Question 1

Segregation of duties means that a company assigns responsibilities so that:

Accepted Answer

A) sufficient workers are available to cover all necessary jobs. 
B) responsibilities for related activities are assigned to two or more people. 
C) employees are restricted to jobs for which they have adequate training. 
D) workers are divided into those who make decisions and those who carry them out.

Question 2

Your company writes a cheque for $857.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 3

Identify whether a company debits (Dr)or credits (Cr)its Cash account to record each of the following transactions:
_____ The company writes a $197.06 cheque.
_____ The company deposits a $5,000 cheque into its account.
_____ In a bank reconciliation,the company discovers that it recorded a $127.35 payment to a supplier as $27.35.
_____ The bank pays $16.00 interest on the company's account.
_____ The company electronically transfers $867 to a supplier.
_____ A customer's cheque in the amount of $31 is returned by the bank as NSF.
_____ The bank charges $12 in fees to the company's bank account.
_____ When preparing the bank reconciliation,the company's accountant discovers a cheque in the amount of $1,000 that had been written but had not been recorded.
_____ A customer electronically transfers $189.43 to the company's bank account.

Accepted Answer

The answer of Identify whether a company debits (Dr)or credits...

Question 4

The cost of goods sold equation is:

Accepted Answer

A) Beginning inventory + Purchases + Purchase discounts + Purchase returns and allowances - Counted ending inventory = Cost of Goods Sold. 
B) Beginning inventory - Purchases - Purchase discounts - Purchase returns and allowances - Counted ending inventory = Cost of Goods Sold. 
C) Beginning inventory + Purchases - Purchase discounts - Purchase returns and allowances - Counted ending inventory = Cost of Goods Sold. 
D) Beginning inventory + Purchases - Purchase discounts - Purchase returns and allowances + Counted ending inventory = Cost of Goods Sold.

Question 5

You have received the bank statement for your company's account and need to reconcile it with your cash account.Your records show an ending balance for the month of $12,722.40 while the bank's records show an ending balance of $12,367.16.
The bank charged $8 in service fees and paid $26.05 in interest.All but three cheques written during the month were processed by the bank without incident during the month.The three exceptions were:
1)Check #841 was correctly processed by the bank as $981.27 but was mistakenly recorded by you as $781.27.
2)Check #853 for $64.57 had not yet been processed by the bank.
3)Check #855 for $683.46 had not yet been processed by the bank.

Accepted Answer

The answer of You have received the bank statement for...

Question 6

Sales discounts where a company offers to give a discount on price if the customer pays earlier are usually given in following types of transactions:

Accepted Answer

A) Business to Business (B2
B)  
B) Business to consumers 
C) To retail customers 
D) To long and frequent customers

Question 7

After preparing a bank reconciliation,no adjusting journal entries need to be made for outstanding cheques or deposits in transit.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 8

The perpetual inventory method of tracking inventory is considered superior to the periodic method because the perpetual method:

Accepted Answer

A) makes calculations easier and less technology can be deployed. 
B) tells what inventory a company should have at any point in time. 
C) saves a company from ever having to count the goods in inventory. 
D) is more consistent with how companies calculated inventory in the past.

Question 9

Which of the following is a true statement for a company using a perpetual inventory system?

Accepted Answer

A) Purchase returns and allowances is a contra-account to revenue. 
B) Sales returns and allowances is a contra-account to revenue. 
C) Purchase returns and allowances is a contra-account to accounts receivable. 
D) Sales returns and allowances is a contra-account to inventory.

Question 10

Over a two-year period,Coca-Cola's gross profit percentage went from 70.4% to 69.7%.Which of the following was the cause of this change?

Accepted Answer

A) Reduced selling prices. 
B) Rising product cost as a percentage of sales. 
C) Increased competition from Pepsi. 
D) All of the above may have caused the change.

Question 11

Which of the following is not an advantage of perpetual inventory system?

Accepted Answer

A) It helps reduce expenses and costs. 
B) It helps increase productivity of the economy. 
C) It is simple and less costly to maintain. 
D) It provides up to date information on inventory and cost of goods sold instantly.

Question 12

The largest source of shrinkage in the retail industry is probably:

Accepted Answer

A) data entry error. 
B) consumer shoplifting. 
C) theft by suppliers or transportation companies. 
D) theft by employees.

Question 13

If a company's records show a different cash balance from that shown on the company's bank statement,either the company or the bank has made an error.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 14

A bank reconciliation is an internal report prepared to verify the accuracy of both the cash account of a business or individual and the bank statement.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 15

Credit terms of "2/10,n/30" mean that if payment is made in two days,a 10% discount may be taken; if not paid within two days,the full invoice price will be due in thirty days.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 16

When a customer returns a defective product for credit,the seller would record the transaction using the Purchase Returns and Allowances account.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 17

A retailer sells plasma TVs at a selling price of $5,000 each.The total sale is $20,000 Under a perpetual inventory system the journal entries to record the sale will include:

Accepted Answer

A) $20,000 will be debited to Inventory and $20,000 will be credited to Accounts Payable. 
B) $20,000 will be debited to Costs of goods sold and $20,000 will be credited to Inventory. 
C) $20,000 will be credited to Inventory and $20,000 will be credited to sales revenue. 
D) $20,000 will be debited to costs of goods sold and $20,000 will be credited to Accounts receivable.

Question 18

Merchandise inventory for sale is recorded in the same account as supplies for internal use.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 19

A periodic inventory system does not require a physical count to determine inventory levels during the accounting period.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 20

On December 31,2010,you count 300 tie clips in inventory.During the next quarter,you carefully record the effect of each purchase and sale transaction on inventory.You buy 128 tie clips during the next quarter.On March 31,2011,you count 288 tie clips in inventory.Which of the following is true?

Accepted Answer

A) Ending inventory would be 278 tie clips on March 31,2008. 
B) Your company uses the periodic inventory method. 
C) Your company's records would show that 140 tie clips were sold during the quarter. 
D) All of the above.

Exam 6: Merchandising Operations and the Multistep Income Statement

Segregation of duties means that a company assigns responsibilities so that:

Your company writes a cheque for $857.Which of the following describes how this transaction should be accounted for?

The cost of goods sold equation is:

Sales discounts where a company offers to give a discount on price if the customer pays earlier are usually given in following types of transactions:

After preparing a bank reconciliation,no adjusting journal entries need to be made for outstanding cheques or deposits in transit. BT: Comprehension

The perpetual inventory method of tracking inventory is considered superior to the periodic method because the perpetual method:

Which of the following is a true statement for a company using a perpetual inventory system?

Over a two-year period,Coca-Cola's gross profit percentage went from 70.4% to 69.7%.Which of the following was the cause of this change?

Which of the following is not an advantage of perpetual inventory system?

The largest source of shrinkage in the retail industry is probably:

If a company's records show a different cash balance from that shown on the company's bank statement,either the company or the bank has made an error. BT: Comprehension

A bank reconciliation is an internal report prepared to verify the accuracy of both the cash account of a business or individual and the bank statement. BT: Knowledge

Credit terms of "2/10,n/30" mean that if payment is made in two days,a 10% discount may be taken; if not paid within two days,the full invoice price will be due in thirty days. BT: Comprehension

When a customer returns a defective product for credit,the seller would record the transaction using the Purchase Returns and Allowances account. BT: Knowledge

A retailer sells plasma TVs at a selling price of $5,000 each.The total sale is $20,000 Under a perpetual inventory system the journal entries to record the sale will include:

Merchandise inventory for sale is recorded in the same account as supplies for internal use. BT: Knowledge

A periodic inventory system does not require a physical count to determine inventory levels during the accounting period. BT: Knowledge

On December 31,2010,you count 300 tie clips in inventory.During the next quarter,you carefully record the effect of each purchase and sale transaction on inventory.You buy 128 tie clips during the next quarter.On March 31,2011,you count 288 tie clips in inventory.Which of the following is true?