Question 1

The Tuck Shop began the current month with inventory costing $10,000,then purchased inventory at a cost of $35,000.The perpetual inventory system indicates that inventory costing $30,000 was sold during the month for $40,000.If an inventory count shows that inventory costing $14,500 is actually on hand at month-end,what amount of shrinkage occurred during the month?

Accepted Answer

A) $500. 
B) $5,000. 
C) $14,495. 
D) $15,000.

Question 2

Intel makes microchips from raw materials acquired from suppliers.Intel is a:

Accepted Answer

A) service company. 
B) retail company. 
C) manufacturer. 
D) merchandising company.

Question 3

Purrfect Pets sells 6,000 bags of dog food this month for $10 each; 2,600 of these bags were sold to customers who took advantage of an 3% early payment discount.Twenty bags were returned by customers who had paid cash; their dogs did not like the dog food.Purrfect Pets had paid $5 a bag for this dog food and received a 2% purchase discount for early payment.Purrfect Pets also paid a trucking company $1,660 for shipping the 6,000 bags.
Calculate the gross profit and the gross profit margin for Purrfect Pets,assuming dog food is the company's only product and that returned product was unopened so it was put back in inventory.

Accepted Answer

The answer of Purrfect Pets sells 6,000 bags of dog...

Question 4

A company starts the period with 100 computers in inventory,purchases 30 more,returns 4 of them to suppliers,and has 83 in inventory at the end of the period.Which of the following statements is true?

Accepted Answer

A) Net purchases total 26 computers. 
B) Net sales total 51 computers. 
C) Net sales total 26 computers. 
D) Net purchases total 51 computers.

Question 5

Customers are the biggest source of shrinkage in the retail industry.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 6

A company sells $10,000 of goods.The gross profit percentage is 32%.Net income would be $3,200.
BT: Application

Accepted Answer

A) True 
 B)False

Question 7

Match the term and the definition.There are more definitions than terms.
_____ outstanding cheque
_____ sales returns and allowances
_____ discount period
_____ net sales
_____ purchase returns and allowances
_____ NSF cheque
_____ maximum credit period
_____ credit card discount
_____ gross profit margin
A.When a company accepts goods back from customers.
B.When companies reduce price for a sale and then raise it back again.
C.Net income divided by gross profit.
D.A reduction in price that is given to purchasers who use credit cards.
E.All the cost of goods bought by a company minus purchase returns and discounts.
F.Gross profit divided by total assets.
G.If companies take this long to pay suppliers they must pay a late penalty.
H.A reduction in sales revenue that occurs when companies accept credit cards.
I.The longest amount of time a company has to pay a supplier the undiscounted amount owed.
J.When a cheque has been written but has not yet been recorded by the cheque writer's bank.
K.Sales revenue minus all sales discounts,credit card discounts,and sales returns and allowances.
L.The length of time a company has to pay a supplier and still receive an early payment discount.
M.Gross profit divided by net sales revenue.
N.When a cheque has been written on an account that does not have enough money to cover it.
O.When companies send goods back to suppliers.
P.Sales revenue minus all expenses.

Accepted Answer

The answer of Match the term and the definition.There are...

Question 8

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 9

Internal controls include the policies and procedures a company implements to protect against theft of assets,to promote efficiency,and to ensure compliance with laws and regulations.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 10

The Sales Returns and Allowances account balance should be deducted from the Sales account balance when computing net sales.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 11

"Shrinkage" is another term for inventory loss due to theft,error,or fraud.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 12

Your company makes a bank deposit of $857 in its chequing account.Which of the following describes how this transaction should be accounted for?

Accepted Answer

A) You add $857 to your recorded cash balance and the bank deducts $857 from your chequing account balance. 
B) You deduct $857 from your recorded cash balance and the bank deducts $857 from your chequing account balance. 
C) You add $857 to your recorded cash balance and the bank adds $857 to your chequing account balance. 
D) You deduct $857 from your recorded cash balance and the bank adds $857 to your chequing account balance.

Question 13

A periodic inventory system does not track the cost of goods sold during the accounting period.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 14

NSF cheques are recorded as accounts payable.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 15

Merchandise was sold on credit for $3,000,terms 1/10,n/30.The correct entry to record the cash collection should be:

Accepted Answer

A) Debit Cash,$3,000,and credit Accounts Receivable,$3,000,if collected within the discount period. 
B) Debit Cash,$3,000,and credit Accounts Receivable,$2,970,and Sales Discount,$30,if collected within the discount period. 
C) Debit Cash,$3,000,and credit Accounts Receivable,$2,970,and Sales Discount,$30,if collected after the discount period. 
D) Debit Cash,$3,000,and credit Accounts Receivable,$3,000,if collected after the discount period. 
E) Sales Discounts is 1% discount ($3,000*.01 = $30)will be debited when payment is received within the discounted period.If payment is received after the discount period,the gross sales amount ($3,000)is collected.

Question 16

In a retail business that uses a perpetual inventory system,scanning a bar code:

Accepted Answer

A) calculates the amount owed by the customer. 
B) identifies the item sold to be removed from the Inventory account. 
C) identifies the item sold to be recorded in the Cost of Goods Sold account. 
D) all of the above.

Question 17

In order to calculate shrinkage:

Accepted Answer

A) both periodic and perpetual inventory systems are needed. 
B) a periodic inventory system is most effective. 
C) a perpetual inventory system requires an occasional count of actual inventory. 
D) it does not matter which system one uses.

Question 18

A rising gross profit percentage indicates management's inability to control production and inventory costs.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 19

Contra-revenue accounts:

Accepted Answer

A) are liabilities. 
B) are recorded with a credit. 
C) are recorded with a debit. 
D) are expenses.

Question 20

In a perpetual inventory system,only one journal entry is required when goods are sold from inventory.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Exam 6: Merchandising Operations and the Multistep Income Statement

Intel makes microchips from raw materials acquired from suppliers.Intel is a:

A company starts the period with 100 computers in inventory,purchases 30 more,returns 4 of them to suppliers,and has 83 in inventory at the end of the period.Which of the following statements is true?

Customers are the biggest source of shrinkage in the retail industry. BT: Knowledge

A company sells $10,000 of goods.The gross profit percentage is 32%.Net income would be $3,200. BT: Application

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers. BT: Knowledge

Internal controls include the policies and procedures a company implements to protect against theft of assets,to promote efficiency,and to ensure compliance with laws and regulations. BT: Knowledge

The Sales Returns and Allowances account balance should be deducted from the Sales account balance when computing net sales. BT: Knowledge

"Shrinkage" is another term for inventory loss due to theft,error,or fraud. BT: Knowledge

Your company makes a bank deposit of $857 in its chequing account.Which of the following describes how this transaction should be accounted for?

A periodic inventory system does not track the cost of goods sold during the accounting period. BT: Knowledge

NSF cheques are recorded as accounts payable. BT: Knowledge

Merchandise was sold on credit for $3,000,terms 1/10,n/30.The correct entry to record the cash collection should be:

In a retail business that uses a perpetual inventory system,scanning a bar code:

In order to calculate shrinkage:

A rising gross profit percentage indicates management's inability to control production and inventory costs. BT: Comprehension

Contra-revenue accounts:

In a perpetual inventory system,only one journal entry is required when goods are sold from inventory. BT: Knowledge