Question 1

A credit customer purchased $450 worth of items.Two days later,the customer returned $300 worth of those items.The entry to record this under the perpetual inventory method would include:

Accepted Answer

Under the perpetual inventory system, when items are returned, the Sales Returns and Allowances account is debited to decrease sales revenue by the amount of the return, which is $300 in this case.

Question 2

The journal entry to record a customer's return of an item for a cash refund would:

Accepted Answer

Under the perpetual system, two entries are required to record a customer's return of an item for a cash refund. The first entry would be to reverse the original sale and the second entry would be to record the refund of cash to the customer. This is because the perpetual system constantly updates inventory levels, so the reversal of the original sale needs to be recorded for accurate inventory valuation. Under the periodic system, only one entry would be required to record the return of the item and the issuance of a cash refund.

Question 3

The freight paid on goods purchased F.O.B.shipping point was debited to the Purchases account.The company uses the periodic method.This error would cause:

Accepted Answer

D

Question 4

Under the periodic inventory system,in addition to making the entry to record a sale,a company would:

Accepted Answer

Under the periodic inventory system, the cost of goods sold is not recorded at the time of sale. Instead, it is calculated at the end of the accounting period, so no additional entry is made when a sale occurs.

Question 5

Which of the following would be used to record the payment for purchases under the periodic system?

Accepted Answer

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

Question 6

Under the perpetual system,when merchandise is sold the journal entry would include a:

Accepted Answer

Under the perpetual inventory system, when merchandise is sold, two entries are made: one to record the revenue (debit Accounts Receivable or Cash and credit Sales) and another to record the cost of goods sold (debit Cost of Goods Sold and credit Merchandise Inventory).

Question 7

The journal entry to record a purchase of inventory for cash under the perpetual system includes:

Accepted Answer

In the perpetual system, inventory purchases are recorded directly into the Merchandise Inventory account, which is an asset account. Therefore, the journal entry would include a debit to Merchandise Inventory. Since the purchase was made with cash, there would also be a credit to Cash, resulting in an increase in the Cash account. Hence, both options A and C are correct.

Question 8

The freight paid on goods purchased F.O.B.shipping point was debited to the Freight Expense account.The goods are not sold at period end.The company uses the perpetual inventory method.This error would cause:

Accepted Answer

When freight paid on goods purchased F.O.B. shipping point is debited to the Freight Expense account, it implies that the cost of transportation is considered as an expense rather than a part of the cost of goods sold or inventory. This error would cause an understatement of the inventory and hence an understatement of the period-end assets.

Question 9

The journal entry to record the purchase of inventory under the perpetual system includes:

Accepted Answer

Under the perpetual system, inventory is recorded at the time of purchase. The journal entry to record the purchase of inventory includes a debit to Merchandise Inventory and a credit to either Accounts Payable (if purchased on credit) or Cash (if purchased for cash). Option A is incorrect because it records the expense before the sale of inventory. Option C is incorrect because it records a sale, not a purchase. Option D is incorrect because it includes both the correct and incorrect options.

Question 10

Under the perpetual inventory system,in addition to making the entry to record a return of goods from a customer,a company would:

Accepted Answer

The answer of Under the perpetual inventory system,in addition to...

Question 11

Office Supplies bought on account were returned for credit and recorded with a debit to Accounts Payable and a credit to Merchandise Inventory.This error would cause:

Accepted Answer

The answer of Office Supplies bought on account were returned...

Question 12

The journal entry to record the return of a purchase of inventory under the periodic system includes a:

Accepted Answer

Under the periodic inventory system, when inventory is returned, the Purchases Returns and Allowances account is credited to reduce the total purchases.

Question 13

In a perpetual inventory system:

Accepted Answer

The answer of In a perpetual inventory system:
...

Question 14

Under the perpetual inventory system,which of the following accounts would NOT be used?

Accepted Answer

The answer of Under the perpetual inventory system,which of the...

Question 15

A customer returned merchandise that had been paid for within a discount period for credit.The entry was recorded with a debit to Sales Returns and Allowances and a credit to Accounts Receivable for the net amount.This error would cause:

Accepted Answer

The answer of A customer returned merchandise that had been...

Question 16

Which of the following accounts is used with a periodic inventory system?

Accepted Answer

In a periodic inventory system, all purchases are recorded in the Purchases account. Purchase Discounts, Purchase Returns, and Allowances are all related to purchases and are also recorded in the Purchases account.

Question 17

The company returned $400 of damaged merchandise purchased on credit.The entry to record this under the periodic inventory method is:

Accepted Answer

Under the periodic inventory system, returns of merchandise are recorded by debiting Accounts Payable and crediting Purchases Returns and Allowances.

Question 18

The perpetual inventory system is a system which:

Accepted Answer

The perpetual inventory system is a system that continually updates inventory as transactions occur. It does not require a physical inventory count, and it can use any inventory valuation method, including LIFO, FIFO, and average cost. Therefore, choices A and B are incorrect. Choice C is the best answer as it accurately describes a necessary component of the perpetual inventory system.

Question 19

Under the perpetual inventory method,merchandise inventory is assigned to Cost of Goods Sold when a company:

Accepted Answer

Under the perpetual inventory method, merchandise inventory is continuously updated every time a sale is made. Therefore, the cost of the inventory sold is immediately assigned to Cost of Goods Sold at the time of the sale.

Question 20

The return of merchandise was recorded as a debit to Accounts Payable and a credit to Purchases.This error would cause:

Accepted Answer

The error does not affect the net income or the period end assets and liabilities, as it involves only the reclassification of accounts payable and purchases, which are both balance sheet accounts.

Quiz 15: Accounting for Merchandise Inventory