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| 1.
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When merchandise inventory is purchased with credit terms of 2/10, n/60, the credit period is 60 days from date of the invoice. |
| | A) | True |
| | B) | False |
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| 2.
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Merchandise purchased on June 8 with credit terms of 2/10, n/30, must be paid sooner than with credit terms of n/10 EOM. |
| | A) | True |
| | B) | False |
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| 3.
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Under the periodic inventory system, inventory shrinkage, theft, and spoilage are accounted for in a special account. |
| | A) | True |
| | B) | False |
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| 4.
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An inventory system in which the business has up-to-date data as to the quantity of goods on hand is called a periodic inventory system. |
| | A) | True |
| | B) | False |
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| 5.
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A deduction allowed from the invoice price of goods if payment is made within a specified period of time is called a trade discount. |
| | A) | True |
| | B) | False |
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| 6.
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Merchandise with a list price of $100, subject to a trade discount of 40 percent and sold with credit terms of 2/10, n/60, would cost the buyer $58.80 if payment is made within the discount period. |
| | A) | True |
| | B) | False |
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| 7.
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When goods are shipped under freight terms of FOB shipping point (FOB factory), the buyer of the goods pays the freight charges. |
| | A) | True |
| | B) | False |
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| 8.
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When a return of merchandise requires the buyer to notify the seller of the reduction in the invoice due to the return, the memorandum sent by the buyer is called a debit memorandum. |
| | A) | True |
| | B) | False |
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| 9.
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The cost of goods sold is determined by adding the cost of purchases to the beginning merchandise inventory and subtracting the ending merchandise inventory. |
| | A) | True |
| | B) | False |
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| 10.
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An income statement in which the details of the cost of goods sold are shown is called a single-step income statement. |
| | A) | True |
| | B) | False |
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| 11.
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In a periodic inventory system, transportation charges for merchandise are added to net purchases to determine the cost of goods purchased. |
| | A) | True |
| | B) | False |
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| 12.
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In a perpetual inventory system, transportation charges are recorded with a debit to the merchandise inventory account. |
| | A) | True |
| | B) | False |
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| 13.
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Transportation-In, Freight-In, and Delivery Expense are all the same account. |
| | A) | True |
| | B) | False |
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| 14.
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Under a periodic system with inventory included in the closing entry procedure, the Credit column of the Income Statement columns of the work sheet will likely contain more than revenue account balances. |
| | A) | True |
| | B) | False |
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| 15.
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The purpose of including the Merchandise Inventory account (a real account) in the closing procedure is to close the beginning balance to the Income Summary account and enter the unsold balance in the Merchandise Inventory account (periodic system). |
| | A) | True |
| | B) | False |
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| 16.
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The steps in the accounting cycle are different for a merchandising business than they are for a service business. |
| | A) | True |
| | B) | False |
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| 17.
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If net sales for the business totals $150,000, gross profit is $65,000, and net income is $40,000, then the cost of goods sold will total $25,000. |
| | A) | True |
| | B) | False |
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| 18.
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If net sales for the business totals $50,000, gross margin is $24,000, and net income is $4,000, then the operating expenses for this company will total $20,000. |
| | A) | True |
| | B) | False |
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| 19.
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Operating expenses include general expenses, administrative expenses, and cost of goods sold. |
| | A) | True |
| | B) | False |
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| 20.
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Merchandise with a list price of $2,000 is sold with a trade discount of 30% and cash terms of 2/10, n/30. If the merchandise is paid for within the discount period, the total cost will be $1,372. |
| | A) | True |
| | B) | False |
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| 21.
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Merchandise is purchased FOB shipping point. The seller will pay the freight charges. |
| | A) | True |
| | B) | False |
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| 22.
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Total cost of merchandise purchases is calculated by subtracting purchase discount, purchase returns and allowances, and cost of transportation-in from gross merchandise purchases. |
| | A) | True |
| | B) | False |
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| 23.
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Net income is calculated by subtracting net sales from cost of goods sold. |
| | A) | True |
| | B) | False |
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| 24.
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A credit memo is a document issued by the seller to "credit" or reduce the customer's account receivable. |
| | A) | True |
| | B) | False |
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| 25.
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A debit memo is a document prepared by the purchaser to "debit" or reduce the purchaser's account receivable. |
| | A) | True |
| | B) | False |
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| 26.
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Accounting for merchandise purchases in a perpetual inventory system requires the use of separate accounts such as purchase, purchase discounts, purchase returns and allowances accounts. |
| | A) | True |
| | B) | False |
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