Question 1

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

Accepted Answer

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

Question 2

Smart Touch Learning purchases $$35,000 of inventory on account, returns 7$$,000 of damaged goods, and pays the remaining balance within a 3% discount period. What is the total amount paid for the inventory?

Accepted Answer

$27,160

Question 3

Which journal entry correctly records the payment of $28,000 owed for inventory, less a 3% purchase discount, under the perpetual inventory system?

Accepted Answer

Debit Accounts Payable $$28,000; Credit Merchandise Inventory 840$$; Credit Cash $27,160

Question 4

A company sells merchandise for $$1,000 cash. The merchandise cost 700. $$Which of the following entries is required under the perpetual inventory system?

Accepted Answer

Both: Debit Cash $$1,000; Credit Sales Revenue 1$$,000 and Debit Cost of Goods Sold $$700; Credit Merchandise Inventory 700$$

Question 5

Which of the following best describes 'FOB shipping point'?

Accepted Answer

The buyer takes ownership of the goods after they leave the seller’s place of business and pays the freight.

Question 6

Calculate the net cost of inventory purchased if a company buys $$100,000 of inventory, returns 10$$,000, receives a $$2,700 discount for early payment, and pays 1$$,500 in freight in.

Accepted Answer

$91,500

Question 7

Which of the following is NOT a step in the four-step closing process for a merchandising company?

Accepted Answer

Make the Merchandise Inventory account equal zero via the Income Summary account.

Question 8

A company’s income statement shows Sales Revenue of $$200,000, Sales Returns and Allowances of 5$$,000, Sales Discounts of $$3,000, and Cost of Goods Sold of 120$$,000. What is the Gross Profit?

Accepted Answer

$72,000

Question 9

Which of the following is true about the multi-step income statement?

Accepted Answer

It contains subtotals such as gross profit and operating income.

Question 10

If a company’s gross profit percentage is calculated as $$\frac{	ext{Gross Profit}}{	ext{Net Sales Revenue}}$$, which of the following would result in a higher gross profit percentage?

Accepted Answer

Lower cost of goods sold relative to net sales revenue

Question 11

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

Accepted Answer

Purchases

Question 12

Which of the following is a contra-revenue account used to record customer returns?

Accepted Answer

Sales Returns and Allowances

Question 13

A company using the perpetual inventory system discovers inventory shrinkage of $1,530 after a physical count. What is the correct adjusting entry?

Accepted Answer

Debit Cost of Goods Sold $$1,530; Credit Merchandise Inventory 1$$,530

Question 14

Which of the following is true regarding freight in under the periodic inventory system?

Accepted Answer

It is debited to the Freight In account.

Question 15

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

Accepted Answer

$4,900

Question 16

Which of the following is NOT included in the calculation of net cost of inventory purchased?

Accepted Answer

Sales revenue

Question 17

Which of the following best describes a sales allowance?

Accepted Answer

A reduction in the amount owed by a customer who keeps the merchandise but receives a price reduction.

Question 18

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

Accepted Answer

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

Question 19

Which of the following accounts is unique to merchandisers and not found in service companies?

Accepted Answer

Merchandise Inventory

Question 20

Under the net method of recording sales with discounts, how is sales revenue initially recorded?

Accepted Answer

At the net amount, after deducting the sales discount

Merchandising Operations: Financial Accounting Study Notes

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