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| 1 | |
The steps of the operating cycle for a retailer usually take place in which order? |
| | A) | Purchases of merchandise ?Sale of merchandise on account ?Collection of the receivables |
| | B) | Sale of merchandise on account ?Purchases of merchandise ?Collection of the receivables |
| | C) | Collection of the receivables ?Purchases of merchandise ?Sale of merchandise on Account |
| | D) | Purchases of merchandise ?Collection of the receivables ?Sale of merchandise on Account |
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| 2 | |
Merchandising activities are carried out by: |
| | A) | manufacturers. |
| | B) | retailers, only. |
| | C) | wholesalers, only. |
| | D) | retailers and wholesalers. |
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| 3 | |
Revenues from sales are $450,000, sales discounts are $12,000, cost of goods sold is $230,000, and operating expenses are $180,000. Income before taxes is which of the following? |
| | A) | $28,000 |
| | B) | $40,000 |
| | C) | $438,000 |
| | D) | $220,000 |
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| 4 | |
Sales were $600,000, gross profit was $220,000, operating expenses were $120,000, and the income tax rate is 30%. Calculate the cost of goods sold and net income. |
| | A) | $380,000 and $30,000, respectively |
| | B) | $380,000 and $100,000, respectively |
| | C) | $380,000 and $70,000, respectively |
| | D) | $100,000 and $70,000, respectively |
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| 5 | |
Revenues from sales are $450,000, sales discounts are $12,000, cost of goods sold is $230,000, and operating expenses are $180,000. Calculate the gross profit. |
| | A) | $28,000 |
| | B) | $40,000 |
| | C) | $202,000 |
| | D) | $208,000 |
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| 6 | |
A company maintains a separate ledger containing the account of each of its customers. The Accounts Receivable account of the company is referred to as which of the following? |
| | A) | Combination account |
| | B) | Control account |
| | C) | Multiple accounts |
| | D) | Subsidiary account |
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| 7 | |
In a perpetual inventory system, as inventory is purchased, it is initially recorded as (1) _____________. When inventory is sold to customers, it is converted to (2) ___________. |
| | A) | (1) an asset (2) an expense |
| | B) | (1) an expense (2) revenue |
| | C) | (1) an expense (2) cost of goods sold |
| | D) | (1) an asset (2) revenue |
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| 8 | |
When a company is using a perpetual inventory system, which entry follows the recording of sales? |
| | 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 |
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| 9 | |
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. |
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| 10 | |
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 |
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| 11 | |
When posting a journal entry from the general journal to appropriate ledgers and subsidiary ledgers that include a debit to Accounts Receivable and a credit to Sales, how many postings are required? |
| | A) | Two postings are required |
| | B) | Three postings are required |
| | C) | One posting is required |
| | D) | None of the accounts are posted |
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| 12 | |
When posting a journal entry from the general journal to appropriate ledgers and subsidiary ledgers for the payment to a supplier of inventory, how many postings are required? |
| | A) | One posting are required |
| | B) | Two postings are required |
| | C) | Three postings are required |
| | D) | None of the accounts are posted |
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| 13 | |
Under a perpetual inventory system, how is the Cost of Goods Sold account closed? |
| | A) | Directly to the Retained Earnings account |
| | B) | To the Income Summary account |
| | C) | To the Inventory account |
| | D) | With the revenue accounts |
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| 14 | |
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. |
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| 15 | |
Sales were $424,000. Beginning inventory was $45,000. Purchases were $245,000. Ending inventory is $38,000. Operating expenses were $124,000. Calculate the cost of goods sold. |
| | A) | $252,000 |
| | B) | $172,000 |
| | C) | $290,000 |
| | D) | $128,000 |
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| 16 | |
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: |
| | A) | when there is no inventory shrinkage. |
| | B) | when there are no accounts payables outstanding. |
| | C) | by creating a Cost of Goods Sold account. |
| | D) | when there are no sales returns and allowances. |
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| 17 | |
Which of the following is a factor suggesting the use of a periodic inventory system? |
| | A) | Items of inventory have a high per-unit cost. |
| | B) | Merchandise is stored in multiple locations. |
| | C) | A low volume of sales transactions. |
| | D) | The inventory includes many different kinds of low-cost items. |
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| 18 | |
Which of the following is a factor suggesting the use of a perpetual inventory system? |
| | A) | Items of inventory have a high per-unit cost. |
| | B) | Merchandise is stored at the site of sales. |
| | C) | A high volume of sales transactions. |
| | D) | The inventory items are low-cost items. |
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| 19 | |
When a retailer purchases inventory under credit terms of 2/10, n/30, a retailer can deduct |
| | A) | 2% from the invoice price by paying within 10 days of the invoice date. |
| | B) | 2% from the invoice price by paying within 30 days of the invoice date. |
| | C) | 10% from the invoice price by paying within 2 days of the invoice date. |
| | D) | 2% from the invoice price by paying on the 10th day of the month following the month of the invoice. |
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| 20 | |
When a retailer purchases inventory under credit terms of 10 eom, the retailer |
| | A) | can deduct 10% from the invoice price by paying within 10 days of the invoice date. |
| | B) | can deduct 10% from the invoice price by paying within 30 days of the invoice date. |
| | C) | can deduct 10% from the invoice price by paying within 2 days of the invoice date. |
| | D) | must pay the full invoice price by the 10th day of the month following the month of the invoice. |
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| 21 | |
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 cost method of recording purchases of merchandise. The company paid the vendor 30 days after receiving the invoice. The journal entry to record the 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) | Both (A) and (C) |
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| 22 | |
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 price method of recording purchases of merchandise. The company paid the vendor 9 days after the invoice date. The journal entry to record the payment would include which of the following? |
| | A) | A credit to Purchase Discounts Taken for $200 |
| | B) | A debit to Accounts Payable for $9,800 |
| | C) | A credit to Cash for $10,000 |
| | D) | A credit to Purchase Discounts Taken for $180 |
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| 23 | |
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 price method of recording purchases of merchandise. The company paid the vendor 45 days after the invoice date. The journal entry the record the 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) | Both (B) and (C) |
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| 24 | |
The company used the net cost method of recording the purchase of merchandise inventory. The invoice amount was $4,500 and credit terms were 2/10, n/30. The company returned 10% of the purchase as unsatisfactory inventory, before the invoice was paid. The journal entry for the return would include which of the following? |
| | A) | A debit to Accounts Payable for $450 |
| | B) | A credit to Inventory for $441 |
| | C) | A credit to Inventory for $450 |
| | D) | A debit to Cash for $450 |
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| 25 | |
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) | A debit to Sales Discount for $500 |
| | B) | A credit to Sales Discount for $500 |
| | C) | A debit to Sales Returns and Allowances for $500 |
| | D) | A credit to Sales Returns and Allowances for $500 |
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| 26 | |
Adding the costs of transportation on merchandise purchases to the cost of goods sold in the income statement is: |
| | A) | consistent with the realization principle. |
| | B) | acceptable under the materiality principle. |
| | C) | consistent with the matching principle. |
| | D) | not acceptable under any circumstance. |
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| 27 | |
Customer Marcus Nickle sent you a check for $490 as payment in full on his account receivable. You offered terms of 2/10, n/30, which Marcus honored by paying his bill within 5 days of the invoice. Which journal entry should 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 |
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| 28 | |
The Sales Returns and Allowance account and the Sales Discountsaccount are closed at the end of the period |
| | A) | with other revenue accounts. |
| | B) | to the Sales account. |
| | C) | to the Cost of Goods Sold account. |
| | D) | with other expense accounts. |
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| 29 | |
Delivery expense is treated in the income statement as which of the following? |
| | A) | An operating expense |
| | B) | A part of the Cost of Goods Sold |
| | C) | A deduction from Net Sales |
| | D) | An other expense |
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| 30 | |
Assume that the sales tax rate in the county in which you reside is 8%. You've made a purchase of merchandise and charged the full amount, including sales tax, to your VISA card for $346.00. The retailer will recognize Sales Tax Payable for which amount? |
| | A) | $25.63 |
| | B) | $27.86 |
| | C) | $32.03 |
| | D) | $24.33 |
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| 31 | |
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. |
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| 32 | |
Consider the following partial income statements of four companies:
| Company A | Company B | Company C | Company D | | Net Sales | $100,000 | $350,000 | $500,000 | $260,000 | | Cost of goods sold | 60,000 | 180,000 | 390,000 | 180,000 | | Gross profit | $40,000 | $170,000 | $110,000 | $80,000 |
To the nearest hundredth, which company has the greatest gross profit margin (gross profit rate)? |
| | A) | Company A |
| | B) | Company B |
| | C) | Company C |
| | D) | Company D |
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| 33 | |
If an accounting manager asks you to delay recording an invoice for the purchase of merchandise until after the closing of the general ledger, but include the merchandise in the physical count of the ending merchandise inventory (periodic inventory method), the manager is attempting to do which of the following? |
| | A) | Increase the reported net income in the income statement of the current period |
| | B) | Take advantage of the credit terms related to the purchase |
| | C) | Follow the matching principle |
| | D) | Employ the net cost method of recording purchases |
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