Question 1

In addition to keeping the records of a purchase transaction,the accounting department should prepare and mail checks in payment of invoices.

Accepted Answer

A) True 
 B)False

Question 2

Chancellor Company purchased merchandize worth $900 on credit,terms n/30 and returned merchandize worth $100 on next day.What is the required journal entry to record the merchandize returns under the periodic inventory system?

Accepted Answer

A) 
$\begin{array}{lll}
\text { Accounts Payable }&100 \
\text { Purchases Returns and Allowances }&&100
\end{array}$ 
B) 
$\begin{array}{lll}
\text { Accounts Payable } &100\
\text { Merchandize Inventory }&&100
\end{array}$ 
C) 
$\begin{array}{lll}
\text { Merchandize Inventory } &100\
\quad \text { Purchases Returns and Allowances }&&100
\end{array}$ 
D) 
$\begin{array}{lll}
\text { Purchases Returns and Allowances } &100\
\quad \text { Merchandize Inventory }&&100
\end{array}$ 
A) 
$\begin{array}{lll}
\text { Accounts Payable }&100 \
\text { Purchases Returns and Allowances }&&100
\end{array}$ 
B) 
$\begin{array}{lll}
\text { Accounts Payable } &100\
\text { Merchandize Inventory }&&100
\end{array}$ 
C) 
$\begin{array}{lll}
\text { Merchandize Inventory } &100\
\quad \text { Purchases Returns and Allowances }&&100
\end{array}$ 
D) 
$\begin{array}{lll}
\text { Purchases Returns and Allowances } &100\
\quad \text { Merchandize Inventory }&&100
\end{array}$

Question 3

The periodic inventory system is used most commonly by companies that sell

Accepted Answer

A)  low-priced, high-volume merchandise. 
B)  low-priced, low-volume merchandise. 
C)  high-priced, low-volume merchandise. 
D)  high-priced, high-volume merchandise. 
A)  low-priced, high-volume merchandise. 
B)  low-priced, low-volume merchandise. 
C)  high-priced, low-volume merchandise. 
D)  high-priced, high-volume merchandise.

Question 4

Under the perpetual inventory system,which of the following accounts would not be used?

Accepted Answer

A)  Cost of Goods Sold 
B)  Merchandise Inventory 
C)  Sales 
D)  Purchases 
A)  Cost of Goods Sold 
B)  Merchandise Inventory 
C)  Sales 
D)  Purchases

Question 5

Indicate whether each business practice listed below strengthens (S)or weakens (W)a company's system of internal control.
_____
a. Bonding of employees
_____
b. Limiting the number of people who have access to cash
_____
c. Combining the recordkeeping and custodianship functions
_____
d. Making all payments with cash
_____
e. Keeping rotation of key employees to a minimum
_____
_____ f. Using prenumbered sales tickets

Accepted Answer

a.S
d.W
b.

Question 6

Using the following information,calculate for 2010 (a)net sales,(b)cost of goods sold,(c)gross margin,and (d)net income.
 $\begin{array}{lr}
\text { Freight-In}&\$200\
\text { Merchandise Inventory, December 31, 2009}&15,000\
\text { Sales}&60,000\
\text { Purchases Returns and Allowances}&300\
\text { Advertising Expense}&4,000\
\text { Purchases } & 20,000 \
\text { Merchandise Inventory, December 31, } 2010 & 5,000 \
\text { Sales Returns and Allowances } & 500 \
\text { General and Administrative Expenses } & 7,000
\end{array}$

Accepted Answer

a.$59,500

Question 7

A purchase on account with an invoice price of $750 has been made.The entry to record the payment after the 2 percent discount period would include a(n)

Accepted Answer

A)  decrease to Accounts Payable for $750. 
B)  decrease to Purchases Discounts for $15. 
C)  increase to Accounts Payable for $735. 
D)  decrease to Cash for $735. 
A)  decrease to Accounts Payable for $750. 
B)  decrease to Purchases Discounts for $15. 
C)  increase to Accounts Payable for $735. 
D)  decrease to Cash for $735.

Question 8

Which of the following sets of documents are in the correct sequence?

Accepted Answer

A)  Purchase order, check, receiving report 
B)  Purchase requisition, receiving report, purchase order 
C)  Purchase order, purchase requisition, invoice 
D)  Purchase requisition, purchase order, invoice 
A)  Purchase order, check, receiving report 
B)  Purchase requisition, receiving report, purchase order 
C)  Purchase order, purchase requisition, invoice 
D)  Purchase requisition, purchase order, invoice

Question 9

An effective system of internal control requires that individuals take periodic vacations.

Accepted Answer

A) True 
 B)False

Question 10

With the periodic inventory system,goods available for sale must be calculated before cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 11

Why is the separation of duties an important control activity in a good system of internal control?

Accepted Answer

When only one employee is responsible fo

Question 12

A formal request for a purchase from the requesting department of a business is known as a purchase requisition.

Accepted Answer

A) True 
 B)False

Question 13

Under the perpetual inventory system,in addition to making the entry to record a sale,a company would

Accepted Answer

A)  record an increase in inventory corresponding to the amount of the sale. 
B)  record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold. 
C)  record an increase in inventory corresponding to the cost of the inventory. 
D)  make no additional entry until the end of the period. 
A)  record an increase in inventory corresponding to the amount of the sale. 
B)  record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold. 
C)  record an increase in inventory corresponding to the cost of the inventory. 
D)  make no additional entry until the end of the period.

Question 14

When a U.S.company does business with a British company and payment is in British pounds,an exchange gain or loss occurs if the exchange rate between dollars and pounds changes between the date of sale and the date of payment.

Accepted Answer

A) True 
 B)False

Question 15

A traditional definition of internal control specifically includes all of the following features except

Accepted Answer

A)  adherence to prescribed managerial policies. 
B)  promotion of operational efficiency. 
C)  reliability of accounting data. 
D)  maintenance of a clean and safe workplace. 
A)  adherence to prescribed managerial policies. 
B)  promotion of operational efficiency. 
C)  reliability of accounting data. 
D)  maintenance of a clean and safe workplace.

Question 16

A sale takes place when title to the goods transfers to the buyer.

Accepted Answer

A) True 
 B)False

Question 17

The entry to record a sales return from a customer would require a(n)

Accepted Answer

A)  decrease to Sales. 
B)  increase to Sales. 
C)  decrease to Sales Returns and Allowances. 
D)  increase to Sales Returns and Allowances. 
A)  decrease to Sales. 
B)  increase to Sales. 
C)  decrease to Sales Returns and Allowances. 
D)  increase to Sales Returns and Allowances.

Question 18

Given the following information,prepare in good form the cost of goods sold section of an income statement for 2010.
 $\begin{array}{ll}
\text { Freight-In } & \$ 8,000 \
\text { Merchandise Inventory, December 31, } 2009 & 30,000 \
\text { Merchandise Inventory, December 31, } 2010 & 32,000 \
\text { Purchases } & 76,000 \
\text { Purchases Returns and Allowances } & 3,600
\end{array}$

Accepted Answer

None

Question 19

Which of the following would not be found in a good system of internal control?

Accepted Answer

A)  Establishing a system of checks and balances 
B)  Having one person handle all the responsibilities of a department 
C)  Establishing an internal audit staff 
D)  Requiring all employees to take earned vacations 
A)  Establishing a system of checks and balances 
B)  Having one person handle all the responsibilities of a department 
C)  Establishing an internal audit staff 
D)  Requiring all employees to take earned vacations

Question 20

Sales Discounts and Sales Returns and Allowances are contra-revenue accounts.

Accepted Answer

A) True 
 B)False

Exam 5: The Operating Cycle and Merchandising Operations

In addition to keeping the records of a purchase transaction,the accounting department should prepare and mail checks in payment of invoices.

Chancellor Company purchased merchandize worth $900 on credit,terms n/30 and returned merchandize worth $100 on next day.What is the required journal entry to record the merchandize returns under the periodic inventory system?

The periodic inventory system is used most commonly by companies that sell

Under the perpetual inventory system,which of the following accounts would not be used?

A purchase on account with an invoice price of $750 has been made.The entry to record the payment after the 2 percent discount period would include a(n)

Which of the following sets of documents are in the correct sequence?

An effective system of internal control requires that individuals take periodic vacations.

With the periodic inventory system,goods available for sale must be calculated before cost of goods sold.

Why is the separation of duties an important control activity in a good system of internal control?

A formal request for a purchase from the requesting department of a business is known as a purchase requisition.

Under the perpetual inventory system,in addition to making the entry to record a sale,a company would

When a U.S.company does business with a British company and payment is in British pounds,an exchange gain or loss occurs if the exchange rate between dollars and pounds changes between the date of sale and the date of payment.

A traditional definition of internal control specifically includes all of the following features except

A sale takes place when title to the goods transfers to the buyer.

The entry to record a sales return from a customer would require a(n)

Given the following information,prepare in good form the cost of goods sold section of an income statement for 2010. Freight-In \ 8,000 Merchandise Inventory, December 31, 2009 30,000 Merchandise Inventory, December 31, 2010 32,000 Purchases 76,000 Purchases Returns and Allowances 3,600

Which of the following would not be found in a good system of internal control?

Sales Discounts and Sales Returns and Allowances are contra-revenue accounts.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

Filters