Question 1

Which of the following is not true of the periodic inventory system?

Accepted Answer

A)  It uses a purchases account. 
B)  It identifies inventory variances. 
C)  It is the simplest system. 
D)  Cost of sales can be calculated only after a physical stocktake. 
A)  It uses a purchases account. 
B)  It identifies inventory variances. 
C)  It is the simplest system. 
D)  Cost of sales can be calculated only after a physical stocktake. B

Question 2

Under the perpetual inventory system, and including GST, what is the entry to record the return of faulty goods to a supplier?

Accepted Answer

A)  DR Accounts payable, CR Inventory, CR GST receivable 
B)  DR Inventory, CR Purchases returns, CR GST receivable 
C)  DR Accounts payable, CR Purchases, CR GST receivable 
D)  DR Inventory, DR GST receivable, CR Accounts payable 
A)  DR Accounts payable, CR Inventory, CR GST receivable 
B)  DR Inventory, CR Purchases returns, CR GST receivable 
C)  DR Accounts payable, CR Purchases, CR GST receivable 
D)  DR Inventory, DR GST receivable, CR Accounts payable A

Question 3

A retailer will use which specific term for income?

Accepted Answer

A)  sales. 
B)  revenue. 
C)  fees income. 
D)  service income. 
A)  sales. 
B)  revenue. 
C)  fees income. 
D)  service income. A

Question 4

Under the periodic inventory system, the______________ of each sale is not recorded.

Accepted Answer

A)  selling price 
B)  cost price 
C)  quantity 
D)  discount 
A)  selling price 
B)  cost price 
C)  quantity 
D)  discount

Question 5

The_______________ refers to the average length of time it takes for a retail business to acquire inventory, sell it to its customers and collect the cash owing.

Accepted Answer

A)  accounting cycle. 
B)  product cycle. 
C)  inventory turnover. 
D)  operating cycle. 
A)  accounting cycle. 
B)  product cycle. 
C)  inventory turnover. 
D)  operating cycle.

Question 6

The opening balance in the inventory account under a periodic inventory system represents:

Accepted Answer

A)  inventory on hand at the end of the current period as determined by a physical stocktake. 
B)  opening inventory plus purchases less ending inventory. 
C)  inventory on hand at the end of the current period before allowing for any inventory variances. 
D)  inventory on hand at the end of the previous period as determined by a physical stocktake. 
A)  inventory on hand at the end of the current period as determined by a physical stocktake. 
B)  opening inventory plus purchases less ending inventory. 
C)  inventory on hand at the end of the current period before allowing for any inventory variances. 
D)  inventory on hand at the end of the previous period as determined by a physical stocktake.

Question 7

Under a periodic inventory system, if inventory at the start of the period is $15 000, purchases for the period are $73 000 and inventory at the end of the period, as per a physical stocktake is $20 000, what is the estimated cost of sales?

Accepted Answer

A)  $68 000 
B)  $108 000 
C)  $88 000 
D)  $53 000 
A)  $68 000 
B)  $108 000 
C)  $88 000 
D)  $53 000

Question 8

Jane sold goods to Johnno for $4400 including GST. Johnno paid his account within the discount period and received a settlement discount of 5%. Using the gross method, which of the following is the correct entry in Jane's books to record Johnno's payment?

Accepted Answer

A)  DR Cash $4180; DR Discount allowed $200; DRGST payable $20; CR Accounts receivable $4400 
B)  DR Cash $4200; DR Discount allowed $200; CR Accounts receivable $4400 
C)  DR Cash $4180; DR Discount allowed $220; DR GST payable $20; CR Accounts receivable $4420 
D)  DR Cash $4180; DR Discount allowed $220; CR Accounts receivable $4400 
A)  DR Cash $4180; DR Discount allowed $200; DRGST payable $20; CR Accounts receivable $4400 
B)  DR Cash $4200; DR Discount allowed $200; CR Accounts receivable $4400 
C)  DR Cash $4180; DR Discount allowed $220; DR GST payable $20; CR Accounts receivable $4420 
D)  DR Cash $4180; DR Discount allowed $220; CR Accounts receivable $4400

Question 9

Which statement relating to inventory is not correct?

Accepted Answer

A)  It is a very active asset, continually being acquired, sold and replaced. 
B)  It is classified as a non-current asset in the balance sheet. 
C)  Another name for inventory is stock-in-trade. 
D)  It makes up a significant portion of a retailer's assets. 
A)  It is a very active asset, continually being acquired, sold and replaced. 
B)  It is classified as a non-current asset in the balance sheet. 
C)  Another name for inventory is stock-in-trade. 
D)  It makes up a significant portion of a retailer's assets.

Question 10

If beginning inventory was $20 000, total purchases for the period were $80 000, freight-in was $4 000 and ending inventory was $45 000, the cost of sales for the period would be:

Accepted Answer

A)  $59 000 
B)  $84 000 
C)  $51 000 
D)  $76 000 
A)  $59 000 
B)  $84 000 
C)  $51 000 
D)  $76 000

Question 11

The account used by the purchaser to record the amount of discount granted by its suppliers for prompt payment is called the:

Accepted Answer

A)  discount allowed account. 
B)  discount received account. 
C)  discount taken account. 
D)  financial discount account. 
A)  discount allowed account. 
B)  discount received account. 
C)  discount taken account. 
D)  financial discount account.

Question 12

Goods held for sale by a retailer in the normal course of business are known as:

Accepted Answer

A)  stock, inventory, stock-in-trade. 
B)  merchandise, inventory. 
C)  inventory, stock, raw materials. 
D)  stock, inventory work-in-process. 
A)  stock, inventory, stock-in-trade. 
B)  merchandise, inventory. 
C)  inventory, stock, raw materials. 
D)  stock, inventory work-in-process.

Question 13

Australia's GST (Goods and Services Tax) legislation requires a tax invoice to be issued for all sales greater than:

Accepted Answer

A)  $50. 
B)  $75. 
C)  $100. 
D)  $200. 
A)  $50. 
B)  $75. 
C)  $100. 
D)  $200.

Question 14

The formula for calculating the gross profit ratio is:

Accepted Answer

A)  Gross profit /sales 
B)  Sales/gross profit 
C)  Cost of sales/sales 
D)  Gross profit after tax/sales 
A)  Gross profit /sales 
B)  Sales/gross profit 
C)  Cost of sales/sales 
D)  Gross profit after tax/sales

Question 15

Under the periodic inventory system inventory purchased is debited to which account?

Accepted Answer

A)  Prepaid expenses 
B)  Cost of sales 
C)  Purchases 
D)  Inventory 
A)  Prepaid expenses 
B)  Cost of sales 
C)  Purchases 
D)  Inventory

Question 16

If the invoice price for goods sold to a customer is $798, including GST, how much GST is to be collected from the customer?

Accepted Answer

A)  Nil 
B)  $72.55 
C)  $79.80 
D)  $98.00 
A)  Nil 
B)  $72.55 
C)  $79.80 
D)  $98.00

Question 17

The account, Sales Returns and Allowances, is classified as what type of account?

Accepted Answer

A)  Liability 
B)  Expense 
C)  Contra account to Inventory 
D)  Contra account to sales revenue 
A)  Liability 
B)  Expense 
C)  Contra account to Inventory 
D)  Contra account to sales revenue

Question 18

Which of the following statements is correct?

Accepted Answer

A)  An expense to sales ratio of 10% in year 1 and 15% in year 2 indicates that management policies to control expenses have been successful. 
B)  In general, the faster the turnover of inventory the lower the profitability of the business. 
C)  A gross profit ratio that is increasing over time indicates an increase in the margin between the purchase price and the selling price of goods. 
D)  The formula for the inventory turnover ratio is sales divided by average inventory. 
A)  An expense to sales ratio of 10% in year 1 and 15% in year 2 indicates that management policies to control expenses have been successful. 
B)  In general, the faster the turnover of inventory the lower the profitability of the business. 
C)  A gross profit ratio that is increasing over time indicates an increase in the margin between the purchase price and the selling price of goods. 
D)  The formula for the inventory turnover ratio is sales divided by average inventory.

Question 19

The account that measures the expense of the inventory sold during the period is called:

Accepted Answer

A)  gross profit. 
B)  purchases. 
C)  cost of sales. 
D)  cost of completed goods. 
A)  gross profit. 
B)  purchases. 
C)  cost of sales. 
D)  cost of completed goods.

Question 20

Bailey Ltd sold goods to Andrews Ltd for $1000. Andrews Ltd paid the account 28 days later. Ignoring GST, the correct entry in Bailey Ltd's books to record the payment by Andrews Ltd is:

Accepted Answer

A)  DR Accounts receivable $1000; CR Sales $1000 
B)  DR Cash at bank $1000; CR Accounts receivable $1000 
C)  DR Accounts receivable $1000; CR Equity $1000 
D)  DR Cash at bank $1000; CR Sales $1000 
A)  DR Accounts receivable $1000; CR Sales $1000 
B)  DR Cash at bank $1000; CR Accounts receivable $1000 
C)  DR Accounts receivable $1000; CR Equity $1000 
D)  DR Cash at bank $1000; CR Sales $1000

Exam 6: Accounting for Retailing

Which of the following is not true of the periodic inventory system?

Under the perpetual inventory system, and including GST, what is the entry to record the return of faulty goods to a supplier?

A retailer will use which specific term for income?

Under the periodic inventory system, the______________ of each sale is not recorded.

The_______________ refers to the average length of time it takes for a retail business to acquire inventory, sell it to its customers and collect the cash owing.

The opening balance in the inventory account under a periodic inventory system represents:

Under a periodic inventory system, if inventory at the start of the period is $15 000, purchases for the period are $73 000 and inventory at the end of the period, as per a physical stocktake is $20 000, what is the estimated cost of sales?

Jane sold goods to Johnno for $4400 including GST. Johnno paid his account within the discount period and received a settlement discount of 5%. Using the gross method, which of the following is the correct entry in Jane's books to record Johnno's payment?

Which statement relating to inventory is not correct?

If beginning inventory was $20 000, total purchases for the period were $80 000, freight-in was $4 000 and ending inventory was $45 000, the cost of sales for the period would be:

The account used by the purchaser to record the amount of discount granted by its suppliers for prompt payment is called the:

Goods held for sale by a retailer in the normal course of business are known as:

Australia's GST (Goods and Services Tax) legislation requires a tax invoice to be issued for all sales greater than:

The formula for calculating the gross profit ratio is:

Under the periodic inventory system inventory purchased is debited to which account?

If the invoice price for goods sold to a customer is $798, including GST, how much GST is to be collected from the customer?

The account, Sales Returns and Allowances, is classified as what type of account?

Which of the following statements is correct?

The account that measures the expense of the inventory sold during the period is called:

Bailey Ltd sold goods to Andrews Ltd for $1000. Andrews Ltd paid the account 28 days later. Ignoring GST, the correct entry in Bailey Ltd's books to record the payment by Andrews Ltd is:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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