A chart of accounts for a merchandising business

Question 1
A sales invoice included the following information: merchandise price, $5,000; freight, $900; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $700 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?
Answer

$5,157

$4,300

$4,257

$4,950

Question 2
Anthony Company sold Madison Company merchandise on account FOB shipping point, 2/10, net 30, for $20,000. Anthony prepaid the $300 shipping charge. Which of the following entries does Anthony make to record this sale?

Answer

Accounts Receivable-Madison, debit $20,000; Sales, credit $20,000

Accounts Receivable-Madison, debit $20,000; Sales, credit $20,000, and
Accounts Receivable-Madison, debit $300; Cash, credit $300

Accounts Receivable-Madison, debit $20,500; Sales, credit $20,500

Accounts Receivable-Madison, debit $20,000; Sales, credit $20,000, and
Freight Out, debit $300; Cash, credit $300

Question 3
Cumberland Co. sells $1,200 of inventory to Hancock Co. for cash. Cumberland paid $850 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?

Answer
Cash $1,200 Dr, Merchandise Inventory $850 Cr

Cash $1,200 Dr, Sales $1,200 Cr, Cost of Merchandise Sold $850 Dr, Merchandise Inventory $850 Cr.

Cash $1,200 Dr, Sales $1,200 Cr

Accounts Receivable $1,200 Dr, Sales $1,200 Cr, Cost of Merchandise Sold $850 Dr, Merchandise Inventory $850 Cr.

Question 4
Discounts taken by a buyer because of early payment are recorded on the seller’s accounting records as
Answer

Purchases discount

Sales discount

Trade discount

Early payment discount

Question 5
Dorman Co. sold merchandise to Smith Co. on account, $18,000, terms 2/15, net 45. The cost of the merchandise sold is $15,500. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?
Answer

$16,250

$14,100

$15,925

$13,818

Question 6
Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
Answer

selling expenses

general expenses

other expenses

administrative expenses

Question 7
Generally, the revenue account for a merchandising business is entitled
Answer

Sales

Net Sales

Gross Sales

Gross Profit

Question 8
Gross profit is equal to:
Answer

sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold

sales plus sales returns and allowances less sales discounts less cost of merchandise sold

sales plus sales discounts less sales returns and allowances less cost of merchandise sold

sales less (sales discounts and sales returns and allowances) less cost of merchandise sold

Question 9
If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as
Answer

FOB shipping point

FOB destination

FOB n/30

FOB buyer

Question 10
If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as
Answer

FOB shipping point
FOB destination
FOB n/30
FOB seller

Question 11
If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are
Answer

consigned
n/30
FOB shipping point
FOB destination

Question 12
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
Answer

n/30
FOB shipping point
FOB destination
consigned

Question 13
In credit terms of 3/15, n/45, the "3" represents the
Answer

number of days in the discount period
full amount of the invoice
number of days when the entire amount is due
percent of the cash discount

Question 14
Inventory shortage is recorded when
Answer

merchandise is returned by a buyer.
merchandise purchased from a seller is incomplete or short.
merchandise is returned to a seller.
there is a difference between a physical count of inventory and inventory records.

Question 15
Merchandise inventory is classified on the balance sheet as a
Answer

Current Liability
Current Asset
Long-Term Asset
Long-Term Liability

Question 16
Merchandise with an invoice price of $5,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?
Answer

$5,200
$5,096
$4,704
$4,900

Question 17
Multiple-step income statements show

Answer
gross profit but not income from operations
neither gross profit nor income from operations
both gross profit and income from operations
income from operations but not gross profit

Question 18
Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?

Answer
selling expense
miscellaneous expense
administrative expense
other expense

Question 19
Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

Answer
debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
debit to Cash and a credit to Sales
debit to Cash, credit to Credit Card Expense, and a credit to Sales
debit to Sales, debit to Credit Card Expense, and a credit to Cash

Question 20
The arrangements between buyer and seller as to when payments for merchandise are to be made are called

Answer
credit terms
net cash
cash on demand
gross cash

Question 21
The inventory system employing accounting records that continuously disclose the amount of inventory is called

Answer

retail
periodic
physical
perpetual

Question 22
The proper journal entry to record the receipt of inventory purchased on account in a perpetual inventory system would be:

Answer

Jan 1 Inventory 540.00
Accounts Payable 540.00

Jan 1 Office Supplies 540.00
Accounts Payable 540.00

Jan 1 Purchases 540.00
Accounts Payable 540.00

Jan 1 Purchases 540.00
Accounts Receivable 540.00

Question 23
When the perpetual inventory system is used, the inventory sold is debited to

Answer

supplies expense
cost of merchandise sold
merchandise inventory
sales

Question 24
Under a perpetual inventory system

Answer

accounting records continuously disclose the amount of inventory
increases in inventory resulting from purchases are debited to Purchases
there is no need for a year-end physical count
the purchase returns and allowances account is credited when goods are returned to vendors

Question 25
A chart of accounts for a merchandising business

Answer

usually is the same as the chart of accounts for a service business
usually requires more accounts than does the chart of accounts for a service business
usually is standardized by the FASB for all merchandising businesses
always uses a three-digit numbering system