Question 1

Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500, how much was cost of goods sold?

Accepted Answer

A)  $50,500 
B)  $52,500 
C)  $40,000 
D)  $38,000

Question 2

The periodic inventory system provides an up-to-date amount of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 3

A merchandising business will earn a net income of exactly $0 when

Accepted Answer

A)  net sales equals cost of goods sold. 
B)  operating expenses equal net sales. 
C)  gross margin equals operating expenses. 
D)  cost of goods sold equals gross margin.

Question 4

A merchandiser's operating cycle concludes with the sale of goods.

Accepted Answer

A) True 
 B)False

Question 5

On June 3, Maryland Company purchased merchandize worth $800 on credit, terms 2/10, n/30. The amount paid on June 10. What is the required journal entry to record the payment under the periodic inventory system?

Accepted Answer

The answer of On June 3, Maryland Company purchased merchandize...

Question 6

Under the perpetual inventory system, the return of goods from a customer is recorded with a debit to Sales Returns and Allowances.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period.

Accepted Answer

A) True 
 B)False

Question 9

Freight-in is considered a cost of merchandise purchased.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Companies that sell goods that have a high unit value tend to use the periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 12

A sale on March 21 with terms of n/10 eom is due to be collected by

Accepted Answer

A)  April 30. 
B)  March 31. 
C)  April 10. 
D)  April 1.

Question 13

An American company makes a credit sale of goods to a company in London for 10,000 British pounds. On the date of sale, the exchange rate was $1.60 per pound. However, on the date payment was received, the exchange rate had risen to $1.70 per pound. As a result, the American company would record

Accepted Answer

A)  an exchange gain of $1,000. 
B)  an exchange loss of $100. 
C)  an exchange loss of $1,000. 
D)  no exchange gain or loss.

Question 14

If a U.S. company sells goods for a fixed number of British pounds, and the exchange rate has risen from $1.60 per pound to $1.65 per pound by the time collection is made, the U.S. company would record an exchange loss.

Accepted Answer

A) True 
 B)False

Question 15

On the income statement, freight-in is treated as an operating expense.

Accepted Answer

A) True 
 B)False

Question 16

A retail operation would not have to take a physical inventory if it uses a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  increase Merchandise Inventory and decrease Cost of Goods Sold. 
B)  increase Cost of Goods Sold and decrease Purchases. 
C)  increase Cost of Goods Sold and decrease Merchandise Inventory. 
D)  make no additional entry until the end of the period.

Question 18

Assume that the $5,509 sales made by Exotic Company for the month ended December 31, 2010, were made to customers using credit cards. Prepare one entry in journal form to record these sales assuming that all of the credit card companies charge Exotic a 2 percent discount fee. (Omit date.) Round to the nearest whole dollar.

Accepted Answer

The answer of Assume that the $5,509 sales made by...

Question 19

Merchandise inventory becomes part of cost of goods sold when a company

Accepted Answer

A)  receives payment from the customer. 
B)  pays for the inventory. 
C)  purchases the inventory. 
D)  sells the inventory.

Question 20

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.

Exam 6: The Operating Cycle and Merchandising Operations

Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500, how much was cost of goods sold?

The periodic inventory system provides an up-to-date amount of inventory on hand.

A merchandising business will earn a net income of exactly $0 when

A merchandiser's operating cycle concludes with the sale of goods.

On June 3, Maryland Company purchased merchandize worth $800 on credit, terms 2/10, n/30. The amount paid on June 10. What is the required journal entry to record the payment under the periodic inventory system?

Under the perpetual inventory system, the return of goods from a customer is recorded with a debit to Sales Returns and Allowances.

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

When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period.

Freight-in is considered a cost of merchandise purchased.

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

Companies that sell goods that have a high unit value tend to use the periodic inventory system.

A sale on March 21 with terms of n/10 eom is due to be collected by

An American company makes a credit sale of goods to a company in London for 10,000 British pounds. On the date of sale, the exchange rate was $1.60 per pound. However, on the date payment was received, the exchange rate had risen to $1.70 per pound. As a result, the American company would record

If a U.S. company sells goods for a fixed number of British pounds, and the exchange rate has risen from $1.60 per pound to $1.65 per pound by the time collection is made, the U.S. company would record an exchange loss.

On the income statement, freight-in is treated as an operating expense.

A retail operation would not have to take a physical inventory if it uses a perpetual inventory system.

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

Merchandise inventory becomes part of cost of goods sold when a company

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)