Question 1

Credit terms of 1/10 n/30 indicates that the buyer is:

Accepted Answer

A)  allowed a 10% discount if payment is made within 30 days.
B)  allowed a 1% discount if payment is made within 10 days.
C)  allowed a 1% discount if payment is made within 30 days.
D)  allowed a 30% discount if payment is made within 10 days. B

Question 2

Following is a random list of some of the accounts and their December 31, 2019, balances for Milita Merchandising. Milita Merchandising uses a periodic inventory system and all account balances are normal. $$\begin{array} { l r } 
\text { Purchases } & \$ 330,000 \
\text { Sales revenue } & 470,000 \
\text { Interest revenue } & 23,000 \
\text { Salary expense } & 45,000 \
\text { Freight in } & 17,000 \
\text { Purchase discounts } & 31,000 \
\text { Sales returns and allowances } & 40,000 \
\text { Interest expense } & 18,000 \
\text { Delivery expense } & 24,000 \
\text { Sales discounts } & 27,000 \
\text { Insurance expense } & 16,000 \
\text { Purchase returns and allowances } & 49,000 \
\text { R. Milita, Capital } & 35,000 \
\text { Utilities expense } & 14,000 \
\text { Amortization expense-equipment } & 10,000 \
\text { R. Milita, Withdrawals } & 18,000
\end{array}$$ The beginning and ending amounts for inventory are $58,000 and $65,000, respectively.
Calculate the following for Milita Merchandising: $\begin{array}{llcc}
  \text { Net sales revenue } &\$\underline{\quad\quad}  \
 \text {  Net purchases} &\$\underline{\quad\quad}\
 \text { Cost of goods available for sale } &\$\underline{\quad\quad}\
 \text {  Cost of goods sold} &\$\underline{\quad\quad}\
 \text {Gross margin  } &\$\underline{\quad\quad}\
 \text { Operating income } &\$\underline{\quad\quad}\
 \text { Net income  } &\$\underline{\quad\quad}\
\end{array}$

Accepted Answer

$\text {Net sales revenue}$
$( \$ 470,000 - \$ 40,000 - \$ 27,000 ) = \$ 403,000$
$\text {Net purchases}$
$( \$ 330,000 - \$ 31,000 - \$ 49,000 ) = \$ 250,000$
$\text {Cost of goods available for sale}$
$( \$ 58,000 + \$ 250,000 + \$ 17,000 ) = \$ 325,000$
$\text {Cost of goods sold}$
$( \$ 325,000 - \$ 65,000 ) = \$ 260,000$
$\text {Gross margin}$
$( \$ 403,000 - \$ 260,000 ) = \$ 143,000$
$\text {Operating income}$
$( \$ 143,000 - \$ 45,000 - \$ 24,000 - \$ 16,000 - \$ 14,000 - \$ 10,000 ) = \$ 34,000$
$\text {Net income}$
$( \$ 34,000 + \$ 23,000 - \$ 18,000 ) = \$ 39,000$

Question 3

The entry to record the sale of merchandise for cash includes a:

Accepted Answer

A)  debit to Accounts Receivable.
B)  credit to Sales Discounts.
C)  debit to Sales Revenue.
D)  credit to Sales Revenue. D

Question 4

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $360 with a cost of $210 would be recorded by the seller as a:

Accepted Answer

A)  credit to Accounts Receivable for $210.
B)  credit to Sales Returns and Allowances for $210.
C)  debit to Sales Revenue for $360.
D)  debit to Inventory for $210.

Question 5

In a periodic inventory system, the entry to record the payment of shipping costs by the company buying the merchandise when the terms are FOB shipping point would include a:

Accepted Answer

A)  debit to Freight In.
B)  debit to Delivery Expense.
C)  credit to Cost of Goods Sold.
D)  credit to Freight Out.

Question 6

Inventory includes all goods that the company owns and expects to use in normal operations.

Accepted Answer

A) True 
 B)False

Question 7

In a periodic inventory system, the closing process includes:

Accepted Answer

A)  debiting Purchases.
B)  crediting Purchase Returns and Allowances.
C)  debiting Sales Discounts.
D)  debiting Inventory for the ending balance.

Question 8

Table 5-4
The following data is for the Atlantis Merchandising, which uses a periodic inventory system: $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 600,000 \
\hline \text { Interest revenue } & 12,000 \
\hline \text { Freight in } & 42,000 \
\hline \text { Beginning inventory } & 77,000 \
\hline \text { Purchase discounts } & 19,000 \
\hline \text { Sales reburns and allowances } & 33,000 \
\hline \text { Operating expenses } & 77,000 \
\hline \text { Interest expense } & 9,000 \
\hline \text { Ending inventory } & 81,000 \
\hline \text { Purchases } & 415,000 \
\hline \text { Sales discounts } & 35,000 \
\hline \text { Omar Atlantis, Withdrawals } & 71,000 \
\hline \text { Purchase returns and allowances } & 39,000 \
\hline
\end{array}$$
-Refer to Table 5-4. Net purchases for Atlantis Merchandising are:

Accepted Answer

A)  $415,000.
B)  $357,000.
C)  $396,000.
D)  $376,000.

Question 9

Please refer to the following trial balance. $$\begin{array} { | l | r | r | } 
\hline & \text { Debit } & \text { Credit } \
\hline \text { Cash } & \$ 5,000 & \
\hline \text { Accounts receivable } & 14,000 & \
\hline \text { Inventory } & 20,000 & \
\hline \text { Supp lies } & 5,000 & \
\hline \text { Land } & 100,000 & \
\hline \text { Accounts payable } & & \$ 3,000 \
\hline \text { Notes payable } & & 25,000 \
\hline \text { Capital } & & 90,000 \
\hline \text { Withdrawals } & 1,000 & \
\hline \text { Sales revenues } & & 160,000 \
\hline \text { Sales returns and allowances } & 2,000 & \
\hline \text { Sales discounts } & 3,000 & \
\hline \text { Cost of goods sold } & 80,000 & \
\hline \text { Salary expense } & 5,000 & \
\hline \text { Utility expense } & 23,000 & \
\hline \text { Rent expense } & 18,000 & \
\hline \text { Interest expense } & 2,000 & \
\hline \text { Totals } & \$ 278,000 & \$ 278,000 \
\hline
\end{array}$$ How much is the gross profit percentage?

Accepted Answer

A)  50.0%
B)  51.6%
C)  46.8%
D)  48.4%

Question 10

The entries to record a $4,500 sale on account under a perpetual inventory system, when the cost of the merchandise is $3,000, include a:

Accepted Answer

A)  debit to Inventory for $3,000.
B)  credit to Sales Revenue for $3,000.
C)  debit to Sales Revenue for $4,500.
D)  credit to Inventory for $3,000.

Question 11

Table 5-6
The following are transactions for Latest Fashions for the month of June. $\text {June 2 Purchased $\$ 2,000$ of inventory under terms $1 / 10 , \mathrm { n } / 60$ and $\mathrm { FOB }$ shipp ing point from Trendy}$
 $\text {Manufacturing. The merchandise had cost Trendy $\$ 1,800$.}$
$\text {June 7 Returned defective merchandise to Trendy Manufacturing with invoice price of $\$ 400$.}$
$\text {June 8 Paid the freight charges on the purchase from Trendy Manufacturing in cash for $\$ 100$.}$
$\text {June 9 Sold merchandise to New Miss Store on account for $\$ 5,000$ with terms $2 / 15 , \mathrm { n } / 60 \mathrm { FOB }$ }$
$\text {shipping point. Cost of the merchandise sold was $\$ 4,000$.}$
$\text {June 10 Paid Trendy Manufacturing the balance on account.}$
$\text {June 12 Granted sales allowance of $\$ 300$ to New Miss Store for defective merchandise.}$
$\text {June 23 Collected balance owed from New Miss Store.}$
-Refer to table 5-6. Prepare the journal entries for Trendy Manufacturing for the transactions listed, assuming that Trendy uses a periodic inventory system.

Accepted Answer

The answer of Table 5-6
The following are transactions for Latest...

Question 12

When the seller accepts a return of undamaged goods from the purchaser, the seller's journal entries would include two entries, if they are using a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 13

Table 5-3 $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 750,000 \
\hline \text { Interest revenue } & 18,000 \
\hline \text { Freight in } & 44,000 \
\hline \text { Beginning inventory } & 75,000 \
\hline \text { Purchases discounts } & 20,000 \
\hline \text { Sales returns and allowances } & 44,000 \
\hline \text { Operating expenses } & 99,000 \
\hline \text { Interest expense } & 15,000 \
\hline \text { Ending inventory } & 72,000 \
\hline \text { Purchases } & 415,000 \
\hline \text { Sales discounts } & 25,000 \
\hline \text { William Browning, Withdrawals } & 61,000 \
\hline \text { Purchase reburns and allowances } & 36,000 \
\hline
\end{array}$$
-Refer to Table 5-3. The cost of goods sold is:

Accepted Answer

A)  $470,000.
B)  $478,000.
C)  $406,000.
D)  $351,000.

Question 14

The gross margin percentage is calculated as:

Accepted Answer

A)  gross margin minus net sales revenue.
B)  gross margin divided by net sales revenue.
C)  gross margin plus net sales revenue.
D)  gross margin times net sales revenue.

Question 15

The caption "Net sales" in a multi-step income statement is different if a business uses the periodic instead of the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 16

The entry to record the return of $250 of inventory to a supplier under the perpetual inventory system is recorded with a debit to:

Accepted Answer

A)  Accounts Payable and a credit to Purchases Discounts.
B)  Purchases Returns and Allowances and a credit to Accounts Payable.
C)  Accounts Payable and a credit to Inventory.
D)  Inventory and a credit to Accounts Payable.

Question 17

When the buyer pays the freight costs, the entry to record the payment under a periodic inventory system would include a debit to:

Accepted Answer

A)  Delivery Expense.
B)  Purchases Discounts.
C)  Inventory.
D)  Freight In.

Question 18

Using a periodic inventory system, the entry to record the purchase of merchandise on account involves a:

Accepted Answer

A)  debit to Inventory.
B)  debit to Accounts Payable.
C)  credit to Inventory.
D)  debit to Purchases.

Question 19

Table 5-2 $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 382,000 \
\hline \text { Net sales revenue } & \$ 360,000 \
\hline \text { Gross margin } & 255,000 \
\hline \text { Operating expenses } & 132,000 \
\hline \text { Interest expense } & 30,000 \
\hline \text { Interest revenue } & 60,000 \
\hline
\end{array}$$
-Referring to Table 5-2, cost of goods sold is:

Accepted Answer

A)  $105,000.
B)  $78,000.
C)  $100,000.
D)  $27,000.

Question 20

Cost of goods sold is $108,000, beginning inventory is $20,000 and purchases is $100,000. What is ending inventory?

Accepted Answer

A)  $32,000
B)  $12,000
C)  $128,000
D)  $102,000

Exam 5: Merchandising Operations and the Accounting Cycle

Credit terms of 1/10 n/30 indicates that the buyer is:

The entry to record the sale of merchandise for cash includes a:

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $360 with a cost of $210 would be recorded by the seller as a:

In a periodic inventory system, the entry to record the payment of shipping costs by the company buying the merchandise when the terms are FOB shipping point would include a:

Inventory includes all goods that the company owns and expects to use in normal operations.

In a periodic inventory system, the closing process includes:

The entries to record a $4,500 sale on account under a perpetual inventory system, when the cost of the merchandise is $3,000, include a:

When the seller accepts a return of undamaged goods from the purchaser, the seller's journal entries would include two entries, if they are using a perpetual inventory system.

The gross margin percentage is calculated as:

The caption "Net sales" in a multi-step income statement is different if a business uses the periodic instead of the perpetual inventory system.

The entry to record the return of $250 of inventory to a supplier under the perpetual inventory system is recorded with a debit to:

When the buyer pays the freight costs, the entry to record the payment under a periodic inventory system would include a debit to:

Using a periodic inventory system, the entry to record the purchase of merchandise on account involves a:

Cost of goods sold is $108,000, beginning inventory is $20,000 and purchases is $100,000. What is ending inventory?