Q: Which of the following is the correct formula for calculating Cost of Goods Sold (COGS)?

$$\text{COGS} = \text{Beginning Inventory} + \text{Net Purchases} - \text{Ending Inventory}$$

Question 1

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

Accepted Answer

Perpetual systems record cost of goods sold with each sales transaction, while periodic systems record it only at the end of the reporting period.

Question 2

A company purchases inventory for $10,000 with terms 2/10, net 30. If the company pays within the discount period, what is the amount paid and how is the discount recorded under the perpetual system?

Accepted Answer

The company pays $$9,800 and records a 200 $$credit to Inventory.

Question 3

Which journal entry is correct for recording the payment of freight costs by the buyer under FOB shipping point in a perpetual inventory system?

Accepted Answer

Inventory \$$XX; Cash \XX$$

Question 4

A merchandiser sold goods for $20,000, expecting a 10% return rate. What is the amount recorded as Refund Liability?

Accepted Answer

$2,000

Question 5

Which of the following is NOT included in the calculation of Cost of Goods Available for Sale (COGAS)?

Accepted Answer

Ending inventory

Question 6

If a seller ships goods FOB destination, who pays the freight costs and when does ownership transfer?

Accepted Answer

Seller pays freight costs; ownership transfers when goods are received by buyer.

Question 7

A company using a perpetual inventory system returns $1,500 of inventory to a supplier. What is the correct journal entry?

Accepted Answer

Accounts Payable \$$1,500; Inventory \1$$,500

Question 8

Which of the following is the correct formula for calculating Cost of Goods Sold (COGS)?

Accepted Answer

$$	ext{COGS} = 	ext{Beginning Inventory} + 	ext{Net Purchases} - 	ext{Ending Inventory}$$

Question 9

When recording a sale in a perpetual inventory system, which two entries are required?

Accepted Answer

Record sales revenue and record cost of goods sold

Question 10

A retailer purchases goods for $$12,000, returns 2$$,000 worth, and receives a $500 purchase allowance. What is the net purchase amount?

Accepted Answer

$9,500

Question 11

Which of the following statements about sales taxes (GST, PST, HST) is correct?

Accepted Answer

Sales taxes are recorded as liabilities owed to governments, not as revenues.

Question 12

A company sells goods for $$30,000 with an expected return rate of 20%. The cost of goods sold is 18$$,000. What is the estimated inventory returns recorded?

Accepted Answer

$3,600

Question 13

Under the perpetual inventory system, how is a purchase discount recorded?

Accepted Answer

As a credit to Inventory, reducing its cost

Question 14

Which entry is required when a customer returns merchandise under a perpetual inventory system?

Accepted Answer

Refund Liability \$$XX; Accounts Receivable \XX $$and Inventory \$$XX; Estimated Inventory Returns \XX$$

Question 15

A company purchases inventory for $$25,000, pays 1$$,000 in freight costs under FOB shipping point, and receives a $2,000 purchase discount. What is the total cost of inventory recorded?

Accepted Answer

Question 16

Which of the following is true regarding FOB shipping point?

Accepted Answer

Buyer owns goods while in transit and pays freight costs.

Question 17

A company purchases inventory for $$50,000, returns 5$$,000, and pays $1,500 in freight costs under FOB shipping point. What is the cost of goods available for sale?

Accepted Answer

$46,500

Question 18

Which of the following is recorded as a current liability when a sale is made with an expected return under IFRS?

Accepted Answer

Refund Liability

Question 19

A company sells goods for $$60,000, cost of goods sold is 36$$,000, and operating expenses are $10,000. What is the income from operations?

Accepted Answer

$14,000

Merchandizing Operations: Financial Accounting Study Notes (Chapter 5)

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