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| 1 | |
Gross profit (also called gross margin) from sales is the difference between which of the following? |
| | A) | Net sales and operating expenses |
| | B) | Net sales and the cost of goods sold |
| | C) | Net sales and the cost of goods sold plus all the expenses |
| | D) | Gross sales less the sales discounts and sales returns and allowances |
| | E) | None of the above |
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| 2 | |
If sales are $75,000 and the cost of goods sold was $52,500, calculate the gross profit (or gross margin) ratio: |
| | A) | 70% |
| | B) | 30% |
| | C) | 43% |
| | D) | 57% |
| | E) | None of the above |
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| 3 | |
Which of the following most correctly defines the activities of a retailer: |
| | A) | A company who turns raw materials into finished products |
| | B) | A company who sells services to the public |
| | C) | An intermediary that buys products from manufacturers and sells to other wholesalers |
| | D) | An intermediary that buys products from manufacturers or wholesalers who then sells them to consumers |
| | E) | None of the above |
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| 4 | |
Which of the following costs are included in the Merchandise Inventory account? |
| | A) | Cost incurred to buy goods held for resale |
| | B) | Cost of shipping goods to the store |
| | C) | Cost of making goods ready for sale |
| | D) | Cost of office supplies |
| | E) | A, B, and C are all accounted for in the Merchandise Inventory account |
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| 5 | |
A merchandiser would include which of the following accounts on their balance sheet? |
| | A) | Cost of Goods Sold |
| | B) | Sales |
| | C) | Deliver Expense |
| | D) | Merchandise Inventory |
| | E) | All of the above |
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| 6 | |
Which type of inventory system continually updates accounting records for merchandising 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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| 7 | |
Which type of company would expect to have the shortest operating cycle? |
| | A) | Department Stores |
| | B) | Jewelry Stores |
| | C) | Grocery Stores |
| | D) | Auto Dealers |
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| 8 | |
When sellers require payment within 10 days after the end of the month of the invoice date, which of the following would be shown as the credit terms? |
| | A) | n/10 EOM |
| | B) | 1/20 net 30 |
| | C) | 2/10 net 30 |
| | D) | net 30 |
| | E) | None of the above |
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| 9 | |
When the terms of a sale are "2/10 net 30", what does the 10 stand for: |
| | A) | The percentage discount offered for quick payment |
| | B) | The number of days in the discount period |
| | C) | The number of days before the invoice is due if a discount is not taken |
| | D) | The days left until the end of the month |
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| 10 | |
When determining discounts for prompt payments, which date is used in determining the discount and credit period for an invoice? |
| | A) | The date of the invoice |
| | B) | The date the invoice was mailed |
| | C) | The date the invoice was received |
| | D) | None of the above |
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| 11 | |
Which of the following is true? |
| | 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) | Under periodic inventory, the net cost of purchases includes the cost of transportation on merchandise purchased. |
| | E) | All of the above are true. |
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| 12 | |
The records for Uptown Pet Shop showed the following: | Sales | $75,000 | Beginning merchandise inventory | $10,000 | | Purchases | 45,000 | Cost of goods sold | 50,000 |
What was the ending merchandise inventory? |
| | A) | $ 5,000 |
| | B) | $15,000 |
| | C) | $25,000 |
| | D) | $40,000 |
| | E) | None of the above |
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| 13 | |
Under a perpetual inventory system merchandise is purchased on account. Which is the correct journal entry to record this purchase? |
| | A) | Debit to Purchases and a credit to Cash |
| | B) | Debit to Merchandise Inventory and a credit to Accounts Payable |
| | C) | Debit to Merchandise Inventory and a credit to Cash |
| | D) | Debit to Purchases Returns and Allowances and a credit to Cost of Goods Sold |
| | E) | None of the above |
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| 14 | |
Using the perpetual inventory system, what account would be credited to record the return of merchandise on account from the standpoint of the buyer? |
| | A) | Accounts Payable |
| | B) | Merchandise inventory |
| | C) | Purchases |
| | D) | Sales |
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| 15 | |
An item of merchandise with a list price of $100 was purchased with a trade discount of 40% and credit terms of 2/10, n/30. The vendor was paid within the discount period. Which is the correct journal entry to record the payment, assuming a perpetual inventory system? |
| | A) | Purchases, debit, $100.00; Purchase Discount, credit, $42.00; Cash, credit, $58.00 |
| | B) | Accounts Payable, debit, $60.00; Merchandise Inventory, credit, $1.20; Cash, credit, $58.80 |
| | C) | Accounts Payable, debit, $100.00; Purchases Discount, credit, $42.00; Cash, credit, $58.00 |
| | D) | Accounts Payable, debit, $40.00; Merchandise Inventory, credit, $.80; Cash, credit, $39.20 |
| | E) | None of the above |
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| 16 | |
Part of the merchandise purchased on account at an earlier time is now being returned. None of the goods have been paid for. Which of the following is the correct journal entry by the buyer for this return, assuming a perpetual inventory system is used? |
| | A) | A debit to Cash and a credit to Purchases |
| | B) | A debit to Merchandise Inventory and a credit to Accounts Payable |
| | C) | A debit to Accounts Payable and a credit to Merchandise Inventory |
| | D) | A debit to Purchases Returns and Allowances and a credit to Cost of Goods Sold |
| | E) | None of the above |
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| 17 | |
Two hundred dollars worth of merchandise purchased on account and paid for at an earlier time is now being returned for credit. The credit terms were 2/10, n/30 and the invoice was paid within the discount period. Which of the following is the correct journal entry for the buyer to record the return, assuming a perpetual inventory system is used? |
| | A) | Accounts Payable, debit, $200; Merchandise Inventory, credit, $200 |
| | B) | Accounts Payable, debit, $204; Merchandise Inventory, credit, $204 |
| | C) | Accounts Payable, debit, $196; Merchandise Inventory, credit, $196 |
| | D) | Accounts Receivable, debit, $200; Merchandise Inventory, credit, $200 |
| | E) | Purchases Returns and Allowances, debit, $196; Merchandise Inventory, credit, $196 |
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| 18 | |
Office supplies are purchased for cash. The company uses a perpetual inventory system. What is the correct journal entry for this purchase of office supplies? |
| | A) | A debit to Purchases and a credit to Cash |
| | B) | A debit to Merchandise Inventory and a credit to Accounts Payable |
| | C) | A debit to Merchandise Inventory and a credit to Cash |
| | D) | A debit to Office Supplies and credit Cost of Goods Sold |
| | E) | A debit to Office Supplies and a credit to Cash |
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| 19 | |
Which of the following would be correct 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) | It is the most common type of shipping term |
| | D) | None of the above |
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| 20 | |
A retailer purchased $3,000 of merchandise on credit. The credit terms were 2/10, n/30, FOB destination. The freight costs were $65. What was the journal entry to record the purchase, assuming a perpetual inventory system? |
| | A) | Merchandise Inventory, debit, $3,000; Accounts Payable, credit, $3,000 |
| | B) | Merchandise Inventory, debit, $3,065; Accounts Payable, credit, $3,065 |
| | C) | Merchandise Inventory, debit, $3,000; Freight-In, debit, $65; Accounts Payable, credit, $3,065 |
| | D) | Merchandise Inventory, debit, $2,935; Freight-In, debit, $65; Accounts Payable, credit, $3,000 |
| | E) | None of the above |
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| 21 | |
Under a perpetual inventory system, with terms of FOB shipping, to what account would the freight on an inventory shipment be charged? |
| | A) | Transportation In |
| | B) | Delivery Expense |
| | C) | Merchandise Inventory |
| | D) | Cost of Goods Sold |
| | E) | None of the above |
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| 22 | |
Overland purchased $6,000 of merchandise from Overseas. The credit terms were 2/10, n/30. The freight terms were FOB shipping point. Freight costs of $120 were included in the invoice. What journal entry should Overland record, assuming Overland uses a perpetual inventory system? |
| | A) | Merchandise Inventory, debit, $6,000; Freight-In, debit, $120; Accounts Payable, credit, $6,120 |
| | B) | Merchandise Inventory, debit, $6,000; Accounts Payable, credit, $6,000 |
| | C) | Merchandise Inventory, debit, $5,880; Accounts Payable, credit, $5,880 |
| | D) | Merchandise Inventory, debit, $5,997.60; Accounts Payable, credit, $5,997.60 |
| | E) | None of the above |
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| 23 | |
Why would a seller offer a sales discount? |
| | A) | It encourages customers to pay quicker by offering an incentive |
| | B) | It decreases the delay in receiving cash from sales on account |
| | C) | It reduces future collection efforts |
| | D) | All of the above |
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| 24 | |
Which of the following statements is true with respect to the cost of goods sold account that a merchandiser using a perpetual inventory system would use? |
| | A) | Cost of goods sold is an asset |
| | B) | Cost of goods sold would appear on the balance sheet |
| | C) | Cost of goods sold has a normal credit balance |
| | D) | All of the above |
| | E) | None of the above |
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| 25 | |
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 Sales of what amount? |
| | A) | $400 |
| | B) | $396 |
| | C) | $408 |
| | D) | $392 |
| | E) | $404 |
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| 26 | |
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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| 27 | |
An item of merchandise was sold for $800 cash by a business using the perpetual inventory system. The item cost $600. After the sale entry has been recorded, a second entry will include which of the following? |
| | A) | A debit to Cash and a credit to Sales for $800 |
| | B) | A debit to Sales and a credit to Merchandise Inventory for $600 |
| | C) | A debit to Cost of Goods Sold and a credit to Merchandise Inventory for $600 |
| | D) | A debit to Merchandise Inventory and a credit to Cost of Goods Sold for $800 |
| | E) | A debit to Cost of Goods Sold and a credit to Purchases for $600 |
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| 28 | |
An item of merchandise was sold for $800 cash by a business using the perpetual inventory system. The item cost $600. Which of the following is correct? |
| | A) | Sales would be recorded at $600 |
| | B) | Cost of Goods Sold would be recorded at $800 |
| | C) | The Gross Profit is $1,400 |
| | D) | The gross profit percentage is 75% |
| | E) | None of the above |
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| 29 | |
Which of the following statements is true concerning a merchandiser's financial statements? |
| | A) | Ending inventory is shown on the balance sheet in current assets |
| | B) | As inventory is sold, its cost is shown as Cost of Goods Sold on an income statement |
| | C) | One period's ending inventory is the next period's beginning inventory |
| | D) | Cost of Goods Sold is often the largest expense for a merchandiser |
| | E) | All of the above are true statements |
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| 30 | |
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 existed at year end. What journal entry is needed to adjust the Merchandise Inventory account? |
| | A) | A debit to Shrinkage and credit to Merchandise Inventory for $500 |
| | B) | A debit to Cost of Goods Sold and a credit to Merchandise Inventory for $500 |
| | C) | A debit to Merchandise Inventory and a credit to Cost of Goods Sold for $500 |
| | D) | A debit to Merchandise Inventory and a credit to Shrinkage for $500 |
| | E) | No entry needed |
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| 31 | |
What are the two classifications of operating expenses on a multi-step income statement? |
| | A) | Cost of Goods Sold and Selling expenses |
| | B) | Selling expenses and General and Administrative expenses |
| | C) | Selling expenses and Other expenses and losses |
| | D) | General and Administrative expenses and Interest expenses |
| | E) | Cost of Goods Sold and General and Administrative expenses |
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| 32 | |
The records for Betty's Floral Shoppe showed the following:
| Cash | $125,000 | Current Liabilities | $ 50,000 | | Net Receivables | 25,000 | Revenues | 180,000 | | Merchandise Inventory | 100,000 | Operating Expenses | 112,000 | | Short-term Investments | 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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| 33 | |
In which closing entries would you include the entry to close out the sales discounts? |
| | A) | In the first closing entry |
| | B) | In the second closing entry |
| | C) | In the third closing entry |
| | D) | In the fourth closing entry |
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| 34 | |
Which of the following is correct regarding the last closing entry for a merchandising company? |
| | A) | Income Summary is closed out to retained earnings |
| | B) | Dividends is closed out to common stock |
| | C) | The dividends account is debited |
| | D) | The Common Stock account is credited |
| | E) | None of the above |
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| 35 | |
The net sales of the business totals $220,000 and the Cost of goods sold for the same period totals $154,000. What is the gross margin percentage? |
| | A) | 25% |
| | B) | 30% |
| | C) | 75% |
| | D) | 70% |
| | E) | None of the above |
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| 36 | |
Interest Expense would fall under which category on a multi-step income statement? |
| | A) | Selling Expense |
| | B) | General and Administrative Expense |
| | C) | Other Revenue |
| | D) | Other Expense |
| | E) | None of the above |
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| 37 | |
Under the periodic inventory system, the Purchases account is used to record which of the following? |
| | A) | Only cash purchases of merchandise inventory |
| | B) | Purchases of any asset on account or note payable |
| | C) | Only purchases of merchandise inventory on account |
| | D) | Purchases of merchandise inventory for cash or on account |
| | E) | Purchases of any asset for cash or on account |
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| 38 | |
Under the periodic inventory system, what entry is used to record a cash payment by a buyer of a freight charge to bring inventory in? |
| | A) | A debit to Merchandise Inventory and a credit to Cash |
| | B) | A debit to Cost of Goods Sold and a credit to Cash |
| | C) | A debit to Transportation-In and a credit to Cash |
| | D) | A debit to Cash and a credit to Merchandise Inventory |
| | E) | None of the above |
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