Question 1

Freight out is an addition to the Inventory account if the firm uses the perpetual inventory method.

Accepted Answer

A) True 
 B)False

Question 2

Net sales revenue is equal to Sales revenue less Sales returns and allowances, and Sales discounts.

Accepted Answer

A) True 
 B)False

Question 3

A firm sells inventory for $1 000, including GST, on credit with terms of 2/10, n/30. Defective inventory of $200, including GST, is returned 2 days later. Which of the following entries would be made to record the cash receipt for the sale if the payment is received 20 days later?

Accepted Answer

A) The accounting entry would be an $800 debit to Cash, a $14.55 credit to Sales discounts, a $1.45 credit to GST Clearing and a $784 credit to Accounts receivable. 
B) The accounting entry would be a $784 debit to Cash, a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing and an $800 credit to Accounts receivable. 
C) The accounting entry would be an $800 debit to Cash and an $800 credit to Accounts receivable. 
D) The accounting entry would be a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing, an $800 debit to Cash and an $816 credit to Accounts receivable. 
A) The accounting entry would be an $800 debit to Cash, a $14.55 credit to Sales discounts, a $1.45 credit to GST Clearing and a $784 credit to Accounts receivable. 
B) The accounting entry would be a $784 debit to Cash, a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing and an $800 credit to Accounts receivable. 
C) The accounting entry would be an $800 debit to Cash and an $800 credit to Accounts receivable. 
D) The accounting entry would be a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing, an $800 debit to Cash and an $816 credit to Accounts receivable.

Question 4

Which of the following are the normal balances of Sales, Sales discounts, and Sales returns and allowances, respectively?

Accepted Answer

A) Debit, debit, and credit 
B) Debit, credit, and credit 
C) Credit, credit, and debit 
D) Credit, debit, and debit 
A) Debit, debit, and credit 
B) Debit, credit, and credit 
C) Credit, credit, and debit 
D) Credit, debit, and debit

Question 5

A firm has purchased inventory and receives an invoice that indicates that the buyer must pay the transportation costs of delivering the inventory. Which of the following will most likely be noted as the delivery terms?

Accepted Answer

A) FOB 2/10, n/30 
B) FOB destination 
C) FOB shipping point 
D) None of the above 
A) FOB 2/10, n/30 
B) FOB destination 
C) FOB shipping point 
D) None of the above

Question 6

In a perpetual inventory system, inventory returned by the customer for a refund is called a:

Accepted Answer

A) sales adjustment. 
B) sales discount. 
C) sales allowance. 
D) sales return. 
A) sales adjustment. 
B) sales discount. 
C) sales allowance. 
D) sales return.

Question 7

Freight in should be added to the inventory account if the firm uses the perpetual inventory method.

Accepted Answer

A) True 
 B)False

Question 8

A firm uses the periodic inventory method. Which of the following entries would be made to record a $1 100 purchase of inventory on credit, including GST?

Accepted Answer

A) The accounting entry would be a $1 100 debit to Accounts payable and a $1 100 credit to Purchases. 
B) The accounting entry would be a $1 000 debit to Purchases, a $100 debit to GST Clearing and a $1 100 credit to Accounts payable. 
C) The accounting entry would be a $1 000 debit to Inventory, a $100 debit to GST Clearing and a $1 100 credit to Accounts payable. 
D) The accounting entry would be a $1 100 debit to Accounts payable, a $1 000 credit to Inventory, and a $100 credit to GST Clearing. 
A) The accounting entry would be a $1 100 debit to Accounts payable and a $1 100 credit to Purchases. 
B) The accounting entry would be a $1 000 debit to Purchases, a $100 debit to GST Clearing and a $1 100 credit to Accounts payable. 
C) The accounting entry would be a $1 000 debit to Inventory, a $100 debit to GST Clearing and a $1 100 credit to Accounts payable. 
D) The accounting entry would be a $1 100 debit to Accounts payable, a $1 000 credit to Inventory, and a $100 credit to GST Clearing.

Question 9

Beginning inventory is $42 000 and Ending inventory is $58 000. Cost of sales is $600 000. Calculate days in inventory.

Accepted Answer

A) 30.4 
B) 25.6 
C) 3.4 
D) 135.3 
A) 30.4 
B) 25.6 
C) 3.4 
D) 135.3

Question 10

A company's net sales revenue is $20 000 000. Its cost of sales is $15 000 000. Its beginning inventory is $100 000, and its ending inventory is $200 000. Which of the following is its rate of inventory turnover?

Accepted Answer

A) 0.1 
B) 100 
C) 10 
D) 01 
A) 0.1 
B) 100 
C) 10 
D) 01

Question 11

A sales return is recorded with a credit to Inventory.

Accepted Answer

A) True 
 B)False

Question 12

Smith Company has a low number of days in inventory. This indicates that:

Accepted Answer

A) their inventory sales are producing low profits. 
B) the firm has a low Gross profit percentage. 
C) the cost of inventory is very high. 
D) their inventory is turning over rapidly. 
A) their inventory sales are producing low profits. 
B) the firm has a low Gross profit percentage. 
C) the cost of inventory is very high. 
D) their inventory is turning over rapidly.

Question 13

What is freight in?

Accepted Answer

A) Transportation costs to ship goods out of the warehouse 
B) Costs that are expensed 
C) Transportation costs that are not recorded 
D) Transportation costs to ship goods into the warehouse 
A) Transportation costs to ship goods out of the warehouse 
B) Costs that are expensed 
C) Transportation costs that are not recorded 
D) Transportation costs to ship goods into the warehouse

Question 14

With a periodic inventory method, purchases, purchase discounts, and purchase returns and allowances are recorded in separate accounts.

Accepted Answer

A) True 
 B)False

Question 15

The following refers to periodic inventory: Compute Cost of sales.

Accepted Answer

A) $116 540 
B) $53 540 
C) $81 460 
D) $114 950 
A) $116 540 
B) $53 540 
C) $81 460 
D) $114 950

Question 16

A sales return is recorded with a credit to Accounts receivable.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is subtracted from Net sales revenue to arrive at Gross profit?

Accepted Answer

A) Cost of goods available for sale 
B) Cost of sales 
C) Overhead expenses 
D) Sales discounts and Sales returns and allowances 
A) Cost of goods available for sale 
B) Cost of sales 
C) Overhead expenses 
D) Sales discounts and Sales returns and allowances

Question 18

On 1 November 2014, Everett Janitorial Supply sold inventory for $5 000, FOB destination, 2/10, n/30. The inventory cost $3 200. Everett paid transportation costs of $100. On 6 November 2014, inventory of $1 000 from the 1 November sale was returned. The returned inventory had cost $600. Everett received payment for the balance of the sale on 10 November 2014. If this were the only sales transaction of the period, what amount of Net sales revenue would be shown on the income statement? All figures include GST.

Accepted Answer

A) $3 920.00 
B) $2 400.00 
C) $3 563.64 
D) $1 636.36 
A) $3 920.00 
B) $2 400.00 
C) $3 563.64 
D) $1 636.36

Question 19

A small increase in the gross profit percentage could indicate:

Accepted Answer

A) a decrease in overhead expenses. 
B) a decrease in profit. 
C) lower inventory turnover. 
D) a significant rise in profit. 
A) a decrease in overhead expenses. 
B) a decrease in profit. 
C) lower inventory turnover. 
D) a significant rise in profit.

Question 20

A high rate of inventory turnover indicates which of the following?

Accepted Answer

A) The firm is making high profit. 
B) The firm is losing inventory to errors in recording. 
C) The firm is experiencing a rapid decline in inventory levels. 
D) The firm sells its inventory rapidly. 
A) The firm is making high profit. 
B) The firm is losing inventory to errors in recording. 
C) The firm is experiencing a rapid decline in inventory levels. 
D) The firm sells its inventory rapidly.

Exam 5: Retailing Operations

Freight out is an addition to the Inventory account if the firm uses the perpetual inventory method.

Net sales revenue is equal to Sales revenue less Sales returns and allowances, and Sales discounts.

A firm sells inventory for $1 000, including GST, on credit with terms of 2/10, n/30. Defective inventory of $200, including GST, is returned 2 days later. Which of the following entries would be made to record the cash receipt for the sale if the payment is received 20 days later?

Which of the following are the normal balances of Sales, Sales discounts, and Sales returns and allowances, respectively?

A firm has purchased inventory and receives an invoice that indicates that the buyer must pay the transportation costs of delivering the inventory. Which of the following will most likely be noted as the delivery terms?

In a perpetual inventory system, inventory returned by the customer for a refund is called a:

Freight in should be added to the inventory account if the firm uses the perpetual inventory method.

A firm uses the periodic inventory method. Which of the following entries would be made to record a $1 100 purchase of inventory on credit, including GST?

Beginning inventory is $42 000 and Ending inventory is $58 000. Cost of sales is $600 000. Calculate days in inventory.

A company's net sales revenue is $20 000 000. Its cost of sales is $15 000 000. Its beginning inventory is $100 000, and its ending inventory is $200 000. Which of the following is its rate of inventory turnover?

A sales return is recorded with a credit to Inventory.

Smith Company has a low number of days in inventory. This indicates that:

What is freight in?

With a periodic inventory method, purchases, purchase discounts, and purchase returns and allowances are recorded in separate accounts.

The following refers to periodic inventory: Compute Cost of sales.

A sales return is recorded with a credit to Accounts receivable.

Which of the following is subtracted from Net sales revenue to arrive at Gross profit?

A small increase in the gross profit percentage could indicate:

A high rate of inventory turnover indicates which of the following?

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

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