BSA 1101 Merchandising - Student\'S COPY PDF

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MULTIPLE CHOICE 1. Which one of the following is not a difference between a retail business and a service business? a. in what is sold b. the inclusion of gross profit in the income statement c. accounting equation d. merchandise inventory included in the balance sheet 2. Net income plus operating expenses is equal to a. cost of merchandise sold b. cost of merchandise available for sale c. net sales d. gross profit SALES Less: sales Returns and Allowances Sales Discounts NET SALES LESS: COST OF SALES GROSS PROFIT LESS: OPERATING EXPENSES NET INCOME

3. Generally, the revenue account for a merchandising business is entitled a. Sales b. Net Sales c. Gross Sales d. Gross Profit 4. What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? a. gross profit b. income from operations c. net income d. gross sales SALES- CS =GP -OE=NI 5. The term "inventory" can indicate a. merchandise held for sale in the normal course of business b. equipment used to manufacture products

c. supplies d. any asset

6. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to a. $12,670 b. $9,070 c. $8,420 d. $17,230 P-PD-PRA+FI =NET COST OF PURCHASES V. NET PURCHASES 7. A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is a. $970 b. $650 c. $300 d. $620 8. Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as a. selling expenses b. general expenses c. other expenses d. administrative expenses 9. Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense? a. selling expense b. miscellaneous expense c. administrative expense d. other expense 10. 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 statement b. revenue statement c. report-form statement d. single-step statement

11. Multiple-step income statements show a. gross profit but not income from operations b. neither gross profit nor income from operations c. both gross profit and income from operations d. income from operations but not gross profit 12. When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the a. account form b. comparative form c. horizontal form d. report form 13. The statement of owner's equity shows a. only net income, beginning and ending capital b. only total assets, beginning and ending capital c. only net income, beginning capital, and withdrawals d. all the changes in the owner's capital as a result of net income, net loss, additional investments, and withdrawals 14. Merchandise inventory is classified on the balance sheet as a a. Current Liability b. Current Asset c. Long-Term Asset d. Long-Term Liability

15. Which account is not classified as a selling expense? a. Sales Salaries b. Freight-Out c. Sales Discounts d. Advertising Expense 16. 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 period b. periodic system keeps a record showing the inventory on hand at all times c. periodic system provides an easy means to determine inventory shrinkage d. periodic system records the cost of the sale on the date the

sale is made

17. The inventory system employing accounting records that continuously disclose the amount of inventory is called a. retail b. periodic c. physical d. perpetual 18. When the perpetual inventory system is used, the inventory sold is shown on the income statement as a. cost of merchandise sold b. purchases c. purchases returns and allowances d. net purchases Accounts Receivable Sales

xx xx

Cost of Sales xx Merchandise Inventory

xx

19. When comparing a retail business to a service business, the financial statement that changes the most is the a. Balance Sheet b. Income Statement c. Statement of Owner's Equity d. Statement of Cash Flow 20. When comparing a retail business to a service business, the financial statement that changes the least is the a. Balance Sheet b. Income Statement c. Statement of Owner's Equity d. Statement of Cash Flow Capital, beg. Add: Net Increase in Capital Net Income during the period Add: Additional Investment Total Less: Owner’s Drawing Capital, End

xx xx xx xx xx

xx xx

21. Gross profit is equal to:

a. sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold b. sales plus sales returns and allowances less sales discounts less cost of merchandise sold c. sales plus sales discounts less sales returns and allowances less cost of merchandise sold d. sales less (sales discounts and sales returns and allowances) less cost of merchandise sold 22. Using the following information, what is the amount of cost of merchandise sold? Purchases Merchandise inventory September 1 Sales returns and allowances Purchases returns and allowances a. b. c. d.

$32,000 5,700

910 1,200

Purchases discounts Merchandise inventory September 30 Sales Freight In

$960 6,370

63,000 1,040

$26,900 $20,530 $30,210 $28,130

23. Using the following information, what is the amount of gross profit? Purchases $32,000 Purchases $960 discounts Merchandise 5,700 Merchandise 6,370 inventory inventory September 1 September 30 910 Sales 63,000 Sales returns and allowances 1,200 Freight In 1,040 Purchases returns and allowances a. $34,870 b. $31,880

c. $27,460 d. $62,090

SALES-CS=GP Cost of sales: MI,beg. + P-PRA-PD+FI-MI, End

24. Using the following information, what is the amount of net sales? Purchases Merchandise inventory September 1 Sales returns and allowances Purchases returns and allowances a. b. c. d.

$32,000 5,700

910 1,200

Purchases discounts Merchandise inventory September 30 Sales Freight In

$960 6,370

63,000 1,040

$28,970 $63,130 $63,000 $62,090

25.Using the following information, what is the amount of merchandise available for sale? Purchases Merchandise inventory September 1 Sales returns and allowances Purchases returns and allowances

$32,000 5,700

910 1,200

Purchases discounts Merchandise inventory September 30 Sales Freight In

a. $35,540 b. $36,580 c. $37,700 d. $34,500 MI,BEG. + NCP=TCGAS =5,700+ 32,000-1,200-960+1,040

$960 6,370

63,000 1,040

26. Where are selling and administrative expenses found on the multiplestep income statement?

a. b. c. d.

before gross profit after sales and before gross profit after net income before expenses after gross profit

27. Dorman Co. sold merchandise to Smith Co. on account, $18,000, terms 2/15, net 45. The cost of the merchandise sold is $15,500. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of net sales from the above transactions? a. $16,250 b. $14,100 c. $15,925 d. $13,818 CREDIT MEMO = DORMAN: DR. A/R-Smith CR. SALES Sales Returns xxx A/R -Smith

xx

DEBIT MEMO: PURCHASES Accounts Payable Accounts Payable xx Purchase Returns xx

28. Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a a. debit to Sales b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. credit to Accounts Receivable Upon Sale : A/R

xx Sales

Cost of Sales MI

xx xx xx

29. Which of the following accounts has a normal debit balance?

a. b. c. d.

Accounts Payable Sales Returns and Allowances Sales Interest Revenue

30. Merchandise is ordered on June 13; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on June 16; the merchandise is received by the buyer on June 18; the entry is made in the buyer's accounts on June 19. The credit period begins with what date? a. June 13 b. June 16 c. June 18 d. June 19 31. 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 Allowances b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. debit to Cost of Merchandise Sold Perpetual: Sales: A/R Sales Cost of Sales xx MI xx ---------------------------------------------------------Returns: MI xx AR xx 32. If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a a. sales invoice b. purchase invoice c. credit memo d. debit memo 33. The arrangements between buyer and seller as to when payments for merchandise are to be made are called a. credit terms b. net cash c. cash on demand

d. gross cash

34. In credit terms of 3/15, n/45, the "3" represents the a. number of days in the discount period b. full amount of the invoice c. number of days when the entire amount is due d. percent of the cash discount 35. Merchandise with a sales price of $800 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 $800 b. Debit to Sales Discounts for $16 c. Credit to Sales for $800 d. Debit to Accounts Receivable for $784 36. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment. What is the amount of the cash discount allowable? a. $170 b. $150 c. $130 d. $250 37. Which of the following accounts has a normal credit balance? a. Sales Returns and Allowances b. Sales c. Merchandise Inventory d. Delivery Expense 38. The entry to record the return of merchandise from a customer would include a a. debit to Sales b. credit to Sales c. debit to Sales Returns and Allowances d. credit to Sales returns and Allowances 39. 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 Sales b. debit to Cash and a credit to Sales c. debit to Cash, credit to Credit Card Expense, and a credit to Sales d. debit to Sales, debit to Credit Card Expense, and a credit to Cash

40. Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as a. sales on account b. sales returns c. cash sales d. sales when the credit card company remits the cash 41. When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry a. debit Merchandise Inventory; credit Cash b. debit Cash; credit Merchandise Inventory c. debit Cash; credit Sales Returns and Allowances d. debit Sales Returns and Allowances; credit Cash 42. When merchandise is returned under the perpetual inventory system, the buyer would credit a. Merchandise Inventory b. Purchases Returns and Allowances c. Accounts Payable d. Accounts Receivable

43. When purchases of merchandise are made for cash, the transaction may be recorded with the following entry a. debit Cash; credit Merchandise Inventory b. debit Merchandise Inventory; credit Cash c. debit Merchandise Inventory; credit Cash Discounts d. debit Merchandise Inventory; credit Purchases 44. Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a a. debit to Accounts Payable b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. credit to Sales 45. Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a a. debit to Cost of Merchandise Sold b. credit to Accounts Payable c. credit to Merchandise Inventory d. credit to Sales 46. In recording the cost of merchandise sold for cash, based on data...