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Quiz Ch. 05 Merchandising Operations

1. Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2%25 cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.
Going-concern principle., Materiality principle., Historical cost principle., Monetary unit principle.,
2. In a perpetual inventory system, the merchandise inventory account must be closed at the end of the accounting period.
$1,800 and $700., $700 and $1,800., $2,500 and $700. generate answer keys , $700 and $700.,
3. In a perpetual inventory system, when a buyer returns defective merchandise to the seller, the buyer credits which account?
$212,000, $144,000 grading , $12,000, $15,000,
4. A company uses the perpetual inventory system and makes a purchase of inventory on open account. Which of the following is the correct journal entry to record this purchase?
A debit to the asset Office Supplies and a credit to Cash., A debit to Merchandise Inventory and a credit to Accounts Payable., A debit to Merchandise Inventory and a credit to Cash., A debit to Sales Returns and Allowances and a credit to Cost of Goods Sold.,
5. During the current year, 2011, a company decides to carry a brand new item in its inventory. It purchases 25 new items for $100 each for a total of $2,500. It sells 7 items during 2011 and has 18 items on hand at the end of the year. In 2012, it buys 6 more items for the same price and only sells 7 items during the entire year. What is the computed amount of Cost of Goods Sold for each year?
The discount percentage and the number of days to the end of the month., The discount percentage and the number of days in the discount period., Only the discount period., Only the discount percentage.,
6. If a company sells merchandise with credit terms 2/10, n/60, the credit period is 10 days and the discount period is 60 days
Gross Sales Revenue plus Sales Returns minus Sales Allowances minus Sales Discounts., Gross Sales Revenue minus Sales Returns minus Sales Allowances plus Sales Discounts., Gross Sales Revenue minus Sales Discounts minus Sales Returns minus Sales Allowances., Gross Sales Revenue plus Sales Returns plus Sales Discounts minus Sales Allowances.,
7. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.
Merchandise Inventory, debit, $8,130; Freight-In, debit, $130; Accounts Payable, credit, $8,130., Merchandise Inventory, debit, $8,130; Accounts Payable, credit, $8,130 interactive learning , Merchandise Inventory, debit, $8,000; Accounts Payable, credit, $8,000., Merchandise Inventory, debit, $7,870; Accounts Payable, credit, $7,870.,
8. Merchandise inventory consists of products that a company acquires to resell to customers
Goods are shipped free on board (FOB) to the buyer%27s place of business., Buyer pays the freight., Seller pays the freight., Trucking company pays the freight.,
9. A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to: (Multichoice)
Sales Returns., Sales Revenue, Cash, Merchandise Inventory,
10. The acid-test ratio is also called the quick ratio.
Wages Expense., Depreciation Expense., Advertising Expense., Rent Expense.,
11. In an earlier chapter, we learned about the Current Ratio, and in the current chapter, we learned about the Acid-Test or Quick ratio. Which of the following statements is true?
A loss on the sale of a building., Interest Revenue., A gain on the sale of office equipment., Wages Expense,
12. Which of the following expenses would not generally be found in the General and Administrative Expenses section of a multi-step income statement?
The single-step format., The multi-step format., A combination of the single-step and multi-step formats., All of the above formats are acceptable,
13. Company A is taking the end-of-the-year physical inventory. Its accounting period ends on December 31. Which of the following items would not be counted in the ending inventory count?
Has no prescribed format., Expenses are identified by their nature or function, Allows alternative measures of income on it., All of the above.,
14. Beginning merchandise inventory plus the net cost of purchases is the merchandise available for sale.
The current ratio is always higher than the acid test ratio., The acid-test ratio is always lower than the current ratio., The acid-test ratio will be equal to or lower than the current ratio., The acid-test ratio will be equal to or lower than the current ratio.,
15. When merchandise is purchased for resale, the Inventory account would be debited for such acquisition costs as the cost of the item itself and any freight charges for which the purchaser is responsible. This procedure is an application of which accounting principle?
TRUE, FALSE, ,
16. Because sellers assume that their customers will pay within the discount period, the seller usually records the discount at the time of the sale.
TRUE, FALSE, ,
17. The profit margin ratio is divided by total assets
customers, wholesalers, retailers,
18. Net Sales Revenue is computed as:
consumers, , online learning games ,
19. Inventory is usually less liquid than acconts receivable because inventory must first be sold before cash can be received
TRUE, FALSE, ,
20. A perpetual inventory system requires updating of the inventory account only at the beginning of an accounting period.
TRUE, FALSE, ,
21. Which of the following items would be included in the reporting of operating income if the entity is a sole proprietorship operating as a law firm?
TRUE, FALSE, school ,
22. The Merchandise Inventory account balance at the end of the curect period is equal to the amount of beginning merchandise inventory for the next period
TRUE, FALSE, ,
23. Cost of goods includes the cost of preparing merchandise for sale
TRUE, FALSE, ,
24. A retailer is an intermediary that buys products from manufacturers and sells them to #
TRUE, FALSE, ,
25. Under IFRSs, the income statement:
TRUE, FALSE, ,
26. Which of the following income statement report formats are used based on generally accepted accounting principles (GAAP)?
TRUE, FALSE, ,
27. A retailer who uses a perpetual inventory system purchased $8,000 of merchandise on credit. The credit terms were 2/10, n/30, FOB shipping point. The freight costs were $130. What was the journal entry to record the purchase?
TRUE, FALSE, ,
28. Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in separate temporary accounts.
TRUE, FALSE, ,
29. A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory
TRUE, FALSE matching excercise , ,
30. A service company ears profit by buying and selling merchandise
TRUE, FALSE, ,
31. Cash sales shorten the operating cycle for a merchanadiser; credit sales lengthen operating cycles
TRUE, FALSE, ,
32. In a periodic inventory system, cost of goods sold is recorded as each sale occurs
TRUE, FALSE, ,
33. A company had sales and cost of goods sold of $350,000 and $200,000, respectively. Its gross profit equals $150,000
TRUE, FALSE, ,
34. FOB shipping point (or FOB factory) implies that ownership of goods transfers to the buyer at the buyer%27s place of business.
TRUE, FALSE, create online activities ,
35. Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.
TRUE, FALSE, ,
36. FOB Shipping Point means that the:
TRUE, FALSE, ,
37. A perpetual inventory system continually updates accounting records for inventory transactions
TRUE, FALSE, ,
38. The buyer received an invoice from the seller for merchandise with a list price of $700 and credit terms of 2/10, n/45. The term, 2/10, in the credit terms denotes which of the following?
TRUE, FALSE, ,
39. Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts
TRUE, FALSE, ,