2023 Question 1 Credit Terms of 2 10 n 30 offered to a customer means that the Customer Answer | Assignments Online

Question 1  

Credit Terms of 2/10, n/30 offered to a customer means that the Customer: 

 

Answer  

A.Must pay the bill within 10 days.  

B.Can deduct a 2% discount if the bill is paid between the 10th & the 30th day from the invoice date.  

C.Can deduct a 2% discount if the bill is paid within 10 days of the invoice date.  

D.Can make two sales returns within 10 days of the invoice date and no returns after 30 days. 

 

Question 2  

Sales Returns & Allowances is Classified as a _ _ _ Account with a _ _ _ Balance. 

 

Answer  

A.Revenue …………….. Credit 

B.Revenue …………….. Debit  

C.Contra Revenue ….. Credit  

D.Contra Revenue ….. Debit

 

Question 3  

Net Sales are Calculated as:

 

Answer 

A.Gross Sales + Sales Returns & Allowances –  Sales Discounts 

B.Gross Sales –  Sales Returns & Allowances –  Sales Discounts 

C.Gross Sales + Sales Returns & Allowances + Sales Discounts 

D.Gross Sales –  Sales Returns & Allowances + Sales Discounts

 

Question 4  

Which of the following Accounts would NOT be Classified as a Selling Expense?

 

Answer  

A.Advertising Expense. 

B.Store Salaries Expense. 

C.Delivery Expense. 

D.Office Rent Expense.

 

Question 5  

If a Retailer Purchases Merchandise from a Manufacturer with the Freight Terms FOB Shipping Point, the Freight Costs will be Paid by the:

 

Answer  

A.Retailer (Buyer). 

B.Manufacturer (Seller). 

C.Retailer & Manufacturer. 

D.Transportation Company.

 

Question 6  

Which of the following Merchandising Income Statement Expressions is NOT Correct?

 

Answer  

A.Gross Profit – Operating Expenses = Net Income 

B.Sales – Cost of Goods Sold = Gross Profit

C.Net Income + Operating Expenses = Gross Profit 

D.Operating Expenses – Cost of Goods  = Gross Profit

 

Question 7  

Merchandise Inventory is Reported on the: 

 

Answer  

A.Balance Sheet as a Current Asset.  

B.Balance Sheet as Plant & Equipment.  

C.Income Statement as Miscellaneous Expense.  

D.Income Statement as Cost of Goods Sold. 

 

Question 8  

A Physical Inventory is taken to determine the Discrepancy Between the Amount of Inventory shown in the Accounting Records and the. 

 

Answer  

A.Inventory is purchased either for cash or on credit (Purchasing Activity).   

B.Goods sold to customers either for cash or on credit (Sales Activity).  

C.Cash collected from its credit customers (Collection Activity).  

D.Actual inventory on hand (Shrinkage Activity). 

 

Question 9  

Which of the following is NOT a Characteristic of the Perpetual Inventory System. 

 

Answer  

A.It uses a Cost of Sold Account to Record the Value of Goods Sold at the same time it Records the Retail Price 

B.It continuously updates the Merchandise Inventory Account every time Goods are Purchased or Sold.  

C.A Physical Inventory must be taken to Detemine the Amount of Goods in Ending Inventory.  

D.With the advent of Cash Register with Scanners & Universal Product Codes on Packages, most Merchandising Businesses use the Perpetual Inventory System. 

 

Question 10  

Under the Periodic Inventory System, Cost of Goods Available for Sale is Calculated as:

 

Answer  

A.Purchases –  Purchases Returns & Allow. –  Purchases Discounts + Freight In. 

B.Purchases –  Purchases Returns & Allow. + Purchases Discounts – Freight In. 

C.Purchases –  Purchases Returns & Allow. –  Purchases Discounts –   Freight In. 

D.Purchases + Purchases Returns & Allow. + Purchases Discounts –   Freight In.

 

Question 11  

Under the First In – First Out (FIFO) Method of Inventory Valuation, Ending Inventory Includes _ _ _ while Cost of Goods Sold includes _ _ _.  

 

Answer  

A.Beginning Inventory & Early Purchases …….. Later Purchases.  

B.Later Purchases …………….. Beginning Inventory & Early Purchases.  

C.Specific Identification of Ending Inv. Units. ………. Specific Identification of Units Sold.   

D.None of the above.  

 

Question 12  

Which of the following Statements about the Last In – First Out (LIFO) Method of Inventory Valuation is NOT Correct when the Cost of each Successive Purchase is Rising?

 

Answer  

A.Cost of Goods Sold with be Lower than under the First In – First Out System.  

B.Cost of Goods Sold with be Higher than under the Weighted Average System.  

C.Cost of Goods Sold with be Higher than under the First In – First Out System.  

D.None of the above. 

 

Question 13  

The Formula to Calculate the Per Unit Cost under the Weighted Average Method of Valuing Inventory is. 

 

Answer  

A.Cost of Goods Available for Sale / Units Available for Sale. 

B.Units Available for Sale / Cost of Goods Available for Sale. 

C.Cost of Goods Sold / Units Sold. 

D.Units Sold / Cost of Goods Sold.

 

Question 14  

Marvin’s Merchandise Mart Paid $800 for Goods Purchased on Account from a Vendor.  It received a Discount of $16 for Prompt Payment within the Discount Period.  The Correct Journal Entry to Record this Transaction is: 

 

Answer  

A.Accounts Payable …………….. 800

     Purchases Discount ……………..   16

     Cash  …………………………………. 784

 

B.Accounts Payable …………….. 784

     Cash  …………………………………. 784

 

C.Accounts Payable …………….. 784

Merchandise Inventory ………   16

     Cash  …………………………………. 800

 

D.Accounts Payable …………….. 800

     Merchandise Inventory ………….   16

     Cash  …………………………………. 784

 

Question 15  

Ellen’s Emporium paid $50 to have Merchandise Shipped to a Customer.  The Correct General Journal Entry to Record this Transaction is:

 

Answer  

A.Delivery Expense ……….. 50

      Cash ………………………….. 50

 

B.Freight – In …………………. 50

      Cash ………………………….. 50

 

C.Merchandise Inventory … 50

      Cash ………………………….. 50

 

D.None of the above.

 

Question 16  

After a Physical Count of Gloria’s Gift Shop Inventory revealed $120 Less in Inventory than the Firms Account Records showed because of Shoplifting & Spoilage.  The firm uses the Perpetual System of Inventory.  The Correct General Journal Entry to Record this “Shrinkage” of Inventory is: 

 

Answer  

A.Merchandise Inventory ….. 120

         Cost of Goods Sold …………. 120 

 

B.Cost of Goods Sold ……… 120

       Merchandise Inventory ……… 120 

 

C.Shrinkage Expense ………. 120

       Merchandise Inventory ……… 120 

 

D.Merchandise Inventory ….. 120

       Shrinkage Expense ………….. 120 

 

Question 17   

The costing of Inventory using the assumption that the beginning inventory & early purchases were the first items to be sold.  So the ending inventory consists of the the most recent purchases of merchandise. 

 

The title and responsibility for the shipment of goods transfers to the buyer at the buyer’s place of business.  Hence the seller pays the transportation costs.

 

A small reduction in the invoice price offered to customers to encourage prompt payment within a designated credit period.  Common credit terms would be 2/10, net 30.

 

An accounting guideline that states when there is doubt as to value determined by an accounting method or practice, it is preferable to choose the one that will understate assets & revenue and/or overstate liabilities & expenses. 

 

An inventory system in which acquisitions of merchandise are recorded in a purchases account.  The quantity of goods on hand & the amount sold to customers is not tracked so the ending inventory must be determined by a physical count.

 

An accounting guideline that states that companies should use the same accounting methods for depreciation & inventory valuation so their financial statements are comparable from period to period.

 

The net cost of merchandise sold during the period which appears on the Income Statement.  It is calculated as Beginning Inventory + Net Cost of Purchases – Ending Inventory. 

 

An inventory system that records all acquisitions of merchandise in an inventory account and continuously updates the cost of inventory on hand after each sale of merchandise.

 

The costing of Inventory using the assumption that the latest purchases were the first items to be sold.  So the ending inventory consists of the beginning inventory & earliest purchases of merchandise.

 

The title & responsibility for the shipment of goods transfers to the buyer at the seller’s place of business.  Hence the buyer pays the transportation costs.

 

The difference between Net Sales & Cost of Goods Sold for the period.  It appears on the Income Statement and is approximately equivalent to the firm’s markup and needs to be sufficient to cover the operating expenses and hopefully a profit.

 

Answer 

A.FOB Shipping Point 

B.Consistency Principle 

C.Perpetual Inventory

D.Cost of Goods Sold

E.First In-First Out

F.Sales Discounts

G.Periodic Inventory

H.Last In-Last Out

I.Conservatism Principle

J.Gross Profit

K.FOB Destination

L.Weighted Average

 

Question 18  

Use the Inventory Table and Data below to answer this Question (#18) and the Next 2 Questions (#19 – #20).  NOTE: 400 Units are in Ending Inventory & 600 Units were Sold.

…………………………….UNITS……PRICE.…….TOTAL

Jan. 1−Begin. Inventory…200…….$5…….$1,000

May 20−1st Purchase…..500…….$6…….$3,000

Oct.−2nd Purchase………300……..$8…….$2,400

TOTALS……………………1,000………..……..$6,400 

 

What is the Value of the Ending Inventory ($ Amount) under the FIFO (First In−First Out) Method of Inventory?

 

 

Question 19  

What is the Value of the Cost of Goods Sold ($ Amount) under the LIFO (Last In−First Out) Method of Inventory?

 

 

Question 20  

What is the Value of the Ending Inventory ($ Amount) under the Weighted Average Method of Inventory?

Answer    solution: 6400/1000 = 6.40 x 400 = 2560

 

Question 21  

Use the Inventory Table below to answer this Question (#21) and the Next  Question (#22)

ITEM………….COST….…MARKET

A………………$80,000……$85,000

B………..……$52,000……$50,000

C………..….$100,000…..$105,000

What is the Value ($ Amount) of a Company’s Inventory shown in the table above using the Lower of Cost or Market Rule (LCM) for the Inventory as a Whole?

 

 

Question 22  

What is the Value ($ Amount) of a Company’s Inventory shown in the table above using the Lower of Cost or Market Rule (LCM) on an Item by Item Basis?

 

 

Question 23 

What is Cost of Goods Sold ($ Amount) based on the Merchandising Account Balances shown in the table below.

Purchases…….……………………….$37,000

Purchases Returns & Allowances……$4,000

Purchases Discounts…………….……$3,000

Freight In………………………………..$2,000