Question 1

A sales allowance is recorded with a debit to Inventory.

Accepted Answer

A) True 
 B)False

Question 2

In a periodic system, inventory balances and the cost of sales for the current period are determined:

Accepted Answer

A) on the first day of each year. 
B) when a physical inventory count is taken. 
C) on a frequent basis. 
D) at the time of sale. 
A) on the first day of each year. 
B) when a physical inventory count is taken. 
C) on a frequent basis. 
D) at the time of sale.

Question 3

Alpha Company had $45 000 in beginning inventory and $80 000 in ending inventory. Cost of sales for the period was $25 000. The inventory turnover is:

Accepted Answer

A) 0.3125. 
B) 0.56. 
C) 4.0. 
D) 0.4. 
A) 0.3125. 
B) 0.56. 
C) 4.0. 
D) 0.4.

Question 4

In a descriptive format income statement, overhead expenses are often classified into distribution, administration, marketing and finance expenses.

Accepted Answer

A) True 
 B)False

Question 5

Inventory is the:

Accepted Answer

A) items purchased to run the daily operations of a business. 
B) expenses of a firm that were incurred. 
C) equipment that was purchased. 
D) items held by a firm to be sold to customers. 
A) items purchased to run the daily operations of a business. 
B) expenses of a firm that were incurred. 
C) equipment that was purchased. 
D) items held by a firm to be sold to customers.

Question 6

A firm that uses the perpetual inventory method purchased inventory for $2 000 from a vendor on credit, FOB shipping point, with terms of 2/10, n/30. The firm paid the shipper $100 cash for freight in. The firm then returned $200 of damaged goods and got an allowance from the vendor. The firm paid the vendor 8 days after the sale. Assuming this was the only transaction affecting inventory, and that there was no beginning balance, what is the overall cost of the inventory? All amounts include GST.

Accepted Answer

A) $1 694.55 
B) $2 100.00 
C) $1 764.00 
D) $1 864.00 
A) $1 694.55 
B) $2 100.00 
C) $1 764.00 
D) $1 864.00

Question 7

The entry to close Sales discounts and Sales returns and allowances results in a debit to Income summary.

Accepted Answer

A) True 
 B)False

Question 8

HiLo Running Store is not registered for GST. Which of the following statements is INCORRECT?

Accepted Answer

A) The firm will not be able to claim a refund from the ATO on GST paid to suppliers. 
B) Journal entries for sales and purchases will not include a GST Clearing account. 
C) Purchases of inventory will be recorded at the 'gross' amount, that is, the amount including GST. 
D) The firm will charge a flat rate of GST on all goods sold. 
A) The firm will not be able to claim a refund from the ATO on GST paid to suppliers. 
B) Journal entries for sales and purchases will not include a GST Clearing account. 
C) Purchases of inventory will be recorded at the 'gross' amount, that is, the amount including GST. 
D) The firm will charge a flat rate of GST on all goods sold.

Question 9

A company's net sales revenue is $540 000. Its cost of sales is $360 000. Its gross profit percentage is:

Accepted Answer

A) 33.33%. 
B) 300%. 
C) 66.67%. 
D) 100%. 
A) 33.33%. 
B) 300%. 
C) 66.67%. 
D) 100%.

Question 10

Which of the following accounts is used ONLY at the end of the accounting period?

Accepted Answer

A) Cost of sales 
B) Net sales revenue 
C) Income summary 
D) Sales revenue 
A) Cost of sales 
B) Net sales revenue 
C) Income summary 
D) Sales revenue

Question 11

A firm that uses the perpetual inventory method purchases inventory of $1 000 on credit, including GST, with terms of 2/10, n/30. Which of the following entries would be made to record the payment if it is made within 10 days?

Accepted Answer

A) $980 debit to Accounts payable, a $20 debit to Inventory and a $1 000 credit to Cash 
B) $18.18 debit to Inventory, a $1.82 debit to GST Clearing, a $1 000 debit to Accounts payable and a $1 020 credit to Cash 
C) $1 000 debit to Accounts payable and a $1 000 credit to Cash 
D) $1 000 debit to Accounts payable, a $18.18 credit to Inventory, a $1.82 credit to GST Clearing and a $980 credit to Cash 
A) $980 debit to Accounts payable, a $20 debit to Inventory and a $1 000 credit to Cash 
B) $18.18 debit to Inventory, a $1.82 debit to GST Clearing, a $1 000 debit to Accounts payable and a $1 020 credit to Cash 
C) $1 000 debit to Accounts payable and a $1 000 credit to Cash 
D) $1 000 debit to Accounts payable, a $18.18 credit to Inventory, a $1.82 credit to GST Clearing and a $980 credit to Cash

Question 12

Compute the amount of payment for an invoice of $5 600, 4/10, n/30 paid on the 7th day.

Accepted Answer

A) $5 600 
B) $5 040 
C) $5 570 
D) $5 376 
A) $5 600 
B) $5 040 
C) $5 570 
D) $5 376

Question 13

When a firm ships goods to a customer and pays for freight out, how is that cost recorded?

Accepted Answer

A) As an addition to cost of sales 
B) As an operating expense 
C) As an addition to the cost of inventory 
D) As a reduction of sales revenue 
A) As an addition to cost of sales 
B) As an operating expense 
C) As an addition to the cost of inventory 
D) As a reduction of sales revenue

Question 14

GST is a flat percentage charge levied on the supply of goods and services.

Accepted Answer

A) True 
 B)False

Question 15

Gross profit is equal to Sales revenue less Sales returns and allowances, and Sales discounts.

Accepted Answer

A) True 
 B)False

Question 16

An invoice in the amount of $600.00 for inventory purchased is shown with a 4/10, n/30 discount. To get the discount, the amount to pay on or before the tenth day is:

Accepted Answer

A) $552.50. 
B) $600.00. 
C) $576.00. 
D) $540.25. 
A) $552.50. 
B) $600.00. 
C) $576.00. 
D) $540.25.

Question 17

A firm uses the periodic inventory method. Which of the following entries would be made to record a return of $220 of inventory purchased on credit, including GST?

Accepted Answer

A) The accounting entry would be a $220 debit to Accounts payable, a $200 credit to Purchase returns and allowances, and a $20 credit to GST Clearing. 
B) The accounting entry would be a $220 debit to Purchases and a $220 credit to Accounts payable. 
C) The accounting entry would be a $200 debit to Accounts payable and a $200 credit to Purchases. 
D) The accounting entry would be a $200 debit to Purchase returns and allowances, a $20 debit to GST Clearing and a $220 credit to Accounts payable. 
A) The accounting entry would be a $220 debit to Accounts payable, a $200 credit to Purchase returns and allowances, and a $20 credit to GST Clearing. 
B) The accounting entry would be a $220 debit to Purchases and a $220 credit to Accounts payable. 
C) The accounting entry would be a $200 debit to Accounts payable and a $200 credit to Purchases. 
D) The accounting entry would be a $200 debit to Purchase returns and allowances, a $20 debit to GST Clearing and a $220 credit to Accounts payable.

Question 18

Net profit is Gross profit plus any other revenues minus overhead expenses.

Accepted Answer

A) True 
 B)False

Question 19

The perpetual inventory system keeps a running record of inventory and cost of sales.

Accepted Answer

A) True 
 B)False

Question 20

If a firm, using a perpetual inventory system, purchases inventory on credit, and later returns $200 of goods to the vendor, including GST, what entry would be made to record the return of goods to the vendor?

Accepted Answer

A) $200 debit to Purchases and a $200 credit to Accounts payable 
B) $200 debit to Accounts payable and a $200 credit to Purchases 
C) $181.82 debit to Inventory, a $18.18 debit to GST Clearing and a $200 credit to Accounts payable 
D) $200 debit to Accounts payable, a $181.82 credit to Inventory and a $18.18 credit to GST Clearing 
A) $200 debit to Purchases and a $200 credit to Accounts payable 
B) $200 debit to Accounts payable and a $200 credit to Purchases 
C) $181.82 debit to Inventory, a $18.18 debit to GST Clearing and a $200 credit to Accounts payable 
D) $200 debit to Accounts payable, a $181.82 credit to Inventory and a $18.18 credit to GST Clearing

Exam 5: Retailing Operations

A sales allowance is recorded with a debit to Inventory.

In a periodic system, inventory balances and the cost of sales for the current period are determined:

Alpha Company had $45 000 in beginning inventory and $80 000 in ending inventory. Cost of sales for the period was $25 000. The inventory turnover is:

In a descriptive format income statement, overhead expenses are often classified into distribution, administration, marketing and finance expenses.

Inventory is the:

The entry to close Sales discounts and Sales returns and allowances results in a debit to Income summary.

HiLo Running Store is not registered for GST. Which of the following statements is INCORRECT?

A company's net sales revenue is $540 000. Its cost of sales is $360 000. Its gross profit percentage is:

Which of the following accounts is used ONLY at the end of the accounting period?

A firm that uses the perpetual inventory method purchases inventory of $1 000 on credit, including GST, with terms of 2/10, n/30. Which of the following entries would be made to record the payment if it is made within 10 days?

Compute the amount of payment for an invoice of $5 600, 4/10, n/30 paid on the 7th day.

When a firm ships goods to a customer and pays for freight out, how is that cost recorded?

GST is a flat percentage charge levied on the supply of goods and services.

Gross profit is equal to Sales revenue less Sales returns and allowances, and Sales discounts.

An invoice in the amount of $600.00 for inventory purchased is shown with a 4/10, n/30 discount. To get the discount, the amount to pay on or before the tenth day is:

A firm uses the periodic inventory method. Which of the following entries would be made to record a return of $220 of inventory purchased on credit, including GST?

Net profit is Gross profit plus any other revenues minus overhead expenses.

The perpetual inventory system keeps a running record of inventory and cost of sales.

If a firm, using a perpetual inventory system, purchases inventory on credit, and later returns $200 of goods to the vendor, including GST, what entry would be made to record the return of goods to the vendor?

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

Filters