Question 1

Merchandise inventory

Accepted Answer

A)  Is a capital asset 
B)  Is a current asset 
C)  Can include supplies 
D)  Is a type of long-term investment 
E)  Is an expense 
A)  Is a capital asset 
B)  Is a current asset 
C)  Can include supplies 
D)  Is a type of long-term investment 
E)  Is an expense B

Question 2

The cost of goods sold section of a multiple-step income statement includes beginning and ending inventories, goods available for sale and operating expenses.

Accepted Answer

A) True 
 B)False  False

Question 3

A periodic inventory system

Accepted Answer

A)  Requires updating the inventory account every month 
B)  Records the cost of new merchandise purchased in a permanent account 
C)  Does not require a physical count of inventory 
D)  Records the cost of new merchandise purchased in a temporary account 
E)  All of the above 
A)  Requires updating the inventory account every month 
B)  Records the cost of new merchandise purchased in a permanent account 
C)  Does not require a physical count of inventory 
D)  Records the cost of new merchandise purchased in a temporary account 
E)  All of the above D

Question 4

Businesses normally get a full credit for the goods and services tax (GST) and/or Harmonized Sales Tax (HST) that they have paid.

Accepted Answer

A) True 
 B)False

Question 5

Gross profit is

Accepted Answer

A)  The same as profit 
B)  Subtracted from operating income to get profit 
C)  Net sales less cost of goods sold 
D)  A special general ledger account 
E)  Only calculated when using the perpetual inventory system 
A)  The same as profit 
B)  Subtracted from operating income to get profit 
C)  Net sales less cost of goods sold 
D)  A special general ledger account 
E)  Only calculated when using the perpetual inventory system

Question 6

You work at a sporting goods store. You are considering adding baseball gloves and bats to your inventory. What would be the selling price of baseball bats with a mark-up percentage of 85% (cost is $12) and the baseball gloves with a target gross margin of 60% (cost is $20).

Accepted Answer

A)  Selling Price (bats) = $32; Selling Price (gloves) = $10.2 
B)  Selling Price (bats) = $37; Selling Price (gloves) = $22 
C)  Selling Price (bats) = $22.20; Selling Price (gloves) = $50 
D)  Selling Price (bats) = $24; Selling Price (gloves) = $25.00 
E)  None of these answers is correct. 
A)  Selling Price (bats) = $32; Selling Price (gloves) = $10.2 
B)  Selling Price (bats) = $37; Selling Price (gloves) = $22 
C)  Selling Price (bats) = $22.20; Selling Price (gloves) = $50 
D)  Selling Price (bats) = $24; Selling Price (gloves) = $25.00 
E)  None of these answers is correct.

Question 7

The operating cycle of a merchandising company

Accepted Answer

A)  Begins with the purchase of merchandise 
B)  Ends with the collection of cash from the sale of merchandise 
C)  Varies among types of businesses 
D)  Applies to both cash and credit sales 
E)  All of the above 
A)  Begins with the purchase of merchandise 
B)  Ends with the collection of cash from the sale of merchandise 
C)  Varies among types of businesses 
D)  Applies to both cash and credit sales 
E)  All of the above

Question 8

A company's cost of merchandise available for sale consists of beginning inventory plus the net cost of purchases minus ending inventory.

Accepted Answer

A) True 
 B)False

Question 9

Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 10

Trade discounts are entered into the accounting system.

Accepted Answer

A) True 
 B)False

Question 11

Pluton uses a periodic inventory system. Prepare general journal entries to record the following transactions on the books of Pluton:

Accepted Answer

The answer of Pluton uses a periodic inventory system. Prepare...

Question 12

A sales discount of 1/15 means the seller will receive 85% of the selling price.

Accepted Answer

A) True 
 B)False

Question 13

The periodic inventory system is superior to the perpetual inventory system in preventing shrinkage.

Accepted Answer

A) True 
 B)False

Question 14

A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or allowance.

Accepted Answer

A) True 
 B)False

Question 15

A perpetual inventory system

Accepted Answer

A)  Gives a continuous record of the amount of inventory on hand 
B)  Uses a Purchases account for the cost of new merchandise purchased 
C)  Was historically used by companies that sold large quantities of low-value items 
D)  Is not widely used in practice 
E)  All of the above 
A)  Gives a continuous record of the amount of inventory on hand 
B)  Uses a Purchases account for the cost of new merchandise purchased 
C)  Was historically used by companies that sold large quantities of low-value items 
D)  Is not widely used in practice 
E)  All of the above

Question 16

A merchandiser earns profit by buying and selling merchandise.

Accepted Answer

A) True 
 B)False

Question 17

Gross profit is also called gross margin.

Accepted Answer

A) True 
 B)False

Question 18

Wholesalers

Accepted Answer

A)  Buy products from manufacturers and sell to retailer 
B)  Buy products from other wholesalers and sell to consumers 
C)  Buy products from manufacturers and sell to consumers 
D)  Buy products from retailers and sell to consumers 
E)  All of the above 
A)  Buy products from manufacturers and sell to retailer 
B)  Buy products from other wholesalers and sell to consumers 
C)  Buy products from manufacturers and sell to consumers 
D)  Buy products from retailers and sell to consumers 
E)  All of the above

Question 19

Retailers

Accepted Answer

A)  Buy products from manufacturers and sell to wholesalers 
B)  Buy products from wholesalers and sell to other wholesalers 
C)  Buy products from manufacturers and wholesalers and sell to consumers 
D)  Buy only from wholesalers 
E)  All of the above 
A)  Buy products from manufacturers and sell to wholesalers 
B)  Buy products from wholesalers and sell to other wholesalers 
C)  Buy products from manufacturers and wholesalers and sell to consumers 
D)  Buy only from wholesalers 
E)  All of the above

Question 20

A trade discount is

Accepted Answer

A)  A term used by a purchaser to describe a cash discount given to customers for prompt payment 
B)  A reduction below a list price 
C)  A term used by a seller to describe a cash discount granted to customers for prompt payment 
D)  A reduction in price for prompt payment 
E)  Also called a rebate 
A)  A term used by a purchaser to describe a cash discount given to customers for prompt payment 
B)  A reduction below a list price 
C)  A term used by a seller to describe a cash discount granted to customers for prompt payment 
D)  A reduction in price for prompt payment 
E)  Also called a rebate

Merchandise inventory

The cost of goods sold section of a multiple-step income statement includes beginning and ending inventories, goods available for sale and operating expenses.

A periodic inventory system

Businesses normally get a full credit for the goods and services tax (GST) and/or Harmonized Sales Tax (HST) that they have paid.

Gross profit is

You work at a sporting goods store. You are considering adding baseball gloves and bats to your inventory. What would be the selling price of baseball bats with a mark-up percentage of 85% (cost is $12) and the baseball gloves with a target gross margin of 60% (cost is $20).

The operating cycle of a merchandising company

A company's cost of merchandise available for sale consists of beginning inventory plus the net cost of purchases minus ending inventory.

Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost of goods sold.

Trade discounts are entered into the accounting system.

Pluton uses a periodic inventory system. Prepare general journal entries to record the following transactions on the books of Pluton:

A sales discount of 1/15 means the seller will receive 85% of the selling price.

The periodic inventory system is superior to the perpetual inventory system in preventing shrinkage.

A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or allowance.

A perpetual inventory system

A merchandiser earns profit by buying and selling merchandise.

Gross profit is also called gross margin.

Wholesalers

Retailers

A trade discount is

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Inventory Costing and Valuation

Internal Control and Cash

Receivables

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters

Exam 5: Accounting for Merchandising Activities

Merchandise inventory

The cost of goods sold section of a multiple-step income statement includes beginning and ending inventories, goods available for sale and operating expenses.

A periodic inventory system

Businesses normally get a full credit for the goods and services tax (GST) and/or Harmonized Sales Tax (HST) that they have paid.

Gross profit is

You work at a sporting goods store. You are considering adding baseball gloves and bats to your inventory. What would be the selling price of baseball bats with a mark-up percentage of 85% (cost is $12) and the baseball gloves with a target gross margin of 60% (cost is $20).

The operating cycle of a merchandising company

A company's cost of merchandise available for sale consists of beginning inventory plus the net cost of purchases minus ending inventory.

Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost of goods sold.

Trade discounts are entered into the accounting system.

Pluton uses a periodic inventory system. Prepare general journal entries to record the following transactions on the books of Pluton:

A sales discount of 1/15 means the seller will receive 85% of the selling price.

The periodic inventory system is superior to the perpetual inventory system in preventing shrinkage.

A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or allowance.

A perpetual inventory system

A merchandiser earns profit by buying and selling merchandise.

Gross profit is also called gross margin.

Wholesalers

Retailers

A trade discount is

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Inventory Costing and Valuation

Internal Control and Cash

Receivables

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters