Question 1

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

Accepted Answer

A perpetual system keeps a running, computerized record of inventory and cost of goods sold, while a periodic system only updates inventory at the end of the period.

Question 2

A company purchases inventory with terms 2/10, n/30. The invoice amount is $5,000. If the company pays within the discount period, how much cash will they pay?

Accepted Answer

$4,900

Question 3

Which of the following is NOT included in the calculation of Cost of Goods Sold (COGS) for a merchandising business?

Accepted Answer

Administrative expenses

Question 4

If goods are shipped FOB Shipping Point, when does the buyer take ownership of the goods?

Accepted Answer

When the goods are shipped from the seller's location

Question 5

A company sold merchandise for $$10,000 with terms 3/15, n/30. The customer returned 1$$,000 of goods before payment. If the customer pays within the discount period, what is the amount of cash received?

Accepted Answer

$8,730

Question 6

Which account is credited when a company records a sale of merchandise on account under a perpetual inventory system?

Accepted Answer

Sales Revenue

Question 7

Which of the following best describes 'Net Sales'?

Accepted Answer

Sales Revenue minus Sales Returns and Allowances and Sales Discounts

Question 8

A company uses a perpetual inventory system. It purchases $$2,000 of inventory, pays 100 in $$freight-in, and returns $200 of the inventory. What is the total amount debited to Merchandise Inventory?

Accepted Answer

$1,900

Question 9

Which of the following is classified as a contra-revenue account?

Accepted Answer

Sales Returns and Allowances

Question 10

If a company has Net Sales of $$50,000, Cost of Goods Sold of 30$$,000, and Operating Expenses of $10,000, what is the Gross Profit?

Accepted Answer

$20,000

Question 11

Which of the following journal entries is correct when a company records a purchase return under a perpetual inventory system?

Accepted Answer

Debit Accounts Payable, Credit Merchandise Inventory

Question 12

A company sells goods for $$5,000 (cost 3$$,000) on account. Which of the following is the correct entry to record the cost of goods sold under a perpetual inventory system?

Accepted Answer

Debit Cost of Goods Sold $$3,000; Credit Merchandise Inventory 3$$,000

Question 13

Which of the following is NOT considered an operating expense?

Accepted Answer

Interest expense

Question 14

A company’s multi-step income statement shows the following: Net Sales $$100,000, Cost of Goods Sold 60$$,000, Operating Expenses $$25,000, and a Gain on Sale of Equipment 5$$,000. What is the company’s Net Income?

Accepted Answer

$15,000

Question 15

Which of the following best describes the purpose of a sales discount?

Accepted Answer

To encourage customers to pay early

Question 16

If a company’s beginning inventory is $$10,000, purchases are 25$$,000, purchase returns are $$2,000, and ending inventory is 8$$,000, what is the Cost of Goods Sold?

Accepted Answer

$25,000

Question 17

Which of the following is true regarding FOB Destination?

Accepted Answer

The seller pays for shipping and owns the goods until they reach the buyer.

Question 18

A company’s trial balance includes: Sales Revenue $$80,000, Sales Returns and Allowances 2$$,000, Sales Discounts $$1,000, and Cost of Goods Sold 50$$,000. What is the Gross Profit?

Accepted Answer

$27,000

Question 19

Which of the following is the correct formula for Gross Profit Rate?

Accepted Answer

$$Gross\ Profit\ Rate = \frac{Gross\ Profit}{Net\ Sales}$$

Question 20

Which of the following is NOT a step in the operating cycle of a merchandising business?

Accepted Answer

Pay dividends to shareholders

Merchandising Operations and Inventory Systems: Financial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards