Question 1

The amount of cost of goods available for sale during the year depends on the amounts of

Accepted Answer

A)  beginning merchandise inventory, net cost of purchases, and ending merchandise inventory. 
B)  beginning merchandise inventory and cost of goods sold. 
C)  beginning merchandise inventory, cost of goods sold, and ending merchandise inventory. 
D)  beginning merchandise inventory and net cost of purchases. 
A)  beginning merchandise inventory, net cost of purchases, and ending merchandise inventory. 
B)  beginning merchandise inventory and cost of goods sold. 
C)  beginning merchandise inventory, cost of goods sold, and ending merchandise inventory. 
D)  beginning merchandise inventory and net cost of purchases.

Question 2

The periodic inventory system relies on a physical count of merchandise for its balance sheet amount.

Accepted Answer

A) True 
 B)False

Question 3

If a retailer makes a sale of $100 on a MasterCard, and MasterCard takes a 5 percent discount on the sale, the retailer would record Cash for $100 and Accounts Payable for $5.

Accepted Answer

A) True 
 B)False

Question 4

The terms "2/10, n/30" mean that a 2 percent discount is allowed on payments made over 10 but before 30 days after the invoice date.

Accepted Answer

A) True 
 B)False

Question 5

Under the perpetual inventory system, the Cost of Goods Sold account is updated only at the end of the period.

Accepted Answer

A) True 
 B)False

Question 6

If insured goods are shipped FOB destination, the seller should file a claim for goods damaged in transit.

Accepted Answer

A) True 
 B)False

Question 7

The entry to record payment of a $1,500 purchase within the 2 percent discount period would include a(n)

Accepted Answer

A)  decrease to Accounts Payable for $1,470. 
B)  increase to Purchases Discounts for $30. 
C)  increase to Accounts Payable for $1,500. 
D)  increase to Cash for $1,500. 
A)  decrease to Accounts Payable for $1,470. 
B)  increase to Purchases Discounts for $30. 
C)  increase to Accounts Payable for $1,500. 
D)  increase to Cash for $1,500.

Question 8

Assume that the sales made by Wessling Company for the month ended February 28, 2010, were made to customers using credit cards and totaled $5,666. Prepare one entry in journal form to record these sales assuming that all of the credit card companies charge Wessling Company a 2.5 percent discount fee. (Omit date.) Round to the nearest whole dollar.

Accepted Answer

The answer of Assume that the sales made by Wessling...

Question 9

Use this information to answer the following question.   In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.
Net income for the period was

Accepted Answer

A)  $173,000. 
B)  $93,000. 
C)  $63,000. 
D)  $203,000. 
A)  $173,000. 
B)  $93,000. 
C)  $63,000. 
D)  $203,000.

Question 10

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 11

Under the perpetual inventory system, when merchandise is sold, its cost is transferred from the Merchandise Inventory account to the Sales account.

Accepted Answer

A) True 
 B)False

Question 12

If it takes Gledhill Company 45 days to sell inventory, 23 days to collect from the sale, and creditors' payment terms are 30 days, the financing period is

Accepted Answer

A)  98 days. 
B)  23 days. 
C)  45 days. 
D)  38 days. 
A)  98 days. 
B)  23 days. 
C)  45 days. 
D)  38 days.

Question 13

Use this information to answer the following question.   In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.
Cost of goods sold for the period was

Accepted Answer

A)  $62,000. 
B)  $50,000. 
C)  $76,000. 
D)  $46,000. 
A)  $62,000. 
B)  $50,000. 
C)  $76,000. 
D)  $46,000.

Question 14

A tabulation of invoices at the end of the day showed $800 in MasterCard invoices, which were deposited into a bank account at full value, less a 5 percent discount. The entry to record the above events would include an increase in

Accepted Answer

A)  Accounts Receivable for $760. 
B)  Cash for $800. 
C)  Sales for $760. 
D)  Credit Card Expense for $40. 
A)  Accounts Receivable for $760. 
B)  Cash for $800. 
C)  Sales for $760. 
D)  Credit Card Expense for $40.

Question 15

Taking a physical inventory refers to making a count of all merchandise on hand at a particular time.

Accepted Answer

A) True 
 B)False

Question 16

Khan Products entered into the transactions listed below. In the journal provided, prepare Khan's journal entries, assuming use of the periodic inventory system. Omit explanations.

Accepted Answer

The answer of Khan Products entered into the transactions listed...

Question 17

An American company makes a credit purchase of goods from a company in London for $500. On the date of purchase, the exchange rate was $1.50 per pound. However, on the date of payment, the rate had risen to $1.55 per pound. As a result, the American company would record

Accepted Answer

A)  an exchange gain of $25. 
B)  an exchange loss of $775. 
C)  an exchange loss of $25. 
D)  no exchange gain or loss. 
A)  an exchange gain of $25. 
B)  an exchange loss of $775. 
C)  an exchange loss of $25. 
D)  no exchange gain or loss.

Question 18

Exchange gains and losses are reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 19

A discount that buyers take for early payment of merchandise is called a

Accepted Answer

A)  customer discount. 
B)  purchases discount. 
C)  sales discount. 
D)  trade discount. 
A)  customer discount. 
B)  purchases discount. 
C)  sales discount. 
D)  trade discount.

Question 20

If it takes 30 days to sell inventory, 60 days to collect for the sale, and creditors' terms are 10 days, the financing period is 100 days.

Accepted Answer

A) True 
 B)False

Exam 6: The Operating Cycle and Merchandising Operations

The amount of cost of goods available for sale during the year depends on the amounts of

The periodic inventory system relies on a physical count of merchandise for its balance sheet amount.

If a retailer makes a sale of $100 on a MasterCard, and MasterCard takes a 5 percent discount on the sale, the retailer would record Cash for $100 and Accounts Payable for $5.

The terms "2/10, n/30" mean that a 2 percent discount is allowed on payments made over 10 but before 30 days after the invoice date.

Under the perpetual inventory system, the Cost of Goods Sold account is updated only at the end of the period.

If insured goods are shipped FOB destination, the seller should file a claim for goods damaged in transit.

The entry to record payment of a $1,500 purchase within the 2 percent discount period would include a(n)

Use this information to answer the following question. In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000. Net income for the period was

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

Under the perpetual inventory system, when merchandise is sold, its cost is transferred from the Merchandise Inventory account to the Sales account.

If it takes Gledhill Company 45 days to sell inventory, 23 days to collect from the sale, and creditors' payment terms are 30 days, the financing period is

Use this information to answer the following question. In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000. Cost of goods sold for the period was

A tabulation of invoices at the end of the day showed $800 in MasterCard invoices, which were deposited into a bank account at full value, less a 5 percent discount. The entry to record the above events would include an increase in

Taking a physical inventory refers to making a count of all merchandise on hand at a particular time.

Khan Products entered into the transactions listed below. In the journal provided, prepare Khan's journal entries, assuming use of the periodic inventory system. Omit explanations.

An American company makes a credit purchase of goods from a company in London for $500. On the date of purchase, the exchange rate was $1.50 per pound. However, on the date of payment, the rate had risen to $1.55 per pound. As a result, the American company would record

Exchange gains and losses are reported on the income statement.

A discount that buyers take for early payment of merchandise is called a

If it takes 30 days to sell inventory, 60 days to collect for the sale, and creditors' terms are 10 days, the financing period is 100 days.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-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

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