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Test 4 - Chapter 5

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Grade 12 Accounting Midterm Prep
Claudia Voin
Quiz by Claudia Voin, updated more than 1 year ago
Claudia Voin
Created by Claudia Voin over 9 years ago
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Resource summary

Question 1

Question
A merchandiser differs from a service business in that it
Answer
  • is more profitable
  • makes, buys, sells goods to customers
  • has greater cash flow
  • requires more government regulation

Question 2

Question
Two categories of expenses in merchandising companies are
Answer
  • cost of goods sold and financial expenses
  • cost of goods sold and financing expenses
  • cost of goods sold and operating expenses
  • sales and cost of goods sold

Question 3

Question
The primary source of revenue for a service company is
Answer
  • Investment income
  • Service revenue
  • The sale of merchandise
  • The sale of capital assets the company owns

Question 4

Question
Service revenue less operating expenses is called
Answer
  • gross profit
  • net profit
  • net income
  • marginal income

Question 5

Question
The operating cycle of a service company differs from that of a merchandising company in that
Answer
  • is usually longer in days
  • is usually shorter in days
  • involves the purchase of inventory
  • involves the sale of merchandise

Question 6

Question
Which of the following formulas in incorrect
Answer
  • gross profit - operating expenses = net income
  • sales - cost of goods sold - operating expenses = net income
  • net income + operating expenses = gross profit
  • operating expenses - cost of goods sold = gross profit

Question 7

Question
With respect to the income statement
Answer
  • contra-revenue accounts do not appear on the income statement
  • contra-revenue accounts increase the amount of operating expenses
  • cost of goods sold reduces gross profit
  • none of the above

Question 8

Question
The journal entry to record the return of merchandise purchased on account under a perpetual inventory system would credit
Answer
  • A/P
  • Purchases R & A
  • Sales
  • Merchandise Inventory

Question 9

Question
Under a perpetual inventory system, acquisition of merchandise for resale is debited to the
Answer
  • merchandise inventory account
  • cost of goods sold account
  • supplies account
  • purchases account

Question 10

Question
Under a perpetual inventory system, cost of goods sold is recorded
Answer
  • on a daily basis
  • on a monthly basis
  • on an annual basis
  • with each sale

Question 11

Question
If ABC's accounting records should, using a perpetual inventory system, an ending inventory balance of $25 000 and a physical count shows $23 000, it is important to
Answer
  • debit your inventory records
  • purchase additional inventory
  • remove the nonexistent inventory from your records
  • credit cost of goods sold

Question 12

Question
Detailed records of goods held for resale are not maintained undera a
Answer
  • perpetual inventory system
  • periodic inventory system
  • double-entry accounting system
  • single-entry accounting system

Question 13

Question
Babcock Co. purchased merchandise from Gerber Co. with freight terms of FOB shipping point. The freight costs will be paid by the
Answer
  • seller
  • buyer
  • transportation company
  • buyer and seller

Question 14

Question
Wright Co. recently made a purchase of $10 000 from a major supplier. Shipping costs were $200, terms FOB shipping point. To record this purchase, Wright Co. will need to debit the
Answer
  • Merchandise Inventory account for $10 000
  • Cost of Goods Sold account for $200
  • Merchandise Inventory account for $10 200
  • Cost of Goods Sold account for $10 200

Question 15

Question
Benders Shoe Store had a beginning merchandise inventory of $18 000. During the period, purchases were $70 000; purchase returns, $3 000; and freight in, $6 000. A physical count of inventory at the end of the period revealed that $12 000 was still on hand. Using a perpetual inventory system, CoGS was
Answer
  • $88k
  • $79k
  • $91k
  • $85k

Question 16

Question
The Sales R&A account is classified as
Answer
  • an asset
  • a contra-asset
  • an expense
  • a contra-revenue

Question 17

Question
A sales invoice is a a source document that
Answer
  • provides support for goods purchased for resale
  • provides evidence of incurred operating expenses
  • provides evidence of credit sales
  • serves only as a customer receipts

Question 18

Question
The journal entry to record a shortage of inventory at the end of the accounting period is
Answer
  • Cost of Goods Sold Merchandise Inventory
  • Merchandise Inventory Service Revenue
  • Accounts Receivable Service Revenue
  • Accounts Receivable Merchandise Inventory

Question 19

Question
Sales revenue
Answer
  • may be recorded before cash is collected
  • will always equal cash collections in a month
  • only results from credit sales
  • is only recorded after cash is collected

Question 20

Question
A Sales R&A account is not debited if
Answer
  • a customer returns defective merchandise
  • a customer receives a credit for merchandise of inferior quality
  • a customer returns goods that are not in accordance with specifications
  • a buyer returns defective merchandise

Question 21

Question
If a customer agrees to keep merchandise that is defective because the seller is willing to reduce the price, this transaction is known as a sales
Answer
  • discount
  • return
  • mistake
  • allowance

Question 22

Question
When goods are returned that relate to a prior cash sale
Answer
  • the Sales R&A account should not be used
  • the Cash account will be credited
  • Sales R&A will be credited
  • A/R will be credited

Question 23

Question
The Sales R&A account does not provide info to management about
Answer
  • possible inferior merchandise
  • the percentage of credits vs cash sales
  • inefficiencies in filling orders
  • customers may be dissatisfied with the products

Question 24

Question
Which of the following accounts has a normal credit balance?
Answer
  • Sales R&A
  • Freight Out
  • Sales
  • Cost of Goods Sold

Question 25

Question
Tokyo Co sells merchandise on account for $1 200 (cost $750) to Thomas Co. Thomas Co returns $00 (cost $250) of merchandise that was damaged, along with a cheeque to settle the account. What entry does Tokyo Co make upon receipt of the cheque?
Answer
  • Cash 1 200, Sales 1 200
  • Sales R&A 250, Cost of Goods Sold 250
  • Cash 800 and Merchandise Inventory 400, A/R 1 200
  • Cash 800, A/R 800

Question 26

Question
Which of the following is a true statement about inventory systems
Answer
  • periodic inventory systems require more detailed inventory records
  • perpetual inventory systems require more detailed inventory records
  • periodic inventory systems requires cost of goods sold to be determined with each sale
  • perpetual inventory systems are specifically meant for companies that sell low unit value items

Question 27

Question
A physical inventory should be taken
Answer
  • after every purchase of merchandise
  • after every sale
  • at or near the balance sheet date
  • only if a manual account system is used

Question 28

Question
Northend Electric returned to Southerby Inc 5 damaged fuses. Southerby accepted the return and refunded the $200 Northend had paid for the order. To record this return, Southerby accountant must
Answer
  • Cash; Sales
  • Sales R&A; Cash
  • Cash; Merchandise Inventory
  • Cost of Goods Sold; Merchandise Inventory

Question 29

Question
In a perpetual inventory system, the Merchandise Inventory account must equal the actual merchandise on hand
Answer
  • at all times
  • only after the physical inventory count has occured
  • only at the beginning of the accounting period
  • only at the end of the accounting period

Question 30

Question
Taking a physical inventory count involves all of the following except
Answer
  • counting the units on hand
  • applying unit costs to the total inventory on hand for each item of inventory
  • evaluating whether inventory needs to be written off as obsolete
  • totaling the cost of each item of inventory determine the total cost of goods on hand

Question 31

Question
If a purchaser using a perpetual system agrees to freight terms of FOB destination, then the
Answer
  • Merchandise Inventory account will be increased
  • Merchandise Inventory account will be decreased
  • Merchandise account will not be affected
  • Cost of Goods Sold account will be increased

Question 32

Question
Freight costs paid by a seller on merchandise sold to customers will cause an increase
Answer
  • in the selling expense of the buyer
  • in operating expenses for the seller
  • to the cost of goods sold for the seller
  • to the Merchandise Inventory account for the seller

Question 33

Question
Using a perpetual inventory system, the respective normal account balances balances of Merchandise Inventory, Sales R&A, Cost of Goods Sold are
Answer
  • credit, credit, credit
  • debit, debit, debit
  • debit, credit, credit
  • debit, debit, credit

Question 34

Question
Income from operations will result if
Answer
  • the cost of goods sold exceeds operating expenses
  • revenues exceed cost of goods sold
  • revenues exceed operating expenses
  • gross profit exceeds operating expense

Question 35

Question
If a company has net sales of 500 000 and cost of goods sold of 350 000, the gross profit percentage is
Answer
  • 70%
  • 30%
  • 15%
  • 100%

Question 36

Question
Gross profit does not appear
Answer
  • on a multiple-step income statement
  • on a single-step income statement
  • to be relevant in analyzing the operating of a merchandising company
  • on the income statement if the periodic system is used because it cannot be calculated

Question 37

Question
Kerr Co has a beginning merchandise inventory at 17 000 an ending merchandise inventory of 20 000 and a cost of goods sold of 20 000. Inventory turnover is calculated to be
Answer
  • 5.41 times
  • 11.76 times
  • 10.81 times
  • 0.10 times

Question 38

Question
Inventory Turnover measures the number of times inventory is
Answer
  • purchased
  • sold
  • returned
  • paid for

Question 39

Question
In preparing closing entries for a merchandising companies, the owner's capital account will be debited for the balance of the
Answer
  • Sales Revenue
  • Cost of Goods Sold
  • Ending Inventory
  • Cash

Question 40

Question
The Merchandise Inventory account account balance appearing in an unadjusted trial balance under a perpetual inventory system represents the
Answer
  • ending inventory
  • beginning inventory
  • cost of merchandise purchased
  • cost of merchandise sold

Question 41

Question
On a classified balance sheet, merchandise inventory is classified as a
Answer
  • current liability
  • capital asset
  • current asset
  • long-term investment

Question 42

Question
The cost of goods sold account
Answer
  • is a temporary account
  • is a permenant account
  • appears on the balance sheet as an asset
  • appears on the income statement as an operating expense

Question 43

Question
When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do not agree with the physical account
Answer
  • has an effect on cost of goods sold
  • has no effect on cost of goods sold
  • requires reporting a loss when actual is higher than records
  • requires reporting a gain when actual is lower than records

Question 44

Question
When recording a credit sale, all of the following accounts are affected except
Answer
  • sales
  • a/r
  • merchandise inventory
  • cash

Question 45

Question
Toby Co purchased 10 000 in merchandise and sold it six months later 18 000, At the time of the sale, Toby will
Answer
  • debit the cost of goods sold account for 18 000
  • debit the cost of goods sold account for 10 000
  • credit the cost of goods sold account for 18 000
  • credit the cost of goods sold account for 10 000
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