Q: Which formula correctly calculates the gross profit percentage?

$$ \text{Gross Profit Percentage} = \frac{\text{Gross Profit}}{\text{Net Sales Revenue}} $$

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 inventory, while a periodic system updates inventory records only at the end of the period.

Question 2

Smart Touch Learning purchased $$35,000 of inventory on account. They returned 7$$,000 of inventory and paid the remaining balance within the 3% discount period. What is the amount paid?

Accepted Answer

$27,160

Question 3

Which journal entry correctly records the payment for inventory purchased on account, after a $7,000 return and a 3% discount on the remaining balance?

Accepted Answer

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

Question 4

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

Accepted Answer

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

Question 5

If a company uses FOB shipping point, who pays the freight charges and when does ownership transfer?

Accepted Answer

The buyer pays the freight and ownership transfers when goods leave the seller's location.

Question 6

Calculate the net cost of inventory purchased if a company buys $$697,710 of inventory, returns 150$$,000, takes $$9,510 in early payment discounts, and pays 36$$,400 in freight in.

Accepted Answer

$574,600

Question 7

Which of the following is NOT a step in closing the accounts of a merchandiser?

Accepted Answer

Make the asset accounts equal zero via the Income Summary account.

Question 8

A multi-step income statement includes which of the following subtotals?

Accepted Answer

Gross profit, operating income, and net income

Question 9

Which formula correctly calculates the gross profit percentage?

Accepted Answer

$$ 	ext{Gross Profit Percentage} = \frac{	ext{Gross Profit}}{	ext{Net Sales Revenue}} $$

Question 10

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

Accepted Answer

Purchases

Question 11

A company using the perpetual inventory system discovers that the physical count of inventory is less than the unadjusted balance. What is this difference called?

Accepted Answer

Inventory shrinkage

Question 12

Which of the following is classified as a selling expense on a multi-step income statement?

Accepted Answer

Advertising expense

Question 13

If a customer returns goods previously purchased on account, which accounts are affected in the seller’s books under the perpetual system?

Accepted Answer

Sales Returns and Allowances and Accounts Receivable

Question 14

Which of the following is true regarding the calculation of net cost of inventory purchased under the periodic system?

Accepted Answer

Net cost of inventory = Purchases - Purchase Returns and Allowances - Purchase Discounts + Freight In

Question 15

A company sells $7,500 of goods on account with terms 2/10, n/30. If the customer pays within the discount period, how much cash does the company receive?

Accepted Answer

$7,350

Question 16

Which of the following is NOT considered an operating expense on a multi-step income statement?

Accepted Answer

Gain on sale of equipment

Question 17

Which of the following best describes 'freight out'?

Accepted Answer

A delivery expense to the seller for shipping goods to customers

Question 18

Which of the following is a correct closing entry for a merchandiser at year-end?

Accepted Answer

Debit Sales Revenue; Credit Income Summary

Question 19

Which of the following is a real-world example of a business using the periodic inventory system?

Accepted Answer

A small local bookstore that counts inventory at the end of each month

Question 20

Which of the following is the correct formula for calculating cost of goods sold under the periodic inventory system?

Accepted Answer

$$ 	ext{Cost of Goods Sold} = 	ext{Beginning Inventory} + 	ext{Net Purchases} - 	ext{Ending Inventory} $$

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