Deck 4: Accounting for a Merchandising Business

Question 1

The general public is referred to as:

A)final consumers.
B)service customers.
C)retail customers.
D)manufacturing customers.

Answer 1

A

Question 2

Amazon.com,JCPenney.com,and Wal-Mart.com are examples of Internet:

A)service businesses.
B)manufacturing businesses.
C)retail businesses.
D)wholesalers.

Answer 2

C

Question 3

Wholesalers purchase large quantities of product from manufacturers and then sell the product to retailers.

Answer 3

True

Question 4

Goods that a retailer has available to sell to its customers are classified as inventory.

Question 5

Retailers may buy goods from the manufacturer and then sell the goods to consumers.

Question 6

Because of innovative and computerized methods of tracking inventory,most businesses today use the perpetual inventory system.

Question 7

Which of the following characterizes Best Buy?

A)Best Buy both purchases and sells products.
B)Best Buy sells products but doesn't purchase products.
C)Best Buy purchases products but doesn't sell products.
D)Best Buy neither purchases nor sells products.

Question 8

A retailer sells goods to a wholesaler.

Question 9

A useful tool that updates inventory is the:

A)cash register.
B)bar code scanner.
C)price tag on the merchandise.
D)UPC number.

Question 10

The general public most often buys products from:

A)a wholesale business.
B)a retail business.
C)a manufacturer.
D)all of the above.

Question 11

Inventory for a merchandising business is classified as a(n):

A)liability.
B)revenue.
C)part of Stockholders' Equity.
D)asset.

Question 12

Which of the following would NOT be classified as a service business?

A)Graham's Lawn Mowing
B)Tonya's Tax Service
C)Rick's Pet Walking
D)Charla's Fashion Boutique

Question 13

Under the perpetual inventory system,the need for a physical count of inventory is eliminated.

Question 14

If there is a difference between the physical count and the perpetual record,the account in which the difference is recorded is:

A)Sales.
B)Cost of Goods Sold.
C)Inventory Expense.
D)Revenue.

Question 15

In the perpetual inventory system,inventory is constantly updated through the inventory tracking system.

Question 16

When the perpetual records do not equal the physical count of the inventory,the general ledger is updated with the differences.

Question 17

Physical inventory counts must be done:

A)when using the periodic system of inventory.
B)when using bar code scan technology.
C)when using the perpetual system of inventory.
D)regardless of inventory system.

Question 18

The general public usually purchase merchandise from wholesalers.

Question 19

Most businesses today use the periodic inventory method.

Question 20

Which of the following would NOT be classified as a retailer?

A)Amazon.com
B)H & R Block
C)Wal-Mart
D)Target

Question 21

If a customer pays within the discount period,the discount will be debited to the Inventory account.

Question 22

The name of the supplier (vendor)is listed in the:

A)Accounts Payable subsidiary ledger.
B)Accounts Payable total.
C)liabilities ledger.
D)inventory ledger.

Question 23

Bach Co.had an inventory balance of $15,250 on January 1,purchased $37,000 during the accounting period,and the cost of goods sold was $25,000.What is the ending balance in the inventory account?

A)$27,250
B)$37,000
C)$52,250
D)Not enough information provided

Question 24

A company pays an invoice early and takes 4% off of the original invoice price.The account to be credited for this amount under a perpetual inventory system is:

A)Inventory.
B)Accounts Payable.
C)Discount.
D)Cash.

Question 25

Northshore Equipment,Inc.purchases $3,500 of inventory on account from Aspen,Co.The journal entry to record this purchase for Northshore Equipment under a perpetual inventory system is:

A)debit Inventory;credit Cash.
B)debit Accounts Payable-Aspen;credit Inventory.
C)debit Inventory;credit Accounts Payable-Northshore Equipment.
D)debit Inventory;credit Accounts Payable-Aspen.

Question 26

If an invoice shows a total of $4,000 with terms 2/10,n/30,the customer may pay $3,920 within 10 days to satisfy the bill.

Question 27

TNT Inc.had an inventory balance of $21,000 on January 1,and $23,500 on December 31.The cost of goods sold during the period was $27,250.What is the purchase amount?

A)$2,500
B)$3,750
C)$29,750
D)$31,000

Question 28

Woods Company had an inventory balance of $3,500 on January 1.During the accounting period they made purchases of $11,500.The ending inventory balance was $2,250.If Woods Co.uses the periodic inventory system,what is the cost of inventory sold during the period?

A)$11,500
B)$12,750
C)$15,000
D)$17,250

Question 29

Woods Company had an inventory balance of $3,500 on January 1.During the accounting period they made purchases of $11,500.The ending inventory balance was $2,250.If Woods Co.uses the periodic inventory system,what is the cost of goods available for sale?

A)$3,500
B)$11,500
C)$12,750
D)$15,000

Question 30

If an invoice reads 2/10,n/30,the 10 refers to the percent that can be taken for the discount.

Question 31

A company uses the perpetual inventory system.At year end the general ledger indicated that this company had a balance of $50,000 in the Inventory account.Actual inventory on hand per a physical count was $51,500.What action does the company now need to take?

A)No action is needed;the difference between the ledger and actual is less than 5%.
B)The company needs to debit Cost of Goods Sold and credit Inventory,$1,500.
C)The company needs to debit Inventory and credit Cost of Goods Sold for $1,500.
D)The company should debit the Purchases account and credit Cost of Goods Sold.

Question 32

When accounting for a merchandising business,which of the following is TRUE?

A)Wholesalers must use the periodic inventory system.
B)Retailers must use the perpetual inventory system.
C)Wholesalers must use the periodic inventory system;retailers may use either the perpetual or periodic inventory system.
D)Retailers and wholesalers may use either the perpetual or periodic inventory system.

Question 33

Under the periodic inventory system,the amount of inventory is:

A)constantly updated.
B)only known when a physical count is taken.
C)adjusted after each sale.
D)adjusted after each purchase.

Question 34

Smith Company had an inventory balance of $12,000 on January 1 and $18,000 on December 31.The cost of goods sold during the period was $63,000.What is the purchase amount?

A)$6,000
B)$33,000
C)$66,000
D)$69,000

Question 35

The purchase of inventory affects both an asset and the Stockholders' Equity account.

Question 36

If damaged goods are received by the merchandiser and are kept with a reduction in price,the account to be credited by the merchandiser for the reduction in price under a perpetual inventory system is:

A)Inventory.
B)Accounts Payable.
C)Returns.
D)Cash.

Question 37

Simmons,Inc.received an invoice from Wilson Company for $5,550 with terms of 3/10,n/45 on March 8.If Simmons pays the bill on March 15,they will credit inventory under a perpetual inventory system for:

A)$0.00.
B)$555.00.
C)$166.50.
D)$5550.00.

Question 38

An invoice with the credit terms 3/10,n/30 means that the customer has 3 days to take a 10% discount off of the invoice total.

Question 39

Credit terms are determined by the purchaser.

Question 40

Both purchase returns and allowances decrease the merchandiser's inventory cost.

Question 41

If an invoice states 5/15,n/60,the 15 refers to the:

A)percent that can be taken for the discount.
B)days in the discount period.
C)days in which to pay the bill in full.
D)percent of the bill that has to be paid in the discount period.

Question 42

Caesar Company returned $750 of goods it had purchased from another company.The original invoice was for $4,200,3/10,n/30.What is the discount if Caesar pays the balance within the discount period?

A)$126.00
B)$103.50
C)$22.50
D)$0.00

Question 43

When merchandise is purchased on account under the perpetual inventory system,the journal entry is:

A)debit Purchases and credit Accounts Payable.
B)debit Accounts Payable and credit Inventory.
C)debit Inventory and credit Accounts Payable.
D)debit Accounts Payable and credit Purchases.

Question 44

A discount offered as an inducement for prompt payment of an invoice is called a(n):

A)invoice discount.
B)purchase discount.
C)early discount.
D)cash discount.

Question 45

Hawk Company purchases goods for resale from Spirits,Inc.The amount of the purchase is $12,500 with terms of 3/10,n/30.Hawk later returns $500 of the goods.Under the perpetual inventory system,the journal entry to record the return is:

A)debit Accounts Payable;credit Purchase Returns and Allowances.
B)debit Purchase Returns and Allowances;credit Accounts Payable.
C)debit Accounts Payable;credit Inventory.
D)debit Accounts Payable;credit Purchase Discounts.

Question 46

A record to keep the amount owed to each supplier is called a(n):

A)Accounts Receivable subsidiary ledger.
B)Accounts Payable subsidiary ledger.
C)transportation ledger.
D)general ledger for Accounts Payable.

Question 47

Aspen,Inc.purchased merchandise from Crimson Corp.for cash.The journal entry for Aspen,Inc.under a perpetual inventory system will be:

A)debit Inventory;credit Cash.
B)debit Cash;credit Inventory.
C)debit Inventory;credit Accounts Payable-Crimson Corporation.
D)debit Inventory;credit Accounts Receivable-Crimson Corporation.

Question 48

The time period within which an invoice may be paid early to receive a discount is called the:

A)credit period.
B)payment period.
C)discount period.
D)cash period.

Question 49

If an invoice reads n/15,it means that:

A)the company has 15 days to pay the bill in full.
B)the company has 15 days to take the discount.
C)the company takes 15% off of the total of the invoice.
D)the company pays 85% of the invoice.

Question 50

Discounts allowed for customers who pay their invoices early:

A)reduce the cost of the purchased inventory.
B)increase the cost of the purchased inventory.
C)are called manufacturers' discounts.
D)are called allowances.

Question 51

An invoice of $237.50 is dated April 2,terms 2/10,n/30.If the invoice is paid on April 9,the amount to be paid is:

A)$4.75.
B)$23.75.
C)$232.75.
D)$237.50.

Question 52

Which of the following credit terms allows a discount of 3% if payment is made within 15 days of the invoice;otherwise,the total amount of the invoice must be paid within 30 days from the date of the invoice?

A)3/15,EOM
B)3/EOM,n/30
C)3/15,n/30
D)15/3,n/30

Question 53

The discount period is determined by the:

A)seller of the merchandise.
B)purchaser of the merchandise.
C)customer.
D)amount of the invoice.

Question 54

The amount of an invoice is $1000,with terms 2/10,n30.The amount to be paid within the discount period is:

A)$1,000.
B)$980.
C)$900.
D)$700.

Question 55

Under the perpetual inventory system,the account to which purchased goods are recorded is:

A)Purchases as a credit.
B)Inventory as a debit.
C)Cost of Goods Sold as a debit.
D)Purchases as a debit.

Question 56

Under the perpetual inventory system,purchases are entered into the asset account,Inventory,at the:

A)time of purchase.
B)time of sale to consumers.
C)time of the inventory count.
D)end of the accounting period.

Question 57

TLR Productions has received an invoice for $4500 with terms of 3/15,n/50.If TLR pays the invoice on the seventeenth day,the Cash account will be:

A)credited for $4,500.
B)credited for $4,365.
C)debited for $4,365.
D)credited for $135.

Question 58

TNT Corporation pays an invoice for $350 in time to take a 3% discount.The journal entry to record the payment of this invoice is:

A)debit Accounts Payable $350;credit Cash $350.
B)debit Accounts Payable $340;credit Cash $340.
C)debit Accounts Payable $340,debit Inventory $10;credit Cash for $350.
D)debit Accounts Payable $350;credit Inventory $10.50,credit Cash for $339.50.

Question 59

Under the perpetual inventory system,which of the following T-accounts correctly shows the cost flows through the Inventory account?

A)

B)

C)

D)

Question 60

The inventory system that uses the merchandise inventory account as an asset account is called the:

A)periodic system.
B)perpetual system.
C)merchandising system.
D)Both inventory systems use the merchandise inventory account as an asset.

Question 61

Under the perpetual inventory system,Sales Returns cause:

A)an increase in Cost of Goods Sold.
B)an increase in Revenue.
C)a decrease in Cost of Goods Sold.
D)no effect on cost of goods sold.

Question 62

Cost of Goods Sold is the account that is matched with the Sales account to record the company's cost of the inventory that was sold under a perpetual inventory system.

Question 63

Merchandise returned by the customer for a cash refund is called a:

A)sales return.
B)sales allowance.
C)debit memorandum.
D)credit memorandum.

Question 64

A list of credit customers is called a(n):

A)Accounts Payable subsidiary ledger.
B)general ledger.
C)Accounts Receivable subsidiary ledger.
D)general journal.

Question 65

Sales is a(n)________ account.

A)asset
B)liability
C)revenue
D)contra-

Question 66

The General Store has cash sales for the week of $5,000 and credit sales of $3,500.The account(s)to be debited for these transactions is/are:

A)MasterCard sales;Visa sales;and cash.
B)Cash;Accounts Receivable.
C)Cash only.
D)MasterCard sales;Visa sales.

Question 67

Sales Discounts and Sales Returns and Allowances are contra-accounts of the Sales account.

Question 68

A customer purchased items on account from Santorini,Inc.After a few days,the customer returned the goods.Santorini,Inc.will issue a:

A)debit memorandum.
B)return receipt.
C)credit memorandum.
D)refund check.

Question 69

A journal entry that has more than one debit or more than one credit is known as a complex journal entry.

Question 70

Debit card and credit card sales are counted as cash transactions.

Question 71

If an invoice shows a total of $5,000 with terms 5/15,n/60,which of the following is NOT a true statement?

A)The customer must pay $5,000 within 60 days after the date of the invoice.
B)The customer may pay $4,750 within 15 days to satisfy the bill.
C)The customer will receive a 10% discount if they pay within 60 days.
D)The customer has a discount period of 15 days.

Question 72

Which of the following accounts is NOT used to account for merchandise sales transactions?

A)Accounts Payable
B)Accounts Receivable
C)Sales Discounts
D)Sales Returns and Allowances

Question 73

The account Sales Returns and Allowances is debited when items are returned from a customer.

Question 74

Under a perpetual inventory system,when goods are returned to the retailer from a customer:

A)Cost of Goods Sold is debited;Sales Returns and Allowances is credited.
B)Sales Returns and Allowances is debited;Cost of Goods Sold is credited.
C)Sales is debited;Cost Goods Sold is credited.
D)Inventory is debited;Sales is credited.

Question 75

James,a customer,purchased $500 of merchandise from Haskins,Inc.Under the perpetual inventory system,Haskins,Inc.will record a:

A)debit to Accounts Receivable or to Cash for $500.
B)credit to Accounts Receivable or to Cash for $500.
C)credit to Cost of Goods Sold for $500.
D)debit to Sales for $500.

Question 76

An entry that has more than one debit and/or credit is called a:

A)double entry.
B)compound entry.
C)multiple-step entry.
D)special entry.

Question 77

The journal entry to record the purchase of merchandise on credit,under the perpetual inventory system is:

A)Debit Purchases,credit Accounts Payable
B)Debit Cost of Goods Sold,credit Accounts Payable
C)Debit Inventory,credit Accounts Payable
D)Debit Purchases,credit Inventory

Question 78

The account in which the revenue earned from the sale of merchandise is entered is:

A)Retained Earnings.
B)Sales.
C)Cash.
D)Inventory.

Question 79

When a customer returns goods,the journal entry for a merchandiser using the perpetual inventory system will include a debit to Sales Returns and Allowances and a debit to Inventory.

Question 80

Sales Returns and Allowances appear on the:

A)Balance Sheet.
B)Statement of Retained Earnings.
C)Income Statement.
D)Income Statement and Balance Sheet.