |
| | B) | False |
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18 | |
Periodic inventory systems are rarely used. |
| | A) | True |
| | B) | False |
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19 | |
Electronic cash registers used for computer-based processing of sales transactions are called point-of-sale (POS) terminals. |
| | A) | True |
| | B) | False |
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20 | |
A check register is an example of a special journal. |
| | A) | True |
| | B) | False |
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21 | |
Credit terms of 2/10, n/30 indicate that a 2% discount can be taken on the purchase price of the merchandise purchased if the account is paid within 10 days. |
| | A) | True |
| | B) | False |
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22 | |
When credit terms of 2/10, n/30 are offered to a buyer, the discount period is 10 days. |
| | A) | True |
| | B) | False |
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23 | |
Recording shipment costs as debits to the Transportation-in account is consistent with the matching principle. |
| | A) | True |
| | B) | False |
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24 | |
The Sales Discount account is an example of a contra-asset account. |
| | A) | True |
| | B) | False |
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25 | |
Transportation-in and delivery expenses are treated as a part of the cost of goods sold. |
| | A) | True |
| | B) | False |
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26 | |
Same-store sales are the same as comparable sales. |
| | A) | True |
| | B) | False |
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27 | |
The most widely used measure of dollar sales volume is gross sales. |
| | A) | True |
| | B) | False |
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28 | |
If net sales are $850,000 and gross profit margin is 8%, then the gross profit was $68,000. |
| | A) | True |
| | B) | False |
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29 | |
Revenues from sales are $450,000, sales discounts are $12,000, cost of goods sold is $230,000, and operating expenses are $180,000. The net income, before taxes, is which of the following? |
| | A) | $28,000 |
| | B) | $40,000 |
| | C) | $438,000 |
| | D) | $220,000 |
| | E) | None of the above |
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30 | |
Revenues from sales are $450,000, sales discounts are $12,000, cost of goods sold is $230,000, and operating expenses are $180,000. Gross profit is which of the following? |
| | A) | $28,000 |
| | B) | $40,000 |
| | C) | $202,000 |
| | D) | $208,000 |
| | E) | None of the above |
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31 | |
Which of the following journal entries indicate the company is using a perpetual inventory system? |
| | A) | Inventory, debit; Accounts Payable, credit |
| | B) | Inventory, debit; Cost of Goods Sold, credit |
| | C) | Purchases, debit; Accounts Payable, credit |
| | D) | Cost of Goods Sold, debit; Inventory, credit |
| | E) | A and D |
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32 | |
When inventory is sold under a perpetual inventory system, which of the following should be recorded? |
| | A) | A debit to Accounts Receivable and a credit to Sales at the selling price of the inventory followed by a debit to Cost of Goods Sold and a credit to Inventory at the cost of the inventory sold. |
| | B) | A debit to Accounts Receivable and a credit to Sales at the cost of the inventory followed by a debit to Cost of Goods Sold and a credit to Inventory at the selling price of the inventory sold. |
| | C) | A debit to Accounts Receivable and a credit to Sales at the cost of the inventory followed by a debit to Cost of Goods Sold and a credit to Inventory at the cost of the inventory sold. |
| | D) | A debit to Accounts Receivable and a credit to Sales at the selling price of the inventory followed by a debit to Cost of Goods Sold and a credit to Inventory at the selling price of the inventory sold. |
| | E) | None of the above |
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33 | |
Recording inventory shrinkage determined through a physical count of the inventory requires which journal entry, under the perpetual inventory system? |
| | A) | Cost of Goods Sold, debit; Accounts Payable, credit |
| | B) | Cost of Goods Sold, debit; Inventory, credit |
| | C) | Inventory, debit; Cost of Goods Sold, credit |
| | D) | Inventory, debit; Accounts Payable, credit |
| | E) | None of the above |
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34 | |
Recording the purchase of merchandise inventory under a periodic inventory system requires which journal entry? |
| | A) | Inventory, debit; Accounts Payable, credit |
| | B) | Purchases, debit; Accounts Payable, credit |
| | C) | Purchases, debit; Cost of Goods Sold, credit |
| | D) | Inventory, debit; Cost of Goods Sold, credit |
| | E) | None of the above |
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35 | |
Sales were $424,000. Beginning inventory was $45,000. Purchases were $245,000. Ending inventory is $38,000. Operating expenses were $124,000. What is the cost of goods sold? |
| | A) | $252,000 |
| | B) | $172,000 |
| | C) | $290,000 |
| | D) | $128,000 |
| | E) | None of the above |
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36 | |
A company using a periodic inventory system can complete its closing procedures in the same manner as if a perpetual inventory system is being used when which of the following exists? |
| | A) | It has no inventory shrinkage. |
| | B) | It has no accounts payable outstanding. |
| | C) | It creates a Cost of Goods Sold account. |
| | D) | It does not have any sales returns and allowances. |
| | E) | It does not take any cash discounts. |
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37 | |
Which of the following is a factor suggesting the use of a periodic inventory system? |
| | A) | Items of inventory with a high per-unit cost |
| | B) | Merchandise stored in multiple locations |
| | C) | Low volume of sales transactions |
| | D) | Inventory of many different kinds of low-cost items |
| | E) | Large company with professional management |
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38 | |
Which of the following is not true about the use of special journals? |
| | A) | Transactions are recorded faster and more efficiently. |
| | B) | Automation may reduce the risk of errors. |
| | C) | Repetitive transactions are handled quickly and efficiently. |
| | D) | Different accounting principles are applied. |
| | E) | A general journal is also required. |
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39 | |
A company purchased $10,000 of merchandise inventory from a vendor who offers credit terms of 2/10 n/30. The company uses the NET method of recording purchases of merchandise. The company paid the vendor 30 days after receiving the invoice. The journal entry at time of payment would include which of the following? |
| | A) | A debit to Purchase Discounts Lost for $200 |
| | B) | A debit to Accounts Payable for $10,000 |
| | C) | A credit to Cash for $10,000 |
| | D) | A and C |
| | E) | A, B and C |
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40 | |
A company purchased $10,000 of merchandise inventory from a vendor who offers credit terms of 2/10 n/30. The company uses the GROSS method of recording purchases of merchandise. The company paid the vendor 9 days after receiving the invoice. The journal entry at time of payment would include which of the following? |
| | A) | A credit to Purchase Discounts Taken for $200 |
| | B) | A debit to Accounts Payable for $10,000 |
| | C) | A credit to Cash for $10,000 |
| | D) | A credit to Purchase Discounts Taken for $180 |
| | E) | A and B |
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41 | |
A company purchased $10,000 of merchandise inventory from a vendor who offers credit terms of 2/10 n/30. The company uses the GROSS method of recording purchases of merchandise. The company paid the vendor 45 days after receiving the invoice. The journal entry at time of payment would include which of the following? |
| | A) | A debit to Purchase Discounts Lost for $200 |
| | B) | A debit to Accounts Payable for $10,000 |
| | C) | A credit to Cash for $10,000 |
| | D) | B and C |
| | E) | A and C |
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42 | |
The company used the NET method of recording the purchase of merchandise inventory. The full payment amount was $4,500 and credit terms were 2/10, n/30. The company returned 10% of the purchase as unsatisfactory inventory. The journal entry for the return would include which of the following? |
| | A) | Debit to Accounts Payable for $450 |
| | B) | Credit to Inventory for $441 |
| | C) | Credit to Inventory for $450 |
| | D) | Debit to Cash for $450 |
| | E) | Debit to Cash for $441 |
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43 | |
You delivered a printing press to your customer. When it was delivered, it was slightly dented on one side, but the dent had no effect on the performance of the printing press. To maintain company goodwill, you authorized a $500 reduction in the invoice price if the customer would keep the printing press. The customer accepted the offer. The journal entry to record the $500 would include which of the following? |
| | A) | Debit to Sales Discount for $500 |
| | B) | Credit to Sales Discount for $500 |
| | C) | Debit to Sales Returns and Allowances |
| | D) | Credit to Sales Return and Allowances |
| | E) | Debit to Accounts Receivable (or Cash) |
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44 | |
Customer Dale Zinc sent you a check for $490 as payment in full on his account receivable. You offered terms of 2/10, n/30, which Dale honored by paying his bill within 5 days of the invoice. Which journal entry would you record? |
| | A) | Cash, debit, $490; Sales Discounts, debit, $9.80; Accounts Receivable, credit, $499.80 |
| | B) | Cash, debit, $490; Sales Discounts, debit, $10; Accounts Receivable, credit, $500 |
| | C) | Cash, debit, $499.80; Sales Discounts, credit, $9.80; Accounts Receivable, credit, $490.00 |
| | D) | Cash, debit, $500; Sales Discounts, credit, $10; Accounts Receivable, credit, $500 |
| | E) | None of the above |
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45 | |
Delivery expense is treated on the income statement as which of the following? |
| | A) | Operating expense |
| | B) | Part of the Cost of Goods Sold |
| | C) | A deduction from Net Sales |
| | D) | Other Expense |
| | E) | A contra-revenue account |
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2002 McGraw-Hill Higher Education