Question 1

Which of the following best describes the term 'Cost of Goods Sold' in accounting?

Accepted Answer

The cost of the merchandise inventory that the business has sold to customers.

Question 2

A business receives goods that are not as ordered but decides to keep them after receiving a price reduction. What is this reduction called?

Accepted Answer

Purchase Allowance

Question 3

Which term refers to a merchandiser that buys goods from manufacturers and then sells them to retailers?

Accepted Answer

Wholesaler

Question 4

If a buyer takes ownership of goods at the delivery destination point, which shipping term applies?

Accepted Answer

FOB Destination

Question 5

A retailer is best described as:

Accepted Answer

A business that buys goods from manufacturers or wholesalers and sells them to customers.

Question 6

Which of the following is an incentive for early payment offered to purchasers?

Accepted Answer

Purchase Discount

Question 7

Under which shipping term does the buyer take title to the goods after the goods leave the seller's place of business?

Accepted Answer

FOB Shipping Point

Question 8

What do the 'credit terms' on an invoice specify?

Accepted Answer

The terms of purchase or sale as stated on the invoice.

Question 9

A seller's request for cash from the purchaser is known as:

Accepted Answer

Invoice

Question 10

A company purchases inventory with credit terms 2/10, n/30. If the invoice amount is $1,000 and the company pays within 10 days, how much will they pay?

Accepted Answer

$980

Question 11

If a business receives goods with an invoice stating 'FOB Shipping Point', who is responsible for the shipping costs?

Accepted Answer

The buyer

Question 12

Which of the following best describes an 'Invoice' in accounting?

Accepted Answer

A seller's request for cash from the purchaser.

Question 13

A retailer purchases goods from a wholesaler. Which party is the final seller to the end customer?

Accepted Answer

Retailer

Question 14

Which of the following scenarios would result in a purchase allowance?

Accepted Answer

Goods are kept by the buyer, but the seller grants a price reduction.

Question 15

A business offers terms 3/15, n/45 on an invoice of $2,000. If the buyer pays on day 20, how much do they pay?

Accepted Answer

$2,000

Question 16

Which of the following is NOT a characteristic of a wholesaler?

Accepted Answer

Sells goods directly to final consumers.

Question 17

If a company records a purchase discount, which of the following equations correctly calculates the amount paid if the invoice is $500 and the discount is 2%?

Accepted Answer

$$500 - (500$$ 	imes 0.02)$

Question 18

A business receives an invoice with the following credit terms: 1/10, n/30. What does this mean?

Accepted Answer

A 1% discount is available if paid within 10 days; otherwise, the net amount is due in 30 days.

Question 19

Which of the following best describes the effect of a purchase allowance on the accounting records?

Accepted Answer

It reduces the amount owed to the seller.

Question 20

A company sells goods to a customer with terms FOB Destination. When does the company recognize revenue from the sale?

Accepted Answer

When the goods reach the buyer's location.

Key Terms and Definitions in Merchandising Operations (Principles of Accounting)

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