Q: Which journal entry correctly records the payment of $5,000 for inventory purchased on account under a perpetual inventory system?

$$\text{Accounts Payable} \downarrow 5,000 = \text{Cash} \downarrow 5,000$$

Q: A company’s Merchandise Inventory account shows $$31,530 before adjustment. A physical count shows 30$$,000. What is the adjusting entry for inventory shrinkage?

$$\text{Inventory Shrinkage} = 31,530 - 30,000 = 1,530$$

Q: Which of the following is the correct formula for gross profit percentage?

$$\text{Gross Profit Percentage} = \frac{\text{Gross Profit}}{\text{Net Sales Revenue}} \times 100$$

Q: Which of the following is the correct formula for calculating Cost of Goods Sold under the periodic inventory system?

$$\text{Cost of Goods Sold} = \text{Beginning Inventory} + \text{Net Purchases} - \text{Ending Inventory}$$

Question 1

Which of the following best describes the main difference between a perpetual and a periodic inventory system?

Accepted Answer

A perpetual system continuously updates inventory records for each purchase and sale.

Question 2

Smart Touch Learning purchases $10,000 of inventory with terms 2/10, n/30. If they pay within the discount period, how much do they pay?

Accepted Answer

$9,800

Question 3

Which journal entry correctly records the payment of $5,000 for inventory purchased on account under a perpetual inventory system?

Accepted Answer

$$	ext{Accounts Payable} \downarrow 5,000 = 	ext{Cash} \downarrow 5,000$$

Question 4

A company purchases $$20,000 of inventory, returns 2$$,000, receives a $$900 discount, and pays 500 in $$freight in. What is the net cost of inventory purchased?

Accepted Answer

$$20,000 - 2,000 - 900 + 500 = 17,600$$

Question 5

Under FOB shipping point, who owns the goods while they are in transit and who pays the freight?

Accepted Answer

The buyer owns the goods and pays the freight.

Question 6

Which of the following is NOT included in the calculation of gross profit on a multi-step income statement?

Accepted Answer

Operating Expenses

Question 7

A company’s Merchandise Inventory account shows $$31,530 before adjustment. A physical count shows 30$$,000. What is the adjusting entry for inventory shrinkage?

Accepted Answer

$$	ext{Inventory Shrinkage} = 31,530 - 30,000 = 1,530$$

Question 8

Which of the following best describes a sales allowance?

Accepted Answer

A reduction in the amount owed by a customer without the return of merchandise.

Question 9

Which of the following is the correct formula for gross profit percentage?

Accepted Answer

$$	ext{Gross Profit Percentage} = \frac{	ext{Gross Profit}}{	ext{Net Sales Revenue}} 	imes 100$$

Question 10

Which of the following accounts is unique to a merchandiser’s balance sheet compared to a service company?

Accepted Answer

Merchandise Inventory

Question 11

A retailer sells 10 tablets for $500 each on account with terms 2/10, n/30. If the customer pays within the discount period, how much cash does the retailer receive?

Accepted Answer

$4,900

Question 12

Which of the following is true regarding the closing process for a merchandiser?

Accepted Answer

Temporary accounts are closed via the Income Summary account.

Question 13

Under the periodic inventory system, which account is used to record inventory purchases?

Accepted Answer

Purchases

Question 14

Which of the following is the correct formula for calculating Cost of Goods Sold under the periodic inventory system?

Accepted Answer

$$	ext{Cost of Goods Sold} = 	ext{Beginning Inventory} + 	ext{Net Purchases} - 	ext{Ending Inventory}$$

Question 15

A company using the perpetual inventory system sells goods costing $$2,000 for 3$$,000 cash. Which journal entries are required?

Accepted Answer

Debit Cash $$3,000; Credit Sales Revenue 3$$,000; Debit Cost of Goods Sold $$2,000; Credit Merchandise Inventory 2$$,000

Question 16

Which of the following is true about freight out?

Accepted Answer

It is a delivery expense to the seller.

Question 17

If a company records sales using the net method, how is a sale of $1,000 with terms 2/10, n/30 initially recorded?

Accepted Answer

Accounts Receivable $$980; Sales Revenue 980$$

Question 18

Which of the following is a key feature of the multi-step income statement?

Accepted Answer

It reports subtotals such as gross profit and operating income.

Question 19

A company using the periodic inventory system has beginning inventory of $$5,000, purchases of 20$$,000, purchase returns of $$2,000, purchase discounts of 1$$,000, freight in of $$500, and ending inventory of 4$$,000. What is the cost of goods sold?

Accepted Answer

$$5,000 + (20,000 - 2,000 - 1,000 + 500) - 4,000 = 18,500$$

Merchandising Operations and Inventory Systems: Financial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards