Question 1

Which of the following is the correct journal entry for a return of goods that were purchased on account under the periodic inventory system?

Accepted Answer

A)  $$\begin{array} { | l | l | l | } 
\hline \begin{array} { l } 
\text { Purchase Returns and } \
\text { Allowances }
\end{array} & \mathrm { XX } & \
\hline \text { Accounts Payable } & & \mathrm { XX } \
\hline
\end{array}$$ 
B)  $\begin{array}{|l|l|l|}
\hline \text { Accounts Payable } & \text { XX } \
\hline \text { Merchandise Inventory } && \text { XX }\
\hline 
\end{array}$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Accounts Payable } & \mathrm { XX } & \
\hline \begin{array} { l } 
\text { Purchase Returns and } \
\text { Allowances }
\end{array} & & \mathrm { XX }  \
\hline
\end{array}$$ 
D)  $\begin{array}{|c|c|l|}
\hline\text { Merchandise Inventory } & \text { XX } \
\hline \text { Accounts Payable } && \text { XX }  \
\hline
\end{array}$ 
A)  $$\begin{array} { | l | l | l | } 
\hline \begin{array} { l } 
\text { Purchase Returns and } \
\text { Allowances }
\end{array} & \mathrm { XX } & \
\hline \text { Accounts Payable } & & \mathrm { XX } \
\hline
\end{array}$$ 
B)  $\begin{array}{|l|l|l|}
\hline \text { Accounts Payable } & \text { XX } \
\hline \text { Merchandise Inventory } && \text { XX }\
\hline 
\end{array}$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Accounts Payable } & \mathrm { XX } & \
\hline \begin{array} { l } 
\text { Purchase Returns and } \
\text { Allowances }
\end{array} & & \mathrm { XX }  \
\hline
\end{array}$$ 
D)  $\begin{array}{|c|c|l|}
\hline\text { Merchandise Inventory } & \text { XX } \
\hline \text { Accounts Payable } && \text { XX }  \
\hline
\end{array}$

Question 2

The loss of inventory that occurs because of theft,damage,and errors is referred to as inventory shrinkage.

Accepted Answer

A) True 
 B)False

Question 3

When using the periodic inventory system,there is no need to record an adjusting entry for inventory shrinkage.

Accepted Answer

A) True 
 B)False

Question 4

A company ships goods to a customer and pays transportation costs.To the seller,the transportation costs are

Accepted Answer

A)  freight out 
B)  freight in 
C)  sales commission 
D)  brokerage 
A)  freight out 
B)  freight in 
C)  sales commission 
D)  brokerage

Question 5

In a multi-step income statement,which of the following items is excluded from the calculation of operating income?

Accepted Answer

A)  gross profit 
B)  interest expense 
C)  selling expense 
D)  administrative expense 
A)  gross profit 
B)  interest expense 
C)  selling expense 
D)  administrative expense

Question 6

If a physical count of inventory indicates that the Merchandise Inventory account is overstated,an adjusting entry is required to record the difference.Assume a perpetual inventory system is used.

Accepted Answer

A) True 
 B)False

Question 7

Gift Shops Unlimited's unadjusted Merchandise Inventory at December 31,2019 was $7,600.The cost associated with the physical count of inventory on hand on December 31,2019 was $7,350.In addition,Gift Shops Unlimited estimated approximately $800 of merchandise sold on account will be returned with a cost of $450.Assume a perpetual inventory system is used.
Requirements:
1.Journalize the adjustment for inventory shrinkage.Omit explanation.
2.Journalize the adjustment for estimated sales returns.Omit explanation.

Accepted Answer

Requirement 1
 \[\begin{array} { | c | c

Question 8

List four items from an invoice that are needed to record a purchase of merchandise inventory.

Accepted Answer

Any of the following are accep

Question 9

The gross profit percentage is one of the most carefully watched measures of ________.

Accepted Answer

A)  profitability 
B)  liquidity 
C)  solvency 
D)  marketability 
A)  profitability 
B)  liquidity 
C)  solvency 
D)  marketability

Question 10

Freight out is the freight on purchased goods.

Accepted Answer

A) True 
 B)False

Question 11

Durable Equipment Company uses the periodic inventory system.Durable reported the following selected amounts at June 30,2019 (the beginning inventory balance is also provided):
 $$\begin{array} { | l | r | } 
\hline \text { Merchandise Inventory, July 1, } & \
2018 & \$ 22,000 \
\hline \text { Merchandise Inventory, June 30, } \
2019 & 19,000 \
\hline \text { Purchases } & 96,000 \
\hline \text { Purchase Discounts } & 5,000 \
\hline \text { Purchase Returns and Allowances } & 8,500 \
\hline \text { Freight In } & 3,200 \
\hline \text { Net Sales Revenue } & 212,400\
\hline \text { Delivery Expense } & 1,400  \
\hline \text { Sales Salaries Expense } &44,200 \
\hline \text { Scheff, Capital } &69,500 \
\hline
\end{array}$$ Requirement A: Compute cost of goods sold.
Requirement B: Compute gross profit.

Accepted Answer

Requirement A
 \[\begin{array} { | l | r

Question 12

The last step of the closing process of a merchandiser is to make the expense accounts equal zero via the Income Summary account.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following line items will appear on the income statement of a merchandiser but not of a service company?

Accepted Answer

A)  Salaries Expense 
B)  Depreciation Expense 
C)  Cost of Goods Sold 
D)  Supplies Inventory 
A)  Salaries Expense 
B)  Depreciation Expense 
C)  Cost of Goods Sold 
D)  Supplies Inventory

Question 14

Precision Musical Instruments,merchandisers of musical instruments,has provided the following details: $$\begin{array} { | l | l | r | } 
\hline \text { Mar. 5 } & \text { Inventory purchased on account } & \$ 775,000 \
\hline \text { Mar. 8 } & \text { Freight in } & 45,000 \
\hline \text { Mar. 13 } & \text { Purchase returns } & 50,000 \
\hline \text { Mar. 14 } & \text { Allowances by vendor } & 15,000 \
\hline & \text { Payment made to vendor for purchases on } & \
\text { Mar. 20 } & \text { March 5 } & ?\
\hline
\end{array}$$ Credit terms are: 3/20,n/45,FOB shipping point.Calculate the net cost of inventory purchased assuming that there are no other inventory-related transactions during the month.Assume that the perpetual inventory system is used.

Accepted Answer

A)  $760,000 
B)  $732,350 
C)  $710,000 
D)  $733,700 
A)  $760,000 
B)  $732,350 
C)  $710,000 
D)  $733,700

Question 15

Under the periodic inventory system,which of the following statements is correct?

Accepted Answer

A)  During the period, the business records the cost of all inventory bought in the Merchandise Inventory account. 
B)  Purchase Returns and Allowances and Purchase Discounts are contra expense accounts. 
C)  Freight in is debited to the Purchases account. 
D)  Purchase discounts are recorded as credits to the Purchases account. 
A)  During the period, the business records the cost of all inventory bought in the Merchandise Inventory account. 
B)  Purchase Returns and Allowances and Purchase Discounts are contra expense accounts. 
C)  Freight in is debited to the Purchases account. 
D)  Purchase discounts are recorded as credits to the Purchases account.

Question 16

Sales are recorded at the amount of the sale less any sales discounts.

Accepted Answer

A) True 
 B)False

Question 17

The following details are provided by Western Wear Merchandisers.The company uses the periodic inventory system. $\begin{array}{|l|c|}
\hline \text { Net Sales } & \$ 202,000 \
\hline \text { Purchases } & 94,000 \
\hline \begin{array}{l}
\text { Purchase Returns and } \
\text { Allowances }
\end{array} & 1,600 \
\hline \text { Prchase Discounts } & 1,200 \
\hline \text { Freight In } & 1,500 \
\hline \begin{array}{l}
\text { Beginning Merchandise } \
\text { Iventory }
\end{array} &63,000 \
\hline \text {Ending Merchandise Inventory } & 37,000\
\hline
\end{array}$ Calculate the amount of net purchases.

Accepted Answer

A)  $154,200 
B)  $89,700 
C)  $91,200 
D)  $108,000 
A)  $154,200 
B)  $89,700 
C)  $91,200 
D)  $108,000

Question 18

The operating cycle of a merchandiser begins when the company purchases inventory from a vendor and ends when the company collects cash from customers.

Accepted Answer

A) True 
 B)False

Question 19

Vegan Specialty Foods,a grocery merchandiser,purchased goods and paid transportation to bring them to the company warehouse.The transportation cost is known as ________.

Accepted Answer

A)  freight out 
B)  selling expense 
C)  freight in 
D)  cost of goods sold 
A)  freight out 
B)  selling expense 
C)  freight in 
D)  cost of goods sold

Question 20

For each of the following accounts,state type of account and the normal account balance.Assume a periodic inventory system.
 $$\begin{array} { | l | l | l | } 
\hline \text { Account Title } & \text { Type of Account } & \text { Normal Account Balance } \
\hline \text { Freight In } & & \
\hline \text { Purchase Discounts } & & \
\hline \text { Merchandise Inventory } & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | l | } 
\hlin

Exam 5: Merchandising Operations

Which of the following is the correct journal entry for a return of goods that were purchased on account under the periodic inventory system?

The loss of inventory that occurs because of theft,damage,and errors is referred to as inventory shrinkage.

When using the periodic inventory system,there is no need to record an adjusting entry for inventory shrinkage.

A company ships goods to a customer and pays transportation costs.To the seller,the transportation costs are

In a multi-step income statement,which of the following items is excluded from the calculation of operating income?

If a physical count of inventory indicates that the Merchandise Inventory account is overstated,an adjusting entry is required to record the difference.Assume a perpetual inventory system is used.

List four items from an invoice that are needed to record a purchase of merchandise inventory.

The gross profit percentage is one of the most carefully watched measures of ________.

Freight out is the freight on purchased goods.

The last step of the closing process of a merchandiser is to make the expense accounts equal zero via the Income Summary account.

Which of the following line items will appear on the income statement of a merchandiser but not of a service company?

Under the periodic inventory system,which of the following statements is correct?

Sales are recorded at the amount of the sale less any sales discounts.

The operating cycle of a merchandiser begins when the company purchases inventory from a vendor and ends when the company collects cash from customers.

Vegan Specialty Foods,a grocery merchandiser,purchased goods and paid transportation to bring them to the company warehouse.The transportation cost is known as ________.

For each of the following accounts,state type of account and the normal account balance.Assume a periodic inventory system. Account Title Type of Account Normal Account Balance Freight In Purchase Discounts Merchandise Inventory

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

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