Chapter 6 Practice Materials.doc

Chapter 6Accounting for Merchandising Businesses F 301Chapter 6Accounting for Merchandising BusinessesMULTIPLE CHOICE1.Which one of the following is not a difference between a retail business and a service business?a.in what is soldb.the inclusion of gross profit in the income statementc.accounting equationd.merchandise inventory included in the balance sheetANS:CDIF:ModerateOBJ:06-01NAT:AACSB Analytic | AICPA BB-Industry2.Net income plus operating expenses is equal to a.cost of goods soldb.cost of goods available for salesd.gross profitANS:DDIF:EasyOBJ:06-01NAT:AACSB Analytic | AICPA FN-Measurement3.Generally, the revenue account for a merchandising business is entitled a.Salesb.Net Salesc.Gross Salesd.Gross ProfitANS:ADIF:EasyOBJ:06-01NAT:AACSB Analytic | AICPA FN-Measurement4.What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?a.gross profitb.income from incomed.gross salesANS:ADIF:EasyOBJ:06-01NAT:AACSB Analytic | AICPA FN-Measurement5.The term inventory indicates a.merchandise held for sale in the normal course ofbusinessb.materials in the process of production or held forproductionc.suppliesd.both (a) and (b)ANS:DDIF:EasyOBJ:06-01NAT:AACSB Analytic | AICPA FN-Measurement6.A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $4,000; Transportation-In, $450; Purchases, $12,000; Purchases Returns and Allowances, $2,300; Purchases Discounts, $220. The cost of merchandise purchased is equal to a.$13,930b.$9,930c.$9,489d.$14520ANS:BDIF:DifficultOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement7.A company, using the periodic inventory system, has merchandise inventory costing $140 on hand at the beginning of the period. During the period, merchandise costing $400 is purchased. At year-end, merchandise inventory costing $180 is on hand. The cost of merchandise sold for the year is a.$720b.$550c.$360d.$140ANS:CDIF:DifficultOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement8.Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as a.selling expensesb.general expensesc.other expensesd.administrative expensesANS:ADIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement9.Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?a.selling expenseb.miscellaneous expensec.administrative expensed.other expenseANS:CDIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement10.The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a a.multiple-step statementb.revenue statementc.report-form statementd.single-step statementANS:DDIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement11.Multiple-step income statements show a.gross profit but not income from operationsb.neither gross profit nor income from operationsc.both gross profit and income from operationsd.income from operations but not gross profitANS:CDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement12.When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the a.account parative formc.horizontal formd.report formANS:DDIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement13.The statement of owners equity shows a.only net income, beginning and ending capitalb.only total assets, beginning and ending capitalc.only net income, beginning capital, and withdrawalsd.all the changes in the owners capital as a result of net income, net loss, additional investments, and withdrawalsANS:DDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement14.Merchandise inventory is classified on the balance sheet as a a.Current Liabilityb.Current Assetc.Long-Term Assetd.Long-Term LiabilityANS:BDIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement15.Which account is not classified as a selling expense?a.Sales Salariesb.Transportation-Outc.Sales Discountsd.Advertising ExpenseANS:CDIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement16.The primary difference between a periodic and perpetual inventory system is that a a.periodic system determines the inventory on hand only at the end of the accounting periodb.periodic system keeps a record showing the inventory on hand at all timesc.periodic system provides an easy means to determine inventory shrinkaged.periodic system records the cost of the sale on the date the sale is madeANS:ADIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement17.The inventory system employing accounting records that continuously disclose the amount of inventory is called a.Retailb.Periodicc.Physicald.PerpetualANS:DDIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement18.When the perpetual inventory system is used, the inventory sold is shown on the income statement as a.cost of merchandise soldb.Purchasesc.purchases returns and purchasesANS:ADIF:EasyOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement19.When comparing a retail business to a service business, the financial statement that changes the most is the a.Balance Sheetb.Income Statementc.Statement of Owners Equityd.Statement of Cash FlowANS:BDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement20.When comparing a retail business to a service business, the financial statement that changes the least is the a.Balance Sheetb.Income Statementc.Statement of Owners Equityd.Statement of Cash FlowANS:CDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement21.Gross profit is equal to:a.sales plus (sales discounts and sales returns and allowances) plus cost of goods soldb.sales plus sales returns and allowances less sales discounts less cost of goods soldc.sales plus sales discounts less sales returns and allowances less cost of goods soldd.sales less (sales discounts and sales returns and allowances) less cost of goods soldANS:DDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement22.Using the following information, what is the amount of cost of merchandise sold?Purchases$28,000Purchases discounts$800Merchandise inventory April 16,500Merchandise inventoryApril 307,800Sales returns and allowances750Sales57,000Purchases returns and allowances1,000Transportation In880a.25,780b.23,270c.31,220d.24,020ANS:ADIF:DifficultOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement23.Using the following information, what is the amount of gross profit?Purchases$28,000Purchases discounts$800Merchandise inventoryApril 16,500Merchandise inventoryApril 307,800Sales returns andallowances750Sales57,000Purchases returns andallowances1,000Transportation In880a.31,970b.30,470c.25,780d.56,250ANS:BDIF:DifficultOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement24.Using the following information, what is the amount of net sales?Purchases$28,000Purchases discounts$800Merchandise inventoryApril 16,500Merchandise inventoryApril 307,800Sales returns andallowances750Sales57,000Purchases returns andallowances1,000Transportation In880a.25,780b.57,000c.57,750d.56,250ANS:DDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement25.Using the following information, what is the amount of merchandise available for sale?Purchases$28,000Purchases discounts$800Merchandise inventoryApril 16,500Merchandise inventoryApril 307,800Sales returns andallowances750Sales57,000Purchases returns andallowances1,000Transportation In880a.33,580b.30,470c.25,780d.34,500ANS:ADIF:DifficultOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement26.Where are selling and administrative expenses found on the multi-step income statement?a.before gross profitb.after sales and before gross profitc.after net income before expensesd.after gross profitANS:DDIF:ModerateOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement27.Silver Co. sold merchandise to Bronze Co. on account, $23,000, terms 2/15, net 45. The cost of the merchandise sold is $18,500. Silver Co. issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900. The Bronze Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?a.$20,090b.$20,500c.$3,490d.$23,000ANS:ADIF:DifficultOBJ:06-02NAT:AACSB Analytic | AICPA FN-Measurement28.Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a a.debit to Salesb.debit to Merchandise Inventoryc.credit to Merchandise Inventoryd.credit to Accounts ReceivableANS:CDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement29.Which of the following accounts has a normal debit balance?a.Accounts Payableb.Sales Returns and Allowancesc.Salesd.Interest RevenueANS:BDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement30.Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the entry is made in the buyers accounts on November 18. The credit period begins with what date?a.November 12b.November 15c.November 17d.November 18ANS:BDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement31.Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a a.credit to Sales Returns and Allowancesb.debit to Merchandise Inventoryc.credit to Merchandise Inventoryd.debit to Cost of Merchandise SoldANS:BDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement32.If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a a.sales invoiceb.purchase invoicec.credit memorandumd.debit memorandumANS:CDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement33.The arrangements between buyer and seller as to when payments for merchandise are to be made are called a.credit cashc.cash on demandd.gross cashANS:ADIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement34.In credit terms of 1/10, n/30, the 1 represents the a.number of days in the discount periodb.full amount of the invoicec.number of days when the entire amount is dued.percent of the cash discountANS:DDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement35.Merchandise with a sales price of $500 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a a.debit to Cash for $500b.Debit to Sales Discounts for $10c.Credit to Sales for $500d.Debit to Accounts Receivable for $490ANS:CDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement36.Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $15,000. The seller paid transportation costs of $1,000 and issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount allowable?a.$160b.$150c.$140d.$100ANS:DDIF:DifficultOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement37.Which of the following accounts has a normal credit balance?a.Sales Returns and Allowancesb.Salesc.Merchandise Inventoryd.Delivery ExpenseANS:BDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement38.The entry to record the return of merchandise from a customer would include a a.debit to Salesb.credit to Salesc.debit to Sales Returns and Allowancesd.credit to Sales returns and AllowancesANS:CDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement39.Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a a.debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Salesb.debit to Cash and a credit to Salesc.debit to Cash, credit to Credit Card Expense, and a credit to Salesd.debit to Sales, debit to Credit Card Expense, and a credit to CashANS:BDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement40.Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as a.sales on accountb.sales returnsc.cash salesd.sales when the credit card company remits the cashANS:CDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement41.When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry a.debit Merchandise Inventory; credit Cashb.debit Cash; credit Merchandise Inventoryc.debit Cash; credit Sales Returns and Allowancesd.debit Sales Returns and Allowances; credit CashANS:BDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement42.When merchandise is returned under the perpetual inventory system, the buyer would credit a.Merchandise Inventoryb.Purchases Returns and Allowancesc.Accounts Payabled.depending on the inventory system used.ANS:ADIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement43.When purchases of merchandise are made for cash, the transaction may be recorded with the following entry a.debit Cash; credit Merchandise Inventoryb.debit Merchandise Inventory; credit Cashc.debit Merchandise Inventory; credit Cash Discountsd.debit Merchandise Inventory; credit PurchasesANS:BDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement44.Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a a.debit to Salesb.debit to Merchandise Inventoryc.credit to Merchandise Inventoryd.credit to SalesANS:BDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement45.Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a a.debit to Cost of Goods Soldb.credit to Accounts Payablec.credit to Merchandise Inventoryd.credit to SalesANS:CDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement46.In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is a.debit Cost of Merchandise Sold; credit Salesb.debit Cost of Merchandise Sold; credit Merchandise Inventoryc.debit Merchandise Inventory; credit Cost of Merchandise Soldd.debit Accounts Receivable; credit Merchandise InventoryANS:BDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement47.The amount of the total cash paid to the seller for merchandise purchased would normally include a.only the list priceb.only the sales taxc.the list price plus the sales taxd.the list price less the sales taxANS:CDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement48.A retailer purchases merchandise with a catalog list price of $10,000. The retailer receives a 25% trade discount and credit terms of 2/10, n/30. What amount should the retailer debit to the Merchandise Inventory account?a.$7,500b.$10,000c.$9,800d.$7,350ANS:ADIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement49.A sales invoice included the following information: merchandise price, $4,000; transportation, $300; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $600 is granted prior to payment, that the transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?a.$3,366b.$3,400c.$3,666d.$3,950ANS:CDIF:DifficultOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement50.Which of the following accounts usually has a debit balance?a.Purchase Discountsb.Sales tax Payablec.Allowance for Doubtful Accountsd.Transportation-InANS:DDIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement51.Merchandise is sold for cash. The selling price of the merchandise is $2,000 and the sale is subject to a 5% state sales tax. The journal entry to record the sale would include a.A debit to Cash for $2,000.b.A credit to Sales for $2,100.c.A credit to Sales Tax Payable for $100.d.None of the above.ANS:CDIF:ModerateOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measurement52.If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as a.FOB shipping pointb.FOB destinationc.FOB n/30d.FOB buyerANS:ADIF:EasyOBJ:06-03NAT:AACSB Analytic | AICPA FN-Measure