Question 1

When a company uses a perpetual inventory system,all merchandise transactions are updated as and when they occur.However,the inventory account may not show the current balance at all times.

Accepted Answer

A perpetual inventory system updates inventory transactions in real-time but the inventory account may not always show the current balance due to factors such as human errors, system glitches or delays in data processing.

Question 2

G-mart,a small-scale grocer,wants to introduce an inventory system to track its inventory.G-mart does not currently use optical scanning registers and computer systems.The perpetual inventory system is most suitable for its operations.

Accepted Answer

The perpetual inventory system requires technology like optical scanning registers and computer systems to continuously update inventory records, which G-mart currently lacks.

Question 3

________ are the expenses that occur in an entity's major line of business.&#10;A)Interest expense&#10;B)Interest revenue&#10;C)Operating expenses&#10;D)Loss on sale of plant asset

Accepted Answer

Operating expenses are the expenses that occur in the major line of business of an entity, such as salaries, rent, advertising, and supplies. Interest expenses and loss on sale of plant asset are not directly related to the major line of business, while interest revenue is a type of income rather than an expense.

Question 4

Gross profit is the extra amount the company receives from the customer for merchandise sold over what the company paid to the vendor.

Accepted Answer

Gross profit is the difference between revenue (amount received from customer) and cost of goods sold (amount paid to vendor/manufacturer).

Question 5

Which of the following line items will appear on the income statement of a merchandiser but not of a service company?&#10;A)Salaries Expense&#10;B)Depreciation Expense&#10;C)Cost of Goods Sold&#10;D)Supplies Inventory

Accepted Answer

Cost of Goods Sold only appears on the income statement of a merchandiser, as it represents the cost of the products that were sold during the period. Service companies do not have a cost of goods sold as they do not sell products. Salaries Expense and Depreciation Expense could appear on the income statement of both merchandisers and service companies, and Supplies Inventory is a balance sheet item that represents the value of supplies on hand, not an expense appearing on the income statement.

Question 6

The perpetual inventory system keeps a running record of inventory and cost of goods sold.

Accepted Answer

The perpetual inventory system is designed to keep a continuous record of inventory and cost of goods sold, updating this information regularly as transactions occur. This is different from the periodic inventory system, which only updates this information at the end of an accounting period. The perpetual system allows businesses to have up-to-date information on the status of their inventory, including how much they have on hand, the value of that inventory, and how much of it has been sold.

Question 7

The main expense of a merchandiser is usually ________.&#10;A)cost of goods sold&#10;B)current assets&#10;C)selling and administrative expenses&#10;D)production overhead

Accepted Answer

The main expense of a merchandiser is usually the cost of goods sold, as it represents the cost of purchasing the products that are sold to customers.

Question 8

The term &#34;inventory,&#34; for a merchandiser,refers to ________.&#10;A)raw materials that are used for production&#10;B)equipment that are used in production process&#10;C)the cost of goods sold&#10;D)goods held for sale to customers

Accepted Answer

Inventory, for a merchandiser, refers to the goods held for sale to customers. This can include finished products or products that are still in the process of being manufactured or delivered. Raw materials and equipment are typically considered assets, while the cost of goods sold is an expense that reflects the cost of producing or acquiring the goods that are eventually sold.

Question 9

Even in a perpetual inventory system that updates the inventory account as and when transactions occur,the business must count its inventory at least once in a year.

Accepted Answer

Although perpetual inventory system keeps a continuous record of inventory levels, businesses often conduct physical inventory counts at least once a year to verify the accuracy of their accounting records and ensure that there are no discrepancies or losses in inventory.

Question 10

On the income statement,a service company reports the cost of merchandise inventory that has been sold to customers.

Accepted Answer

A service company does not sell merchandise inventory, instead they sell services, so they do not report the cost of merchandise inventory on their income statement.

Question 11

The operating cycle of a merchandiser begins when the company purchases inventory from a vendor and ends when the company collects cash from customers.

Accepted Answer

The answer of The operating cycle of a merchandiser begins...

Question 12

An entity that buys goods and sells them to customers at a markup is a ________.&#10;A)merchandiser&#10;B)service provider&#10;C)manufacturer&#10;D)producer

Accepted Answer

The answer of An entity that buys goods and sells...

Question 13

Best Value Company started its operations on January 1,2017.It engages in buying and selling different types of electronic gadgets.The first step in its operating cycle would be to ________.&#10;A)collect cash from customers&#10;B)sell goods to customers&#10;C)purchase inventory from vendors&#10;D)record the sales in accounts

Accepted Answer

The answer of Best Value Company started its operations on...

Question 14

On the income statement,a merchandising company reports the cost of merchandise inventory that has been sold to customers.

Accepted Answer

The answer of On the income statement,a merchandising company reports...

Question 15

List the three steps,in order of occurrence,of the operating cycle of a merchandising business.

Accepted Answer

The answer of List the three steps,in order of occurrence,of...

Question 16

In a periodic inventory system,the Cost of Goods Sold account is continuously updated as and when sales occur.

Accepted Answer

The answer of In a periodic inventory system,the Cost of...

Question 17

The operating cycle of a merchandiser begins when the company purchases inventory from a vendor and ends when the company then sells the inventory to a customer.

Accepted Answer

The answer of The operating cycle of a merchandiser begins...

Question 18

Gross profit is calculated as the difference between net sales revenue and ________.&#10;A)purchases&#10;B)cost of goods sold&#10;C)cost of merchandise inventory&#10;D)selling and administrative expenses

Accepted Answer

The answer of Gross profit is calculated as the difference...

Question 19

A wholesaler is a merchandiser who buys merchandise from a manufacturer and sells the same to a retailer.

Accepted Answer

The answer of A wholesaler is a merchandiser who buys...

Question 20

A retailer purchases goods from a manufacturer and sells them to customers.

Accepted Answer

The answer of A retailer purchases goods from a manufacturer...

Question 21

A purchase discount is the amount offered to the purchaser for delaying the payment to the seller.

Accepted Answer

The answer of A purchase discount is the amount offered...

Question 22

Which of the following is not recorded in a modern perpetual inventory system?&#10;A)units purchased and cost amount&#10;B)units sold and sales and cost amounts&#10;C)customer account numbers and balances owed from the sale of merchandise inventory&#10;D)the quantity of merchandise inventory on hand and its cost

Accepted Answer

The answer of Which of the following is not recorded...

Question 23

Nurix Company sold goods on credit terms n/20 to Jelly Harper Company.This means no discounts are offered,and the amount of the invoice is due 20 days after the invoice date.

Accepted Answer

The answer of Nurix Company sold goods on credit terms...

Question 24

Merchandise inventory accounting systems can be broadly categorized into two types.They are ________.&#10;A)FIFO and LIFO&#10;B)perpetual and periodic&#10;C)wholesale and retail&#10;D)manufacturer and producer

Accepted Answer

The answer of Merchandise inventory accounting systems can be broadly...

Question 25

Credit terms of a merchandising company are 1/15,net 40.This means that the buyer can receive a discount of 1% if the invoice is paid within 40 days of the invoice date.

Accepted Answer

The answer of Credit terms of a merchandising company are...

Question 26

What does &#34;2/10&#34; mean,with respect to &#34;credit terms of 2/10,n/30&#34;?&#10;A)A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.&#10;B)Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice.&#10;C)A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date.&#10;D)Interest of 10 percent will be charged if invoice is paid after two days.

Accepted Answer

The answer of What does &#34;2/10&#34; mean,with respect to &#34;credit...

Question 27

Which of the following statements is not correct?&#10;A)In a perpetual inventory system,the &#34;cash register&#34; at the store is a computer terminal that records sales and updates inventory records.&#10;B)Even in a perpetual inventory system,a business must count inventory at least one a year.&#10;C)Restaurants and small retail stores often use the periodic inventory system.&#10;D)In a periodic inventory system,merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Accepted Answer

The answer of Which of the following statements is not...

Question 28

A company using the perpetual inventory system purchased merchandise on account for $5,000.Give the journal entry to record this transaction.

Accepted Answer

The answer of A company using the perpetual inventory system...

Question 29

Under the perpetual inventory system,when a purchaser makes payment within the discount period,the amount of discount will be credited to the Merchandise Inventory account.

Accepted Answer

The answer of Under the perpetual inventory system,when a purchaser...

Question 30

Credit terms of 2/10,n/30 indicate that a discount of 2% will be given if payment is made within 10 days of the invoice date.Otherwise,the total invoice amount is due within 30 days of the invoice date.

Accepted Answer

The answer of Credit terms of 2/10,n/30 indicate that a...

Question 31

An invoice is a request by the seller for payment from the purchaser.

Accepted Answer

The answer of An invoice is a request by the...

Question 32

The Merchandise Inventory account is an expense account that is used for goods purchased that the business owns and intends to resell to customers,as well as for purchase of office supplies and equipment.

Accepted Answer

The answer of The Merchandise Inventory account is an expense...

Question 33

The Merchandise Inventory account is an expense account that is used only for goods purchased that the business owns and intends to resell to customers.

Accepted Answer

The answer of The Merchandise Inventory account is an expense...

Question 34

Purchase discounts are calculated on the amount of the merchandise purchased including freight costs.

Accepted Answer

The answer of Purchase discounts are calculated on the amount...

Question 35

The Merchandise Inventory account is an asset account that is used only for goods purchased that the business owns and intends to resell to customers.

Accepted Answer

The answer of The Merchandise Inventory account is an asset...

Question 36

An invoice is also known as a bill.

Accepted Answer

The answer of An invoice is also known as a...

Question 37

A company that uses the perpetual inventory system purchases inventory for $61,000 on account,with terms of 3/10,n/30.Which of the following is the journal entry to record the payment made within 10 days?

A)a debit to Accounts Payable for $61,000,a credit to Cash for $59,170,and a debit to Merchandise Inventory for $1,830
B)a debit to Accounts Payable for $61,000,a credit to Merchandise Inventory for $1,830,and a credit to Cash for $59,170
C)a debit to Merchandise Inventory for $1,830,a debit to Accounts Payable for $61,000,and a credit to Cash for $62,830
D)a debit to Accounts Payable for $59,170,a debit to Merchandise Inventory for $1,830,and a credit to Cash for $61,000

Accepted Answer

The answer of A company that uses the perpetual inventory...

Question 38

A company that uses the perpetual inventory system purchased inventory for $910,000 on account with terms of 4/7,n/20.Which of the following correctly records the payment made 15 days after the date of invoice?

A)

<strong>A company that uses the perpetual inventory system purchased inventory for $910,000 on account with terms of 4/7,n/20.Which of the following correctly records the payment made 15 days after the date of invoice?</strong> A) B) C) D) <div style=padding-top: 35px>

B)

C)

D)

Accepted Answer

The answer of A company that uses the perpetual inventory...

Question 39

Which of the following entries would be made to record the purchase of inventory on account,if a company uses the perpetual inventory system?&#10;A)a debit to Purchases and a credit to Accounts Payable&#10;B)a debit to Accounts Payable and a credit to Purchases&#10;C)a debit to Merchandise Inventory and a credit to Accounts Payable&#10;D)a debit to Accounts Payable and a credit to Merchandise Inventory

Accepted Answer

The answer of Which of the following entries would be...

Question 40

The purchase discount amount is calculated on the amount of the invoice minus the returns and allowances.

Accepted Answer

The answer of The purchase discount amount is calculated on...

Question 41

Under the perpetual inventory system,discounts taken on an invoice by the buyer would be ________.&#10;A)debited to Merchandise Inventory&#10;B)credited to Merchandise Inventory&#10;C)debited to Cost of Goods Sold&#10;D)credited to Cost of Goods Sold

Accepted Answer

The answer of Under the perpetual inventory system,discounts taken on...

Question 42

Defective,damaged,or otherwise unsuitable merchandise that is returned to the seller is referred to as purchase allowances by the purchaser.

Accepted Answer

The answer of Defective,damaged,or otherwise unsuitable merchandise that is returned...

Question 43

A company using the perpetual inventory system purchased inventory worth $540,000 on account with credit terms of 2/15,n/45.Defective inventory of $40,000 was returned 2 days later,and the accounts were appropriately adjusted.If the company paid the invoice 20 days later,the journal entry to record the payment would be ________.

A)$540,000 debit to Accounts Payable and $540,000 credit to Cash
B)$500,000 debit to Accounts Payable and $500,000 credit to Cash
C)$540,000 debit to Accounts Payable,$530,000 credit to Cash,and $10,000 credit to Merchandise Inventory
D)$530,000 debit to Accounts Payable,$10,000 credit to Merchandise Inventory,and $500,000 credit to Cash

Accepted Answer

The answer of A company using the perpetual inventory system...

Question 44

Oscar Packers received an allowance from the vendor for an amount of $400.Give the journal entry for this transaction.The company uses a perpetual inventory system.

Accepted Answer

The answer of Oscar Packers received an allowance from the...

Question 45

If purchase allowances are granted,the buyer need not return the goods to the seller.

Accepted Answer

The answer of If purchase allowances are granted,the buyer need...

Question 46

The terms of an invoice are 3/10,n/25.This means that a ________.&#10;A)discount of 10 percent is allowed if the invoice is paid within three days&#10;B)discount of 3 percent is allowed if the invoice is paid within 10 days&#10;C)discount of 25 percent is allowed if the invoice is paid within 10 days&#10;D)discount of 3 percent is allowed if the invoice is paid after 25 days

Accepted Answer

The answer of The terms of an invoice are 3/10,n/25.This...

Question 47

A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $700 to the vendor.Which of the following would be the correct journal entry to record these returns?

A)

<strong>A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $700 to the vendor.Which of the following would be the correct journal entry to record these returns?</strong> A) B) C) D) <div style=padding-top: 35px>

B)

C)

D)

Accepted Answer

The answer of A company that uses a perpetual inventory...

Question 48

An invoice,with payment terms of 6/10,n/30,was issued on April 28 for $230.00.If the payment was made on May 12,the amount of payment will be ________.(Round your answer to the nearest cent. )&#10;A)$230.00&#10;B)$207.00&#10;C)$216.20&#10;D)$224.00

Accepted Answer

The answer of An invoice,with payment terms of 6/10,n/30,was issued...

Question 49

On January 21,2016,Bessant Company received merchandise from Mullies Company.On that date,it found a few of these goods to be damaged.On January 22,it returned the damaged goods to the seller.Such returns will be treated as ________ by Bessant.

A)purchase returns
B)sales returns
C)purchase allowances
D)sales allowances

Accepted Answer

The answer of On January 21,2016,Bessant Company received merchandise from...

Question 50

A company purchased inventory for $2,000 from a vendor on account,FOB shipping point,with terms of 2/10,n/30.The company paid $100 cash for freight in.Prepare the journal entry to record payment of the invoice within 10 days by the purchaser.(Assume a perpetual inventory system. )

Accepted Answer

The answer of A company purchased inventory for $2,000 from...

Question 51

An invoice of $800 for merchandise purchased is showing 2/15,n/30 as terms of credit.If the invoice is paid on or before the fifteenth day,the amount to be paid is ________.&#10;A)$784&#10;B)$800&#10;C)$816&#10;D)$819

Accepted Answer

The answer of An invoice of $800 for merchandise purchased...

Question 52

Under the perpetual inventory system,when a wholesaler returns the goods purchased on account,the ________ account is credited.&#10;A)Accounts Receivable&#10;B)Merchandise Inventory&#10;C)Cost of Goods Sold&#10;D)Accounts Payable

Accepted Answer

The answer of Under the perpetual inventory system,when a wholesaler...

Question 53

Under the terms FOB destination,title to the merchandise will pass to the purchaser when the goods are received by the purchaser.

Accepted Answer

The answer of Under the terms FOB destination,title to the...

Question 54

A company using the perpetual inventory system purchased inventory worth $21,000 on account with terms of 3/10,n/30.Defective inventory of $1,000 was returned two days later,and the accounts were appropriately adjusted.If the invoice is paid within 10 days,the amount of the purchase discount that would be available to the company is ________.

A)$600
B)$660
C)$630
D)$620

Accepted Answer

The answer of A company using the perpetual inventory system...

Question 55

Complete the following table to show how FOB terms apply to merchandise inventory purchased by a merchandiser.&#10;

Accepted Answer

The answer of Complete the following table to show how...

Question 56

A company purchased inventory for $100,000 on account and recorded it as follows:

The vendor's invoice showed terms of 3/10,net 30.Give the journal entry for the payment of the invoice seven days after the invoice date,assuming that the vendor uses the perpetual inventory system.

Accepted Answer

The answer of A company purchased inventory for $100,000 on...

Question 57

Freight in is recorded in the Merchandise Inventory account if the purchaser uses the perpetual inventory system.

Accepted Answer

The answer of Freight in is recorded in the Merchandise...

Question 58

A company purchased inventory for $2,200 on account,and recorded the following journal entry:

The vendor's invoice showed terms of 3/10,n/30.Give the journal entry for the payment of the invoice 17 days after the invoice date.

Accepted Answer

The answer of A company purchased inventory for $2,200 on...

Question 59

Under the perpetual inventory system,purchase returns or allowances are debited to the Merchandise Inventory account by the purchaser.

Accepted Answer

The answer of Under the perpetual inventory system,purchase returns or...

Question 60

If goods are sold on terms FOB shipping point,the ________.&#10;A)seller normally pays the transportation costs&#10;B)buyer normally pays the transportation costs&#10;C)buyer and the seller split the transportation costs&#10;D)shipping company bears the transportation cost

Accepted Answer

The answer of If goods are sold on terms FOB...

Question 61

A company sold merchandise with a cost of $238 for $440 on account.The seller uses the perpetual inventory system.The entry to record the cost of merchandise sold would include ________.&#10;A)a debit to Sales Revenue and a credit to Cash for $440&#10;B)a debit to Cash and a credit to Sales Revenue for $440&#10;C)a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $238&#10;D)a debit to Merchandise Inventory for $238 and a credit to Cost of Goods Sold for $238

Accepted Answer

The answer of A company sold merchandise with a cost...

Question 62

Owens Jewelers uses the perpetual inventory system.On April 2,Owens sold merchandise with a cost of $5,500 for $7,000 to a customer on account with terms of 1/15,n/30.Which of the following journal entries correctly records the sales revenue?

A)

<strong>Owens Jewelers uses the perpetual inventory system.On April 2,Owens sold merchandise with a cost of $5,500 for $7,000 to a customer on account with terms of 1/15,n/30.Which of the following journal entries correctly records the sales revenue?</strong> A) B) C) D) <div style=padding-top: 35px>

B)

C)

D)

Accepted Answer

The answer of Owens Jewelers uses the perpetual inventory system.On...

Question 63

WAXS-D,merchandisers of musical instruments,has provided the following details:

Credit terms are: 4/20,n/45,FOB shipping point.Calculate the net cost of inventory purchased assuming that there are no other inventory-related transactions during the month.

A)$713,000
B)$665,280
C)$658,000
D)$666,680