Deck 6: Merchandising Activities

Question 1

Which of the following businesses is most likely to use a periodic inventory system?

A) An aircraft manufacturer.
B) A supermarket that is part of a national chain.
C) An independently owned art gallery with a manual accounting system.
D) A beer bar.

Answer 1

A beer bar.

Question 2

A periodic inventory system eliminates the need for:

A) Taking an annual physical inventory.
B) Recording the revenue from sales transactions.
C) Recording the cost of merchandise sold as sales occur.
D) None of the above.

Answer 2

Recording the cost of merchandise sold as sales occur.

Question 3

If management wants to know the cost and quantity of merchandise on hand at all times, the business will probably:

A) Use a periodic inventory system.
B) Maintain an inventory subsidiary ledger.
C) Take a complete physical inventory each day.
D) Debit all purchases of merchandise directly to the Cost of Goods Sold account.

Answer 3

Maintain an inventory subsidiary ledger.

Question 4

In a perpetual inventory system, the entry to record the cost of goods sold always includes an entry of equal amount to the:

A) Inventory account.
B) Sales account.
C) Purchases account.
D) None of the above.

Question 5

Prior to taking a physical inventory at year?end, the perpetual inventory records of Athena Designs showed an inventory of $26,000, sales of $358,000, and a cost of goods sold of $215,000. The year?end physical inventory indicated merchandise on hand costing $24,000. The company's gross profit for the year was:

A) $334,000.
B) $145,000.
C) $141,000.
D) Some other amount.

Question 6

At the end of last year, Helen's, Inc. had merchandise costing $115,000 in inventory. During January of the current year, the company purchased merchandise costing $35,000, and sold merchandise which it had purchased at a total cost of $55,000.
Based upon the above information, place the best answer in the space provided. In questions 1 through 3, assume that Helen's uses a perpetual inventory system.

-The total debited to the Inventory account during January was:

A) $0.
B) $35,000.
C) $55,000.
D) None of these.

Question 7

At the end of last year, Helen's, Inc. had merchandise costing $115,000 in inventory. During January of the current year, the company purchased merchandise costing $35,000, and sold merchandise which it had purchased at a total cost of $55,000.
Based upon the above information, place the best answer in the space provided. In questions 1 through 3, assume that Helen's uses a perpetual inventory system.

-The balance in the Inventory account at January 31 was:

A) $35,000.
B) $205,000.
C) $95,000.
D) None of these.

Question 8

At the end of last year, Helen's, Inc. had merchandise costing $115,000 in inventory. During January of the current year, the company purchased merchandise costing $35,000, and sold merchandise which it had purchased at a total cost of $55,000.
Based upon the above information, place the best answer in the space provided. In questions 1 through 3, assume that Helen's uses a perpetual inventory system.

-The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was:

A) $0.
B) $35,000.
C) $55,000.
D) None of these.

Question 9

assume that Helen's, Inc. uses a periodic inventory system and takes a physical inventory only at year-end.

-The total debited to the Inventory account during January was:

A) $0.
B) $35,000.
C) $55,000.
D) None of these.

Question 10

assume that Helen's, Inc. uses a periodic inventory system and takes a physical inventory only at year-end.

-The balance in the Inventory account at January 31 was:

A) $0.
B) $105,000.
C) $115,000.
D) None of these.

Question 11

assume that Helen's, Inc. uses a periodic inventory system and takes a physical inventory only at year-end.

-The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was:

A) $0.
B) $35,000.
C) $55,000.
D) None of these.

Question 12

At the end of last year, Baron's Bazaar had merchandise costing $381,000 in inventory. During January of the current year, the company purchased merchandise costing $133,500, and sold merchandise that it had purchased at a total cost of $109,300.
a) Assume that Baron's Bazaar uses a perpetual inventory system.
(1) The total amount debited to the Inventory account during January was: $________________
(2) The balance in the Inventory account at January 31 was: $________________
(3) The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was: $________________
b) Assume that Baron's Bazaar uses a periodic inventory system and takes a physical inventory only at year-end (December 31). (Note: $0 may be an appropriate answer to one or more of the following questions.)
(1) The total amount debited to the Inventory account during January was: $________________
(2) The balance in the Inventory account at January 31 was: $________________
(3) The amount of costs transferred from the Inventory account to the Cost of Goods Sold account during January was: $________________

Question 13

Phillips Co. is an office supply store. The company uses a perpetual inventory system, records purchases at net cost, and records sales revenue at full invoice price.
Record the following transactions in the company's general journal. To conserve space, you may omit the written explanations which normally should accompany the entries.