Q: A company using the perpetual inventory system sold goods costing $2,000 for $3,000 on account. Which journal entry correctly records the cost of goods sold?

$ \begin{align*} \text{Debit: Cost of Goods Sold } & 2,000 \\ \text{Credit: Inventory } & 2,000 \end{align*} $

Q: If a company discovers $5,000 of inventory was stolen and uses a perpetual inventory system, which entry should be made?

$ \begin{align*} \text{Debit: Inventory Shrinkage } & 5,000 \\ \text{Credit: Inventory } & 5,000 \end{align*} $

Q: Which journal entry records the return of merchandise previously purchased on account under a perpetual inventory system?

$ \begin{align*} \text{Debit: Accounts Payable } & X \\ \text{Credit: Inventory } & X \end{align*} $

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

$ \text{Gross Profit} = \text{Net Sales} - \text{Cost of Goods Sold}$

Question 1

Which inventory costing method assigns the most recent costs to ending inventory under a perpetual inventory system?

Accepted Answer

LIFO (Last-In, First-Out)

Question 2

A company using the perpetual inventory system sold goods costing $2,000 for $3,000 on account. Which journal entry correctly records the cost of goods sold?

Accepted Answer

$
\begin{align*}
	ext{Debit: Cost of Goods Sold } & 2,000 \
	ext{Credit: Inventory } & 2,000 
\end{align*}
$

Question 3

If a company discovers $5,000 of inventory was stolen and uses a perpetual inventory system, which entry should be made?

Accepted Answer

$
\begin{align*}
	ext{Debit: Inventory Shrinkage } & 5,000 \
	ext{Credit: Inventory } & 5,000 
\end{align*}
$

Question 4

Which of the following is NOT included in the calculation of cost of goods sold under a perpetual inventory system?

Accepted Answer

Depreciation Expense

Question 5

A company had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $8,000. What is the cost of goods sold?

Accepted Answer

$
\$10,000 + \$25,000 - \$8,000 = \$27,000$

Question 6

Which of the following best describes the multi-step income statement format?

Accepted Answer

It separates operating revenues and expenses from non-operating items.

Question 7

If a company uses FIFO under a perpetual system, which units are assumed to be sold first?

Accepted Answer

The oldest units in inventory

Question 8

A company made a sale on account for $5,000 with terms 2/10, n/30. If the customer pays within the discount period, what amount is received?

Accepted Answer

$4,900

Question 9

Which of the following transactions would NOT affect the merchandise inventory account under a perpetual system?

Accepted Answer

Payment of salaries to office staff

Question 10

A company’s physical inventory count at year-end is less than the inventory balance in the perpetual records. What is the most likely cause?

Accepted Answer

Inventory shrinkage due to theft or loss

Question 11

Which journal entry records the return of merchandise previously purchased on account under a perpetual inventory system?

Accepted Answer

$
\begin{align*}
	ext{Debit: Accounts Payable } & X \
	ext{Credit: Inventory } & X 
\end{align*}
$

Question 12

If a company’s gross profit percentage decreases from one year to the next, which of the following is a possible explanation?

Accepted Answer

Cost of goods sold increased relative to sales

Question 13

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

Accepted Answer

$
	ext{Gross Profit} = 	ext{Net Sales} - 	ext{Cost of Goods Sold}$

Question 14

A company’s multi-step income statement shows net sales of $100,000, cost of goods sold of $60,000, and operating expenses of $25,000. What is the operating income?

Accepted Answer

$
\$100,000 - \$60,000 - \$25,000 = \$15,000$

Question 15

Which of the following is a key advantage of the perpetual inventory system over the periodic system?

Accepted Answer

It provides real-time inventory information

Merchandising Operations, Inventory, and Accounting Information Systems: Study Notes & Practice Questions

Study Guide - Practice Questions

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