Question 1

When the perpetual inventory system is used,the inventory sold is shown on the income statement as

Accepted Answer

A)  cost of merchandise sold
B)  purchases
C)  purchases returns and allowances
D)  net purchasesE) C) and D)
F) A) and C)

Question 2

Under the perpetual inventory system,when a sale is made,both the sale and cost of merchandise sold are recorded.

Accepted Answer

A) True 
 B)False

Question 3

Inventory shrinkage is recorded when

Accepted Answer

A)  merchandise is returned by a buyer
B)  merchandise purchased from a seller is incomplete or short
C)  merchandise is returned to a seller
D)  there is a difference between a physical count of inventory and inventory recordsE) A) and B)
F) B) and D)

Question 4

The single-step income statement is easier to prepare,but a criticism of this format is that gross profit and income from operations are not readily available.

Accepted Answer

A) True 
 B)False

Question 5

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Accepted Answer

A)  multiple-step statement
B)  revenue statement
C)  report-form statement
D)  single-step statementE) B) and D)
F) All of the above

Question 6

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment,the terms are stated as FOB destination.

Accepted Answer

A) True 
 B)False

Question 7

If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000,what would be the necessary adjusting entry to record inventory shrinkage?

Accepted Answer

A)  debit Merchandise Inventory,$158,000; credit Cost of Merchandise Sold,$158,000
B)  debit Merchandise Inventory,$5,000; credit Cost of Merchandise Sold,$5,000
C)  debit Cost of Merchandise Sold,$163,000; credit Merchandise Inventory,$158,000
D)  debit Cost of Merchandise Sold,$5,000; credit Merchandise Inventory,$5,000E) A) and B)
F) A) and C)

Question 8

The primary difference between the periodic and perpetual inventory systems is that a

Accepted Answer

A)  periodic system determines the inventory on hand only at the end of the accounting period
B)  periodic system keeps a record showing the inventory on hand at all times
C)  periodic system provides an easy means to determine inventory shrinkage
D)  periodic system records the cost of the sale on the date the sale is madeE) None of the above
F) A) and B)

Question 9

When the terms of sale are FOB shipping point,the buyer pays the freight charges.

Accepted Answer

A) True 
 B)False

Question 10

In recording the cost of merchandise sold for cash,based on data available from perpetual inventory records,the journal entry is

Accepted Answer

A)  debit Cost of Merchandise Sold; credit Sales
B)  debit Cost of Merchandise Sold; credit Merchandise Inventory
C)  debit Merchandise Inventory; credit Cost of Merchandise Sold
D)  debit Accounts Receivable; credit Merchandise InventoryE) C) and D)
F) A) and B)

Question 11

The entry to record the return of merchandise from a customer would include a

Accepted Answer

A)  debit to Sales
B)  credit to Sales
C)  debit to Customer Refunds Payable
D)  debit to Estimated Returns InventoryE) A) and D)
F) A) and C)

Question 12

Using a perpetual inventory system,the entry to record the sale of merchandise on account includes a

Accepted Answer

A)  debit to Sales
B)  debit to Merchandise Inventory
C)  credit to Merchandise Inventory
D)  credit to Accounts ReceivableE) A) and B)
F) A) and C)

Question 13

Multiple-step income statements show

Accepted Answer

A)  gross profit but not income from operations
B)  neither gross profit nor income from operations
C)  both gross profit and income from operations
D)  income from operations but not gross profitE) A) and B)
F) None of the above

Question 14

The inventory system employing accounting records that continuously disclose the amount of inventory is called

Accepted Answer

A)  retail
B)  periodic
C)  physical
D)  perpetualE) A) and B)
F) B) and C)

Question 15

Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.

Accepted Answer

A) True 
 B)False

Question 16

Calculate income from operations for Jonas Company based on the following data:

Accepted Answer

A)  $485,500
B)  $711,500
C)  $173,500
D)  $226,000E) A) and B)
F) A) and C)

Question 17

Merchandise inventory is classified on the balance sheet as a

Accepted Answer

A)  current liability
B)  current asset
C)  long-term asset
D)  long-term liabilityE) B) and C)
F) None of the above

Question 18

Determine the amount to be paid in full settlement of each invoice,assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

Accepted Answer

a. $3,374 ...

Question 19

In a periodic inventory system,the cost of merchandise purchased includes the cost of freight-in.

Accepted Answer

A) True 
 B)False

Question 20

Which account is not classified as a selling expense?

Accepted Answer

A)  Sales Salaries
B)  Delivery Expense
C)  Cost of Goods Sold
D)  Advertising ExpenseE) B) and C)
F) A) and B)

Exam 5: Accounting for Merchandising Businesses

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Correct AnswerverifiedShow Answer

In a periodic inventory system,the cost of merchandise purchased includes the cost of freight-in.

Correct AnswerverifiedShow Answer

The single-step income statement is easier to prepare,but a criticism of this format is that gross profit and income from operations are not readily available.

Correct AnswerverifiedShow Answer

If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000,what would be the necessary adjusting entry to record inventory shrinkage?

Correct AnswerverifiedShow Answer

Under the perpetual inventory system,when a sale is made,both the sale and cost of merchandise sold are recorded.

Correct AnswerverifiedShow Answer

The inventory system employing accounting records that continuously disclose the amount of inventory is called

Correct AnswerverifiedShow Answer

When the perpetual inventory system is used,the inventory sold is shown on the income statement as

Correct AnswerverifiedShow Answer

Merchandise inventory is classified on the balance sheet as a

Correct AnswerverifiedShow Answer

Calculate income from operations for Jonas Company based on the following data:

Correct AnswerverifiedShow Answer

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment,the terms are stated as FOB destination.

Correct AnswerverifiedShow Answer

Multiple-step income statements show

Correct AnswerverifiedShow Answer

The primary difference between the periodic and perpetual inventory systems is that a

Correct AnswerverifiedShow Answer

Using a perpetual inventory system,the entry to record the sale of merchandise on account includes a

Correct AnswerverifiedShow Answer

The entry to record the return of merchandise from a customer would include a

Correct AnswerverifiedShow Answer

Which account is not classified as a selling expense?

Correct AnswerverifiedShow Answer

Inventory shrinkage is recorded when

Correct AnswerverifiedShow Answer

In recording the cost of merchandise sold for cash,based on data available from perpetual inventory records,the journal entry is

Correct AnswerverifiedShow Answer

Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.

Correct AnswerverifiedShow Answer

Determine the amount to be paid in full settlement of each invoice,assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

Correct Answerverifieda. $3,374 ...View AnswerShow Answer

When the terms of sale are FOB shipping point,the buyer pays the freight charges.

Correct AnswerverifiedShow Answer

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a. $3,374 ...
View Answer

Correct Answer
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