Chapter 5 - CH5 PDF

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1.Merchandise was sold on credit for $3,000, terms 1/10, n/30. The entry to record the cash collection should include a: Debit Cash, $3,000, and credit Accounts Receivable, $3,000, if collected after the discount period Debit Cash, $3,000, and credit Accounts Receivable, $3,000, if collected within the discount period. Debit Cash, $3,000, and credit Accounts Receivable, $2,970, and Sales Discount, $30, if collected after the discount period Debit Cash, $3,000, and credit Accounts Receivable, $2,970, and Sales Discount, $30, if collected within the discount period None of the above 2. Lincoln Glass Company sold goods for $5,000 to Olivia Company on March 12 on credit. Terms of the sale were 3/10, n/30. At the time of the sale, Lincoln recorded the transaction by debiting accounts receivable for $5,000 and crediting sales revenue for $5,000 while Olivia debited Purchases for $5,000 and credited Accounts Payable for $5,000. Olivia paid the balance due, less the discount, on March 21. To record the March 21 transaction, Lincoln would debit which of the following? Accounts receivable for $4,850 Cash for $4,850 Accounts receivable for $5,000 None of the others alternatives are correct Cash for $5,000 3. Banner Ltd., bought merchandise for $900, terms 2/10, n/30. If Banner returns $300 worth of the goods to the vendor and pays the balance by the tenth day, the entry to record the payment should include a None of the others alternatives are correct Debit to Purchases Returns and Allowances of $294 Debit to Accounts Payable of $300 Debit to Discounts of $12 Credit to Cash of $588 4. A firm's gross profit on net sales is 10%. The firm had net sales of $400,000 and net cost of purchases of $350,000. If the beginning inventory was $40,000, how much was the ending inventory? $10,000 $50,000 None of the others alternatives are correct $390,000 $30,000 5. The ending balance of the Accounts Receivable account was $12,000 and the beginning balance was $14,000. Collections from customers were $22,000. What was the amount of services billed to customers? $26,000 $34,000 $22,000 $46,000 None of the others alternatives are correct

6. A company purchases $25,000 of inventory in January 20X6, pays for it in March 20X6 and sells them in May 20X6. The accounting period ends on December 31st. Which of the following statements is correct? The company will report accounts payable of $25,000 in 20X6 Balance Sheet The statement of cash flows for 20X6 will report an operating cash outflow of $25,000 The 20X5 income statement will report the $25,000 as cost of goods sold None of the others alternatives are correct The 20X6 Statement of Retained Earnings will not be affected by this transaction 7. A company reports its 20X4 purchases at $13 million. Its ending inventory for 20X4 is $1.5 million and for 20X3, ending inventory was $1.2 million. How much cost of goods sold did the company report in 20X4? $13.3 million None of the others alternatives are correct $13.0 million $12.7 million $10.3 million 8. At the end of the month Main Ltd. determined that the cost of goods that had been sold during the month was $125,000. How might this information be recorded? An increase in expenses of $125,000 and an increase in accounts payable of $125,000 A decrease in inventory of $125,000 and an increase in expenses of $125,000 None of the others alternatives are correct The information is not recorded as no economic event had taken place. An increase in inventory of $125,000 and a decrease in cash of $125,000. 10. Atkinson Corporation sold merchandise with an invoice price of $5,000 to Zoltan, Inc., with terms of 5/10, n/30. In the books of Zoltan, which of the following is the correct entry to record the payment by Zoltan within the 10 days if the company uses the perpetual inventory system and the gross method to record purchases? Dr. Purchases Cr. Cash

4,750 4,750

Dr. Cash 4,750 Dr. Sales Discount 250 Cr. Accounts Receivable 5,000 None of the others alternatives are correct Dr. Accounts Payable 4,750 Cr. Cash 4,750 Dr. Accounts Payable 5,000 Cr. Cash 4,750 Cr. Purchase Discount 250

11. The 20X5 records of Western Company showed beginning inventory, $100,000; cost of goods sold, $400,000; and ending inventory, $200,000. The amount of inventory to be reported in the Balance Sheet of 20X4 is: $300,000 $500,000 $200,000 $400,000 $100,000

12. Bag Company buys on account $1,000 of merchandise from Cart Company subject to terms 2/10 n/30 on Feb 1. On Feb 2 it returns $200 worth of merchandise for full credit. Bag pays its balance in full on Feb 5. Bag would write a cheque on Feb 5 for: $800 $784 $780 $1,000 None of the above 13. Which of the following accounts are increased by credits and decreased by debits? Retained Earnings Accumulated Depreciation Allowance for Doubtful Accounts Purchase Returns & Allowances All of the above 14. A company reports its 20X4 cost of goods sold at $10 million. Its ending inventory for 20X4 is $1.5 million and for 20X3, ending inventory was $1.2 million. How much inventory did the company purchase during 20X4? $12.7 million $10.3 million $13.0 million None of the others alternatives are correct $13.3 million 15. Lincoln Glass Company sold goods for $5,000 to Olivia Company on March 12 on credit. Terms of the sale were 3/10, n/30. At the time of the sale, Lincoln recorded the transaction by debiting accounts receivable for $5,000 and crediting sales revenue for $5,000 while Olivia debited Purchases for $5,000 and credited Accounts Payable for $5,000. Olivia paid the balance due, less the discount, on March 21. To record the March 21 transaction, Lincoln would credit which of the following? Accounts receivable for $4,850 None of the others alternatives are correct Accounts receivable for $5,000 Cash for $5,000 Cash for $4,850

16. Lincoln Glass Company sold goods for $5,000 to Olivia Company on March 12 on credit. Terms of the sale were 3/10, n/30. At the time of the sale, Lincoln recorded the transaction by debiting accounts receivable for $5,000 and crediting sales revenue for $5,000 while Olivia debited Purchases for $5,000 and credited Accounts Payable for $5,000. Olivia paid the balance due, less the discount, on March 21. To record the March 21 transaction, Olivia would debit which of the following? Cash for $4,850 Accounts payable for $5,000 Cash for $5,000 None of the others alternatives are correct Accounts payable for $4,850 17. A firm's gross profit on net sales is 35%. The firm had net sales of $400,000 and net cost of purchases of $280,000. If the beginning inventory was $40,000, how much was the ending inventory? $20,000 $60,000 $180,000 $40,000 None of the others alternatives are correct 18. On January 1, 20X7, the ledger of Conglomo Corporation correctly showed supplies inventory of $900. During 20X7, supplies purchases amounted to $6,000. A count (inventory) of supplies on hand at December 31, 20X7, showed $1,800. The 20X7 Balance Sheet statement should report supplies amounting to: $6,900 $1,800 None of the others alternatives are correct $6,000 $5,100 19. When a company uses the perpetual inventory system in accounting for its merchandise inventory, which of the following is true? None of the others alternatives are correct The inventory account is updated throughout the year as purchases are made. Purchases are recorded in the cost of goods sold account. The inventory account is updated after each sale Cost of goods sold is computed at the end of the accounting period rather than at each sale. A firm's gross profit on net sales is 30%. The firm had net sales of $420,000 and net cost of purchases of $280,000. If the beginning inventory was $40,000, how much was the ending inventory? $40,000 None of the others alternatives are correct $60,000 $26,000 $126,000

20. Atkinson Corporation sold merchandise with an invoice price of $3,000 to Zoltan, Inc., with terms of 4/10, n/30. In the books of Zoltan, which of the following is the correct entry to record the payment by Zoltan within the 10 days if the company uses the periodic inventory system and the gross method to record purchases? Dr. Accounts Payable 2,880 Cr. Cash 2,880 Dr. Purchases 2,880 Cr. Cash

2,880

Dr. Accounts Payable 3,000 Cr. Cash 2,880 Cr. Purchase Discount 120 None of the others alternatives are correct Dr. Cash 2,880 Dr. Sales Discount 120 Cr. Accounts Receivable 3,000

21. Best Company had the following information in its records: Sales $400,000 this period Sales Discounts $12,000 this period Sales terms for Best on its invoices are 3/10, n/60 Not determinable from the data provided 2/10, n/30 3/10, n/30 2/10, n/60 22. Revenue should not be recognized by a firm: a, b and c are all incorrect statements until title to the goods sold has passed if goods are in transit at year end a, b and c are all correct statements when cash is received if the accrual method is being used normally before goods are shipped 23. A company reports its 20X4 cost of goods sold at $13 million. Its ending inventory for 20X4 is $1.5 million and for 20X3, ending inventory was $1.2 million. How much inventory did the company purchase during 20X4? $13.3 million $10.3 million $13.0 million $12.7 million None of the others alternatives are correct

24. Lincoln Glass Company sold goods for $5,000 to Olivia Company on March 12 on credit. Terms of the sale were 3/10, n/30. At the time of the sale, Lincoln recorded the transaction by debiting accounts receivable for $5,000 and crediting sales revenue for $5,000 while Olivia debited Purchases for $5,000 and credited Accounts Payable for $5,000. Olivia paid the balance due, less the discount, on March 21. To record the March 21 transaction, Olivia would credit which of the following? Accounts payable for $4,850 None of the others alternatives are correct Cash for $5,000 Accounts payable for $5,000 Cash for $4,850 25. Which of the following represents the main difference between a merchandising firm and a manufacturing firm? Merchandising firms have three components of inventory on the balance sheet and manufacturing firms have one component of inventory on the balance sheet. Merchandising firms usually use a periodic system whereas manufacturing firms usually use a perpetual method. None of the others alternatives are correct Merchandising firms purchase goods for resale whereas manufacturing firms manufacture inventory for original resale. Merchandising firms usually use FIFO and manufacturing firms usually use weighted average cost to value ending inventory. 26. Banner Ltd., bought merchandise for $900, terms 2/10, n/30. If Banner returns $300 worth of the goods to the vendor, the entry to record the return should include a None of the others alternatives are correct Debit to Purchases Returns and Allowances of $294 Debit to Accounts Payable of $300 Credit to Purchases Returns and Allowances of $294 Debit to Discounts Lost of $6

27. The following amounts have been extracted from the accounts of Sell-It at its year-end, December 31, 20x9: Sales $50,000 Cost of Goods Sold $35,000 Inventory $10,000 Account Payable $8,000 The gross profit which Sell-it would report is

$7,000 None of the others alternatives are correct $50,000 $15,000 $40,000

28. The essential difference between cash discounts and trade discounts is: The buyer calls them trade discounts but the seller calls them cash discounts Cash discounts are recognized in the accounting records but trade discounts are not The buyer calls them cash discounts but the seller calls them trade discounts Trade discounts are recognized in the accounting records but cash discounts are not None of the above 29. On January 1, 20X7, the ledger of Conglomo Corporation correctly showed supplies inventory of $1,000. During 20X7, supplies purchases amounted to $6,000. A count (inventory) of supplies on hand at December 31, 20X7, showed $2,000. The 20X6 Balance Sheet statement should report supplies amounting to: $6,000 $2,000 $5,000 $7,000 None of the others alternatives are correct 30. Checker Co. buys $500 of merchandise from a supplier subject to terms 2/10 n/30. Checker pays within the discount period and subsequently discovers the merchandise is all defective. It is all returned for full credit. None of the above statements are correct The credit will be for some other amount The credit will be for $500 The credit will be to the Purchases account in Checker's general ledger The credit will not necessitate a journal entry as it will just be offset against the next purchase 31. In shipping, the term FOB Destination means that title will pass: When the purchase order is received When the purchase requisition is mailed When the merchandise is received When the merchandise is shipped None of the above 32. A company purchases $25,000 of inventory in January 20X6, pays for it in March 20X6 and sells them in May 20X6. The accounting period ends on December 31st. Which of the following statements is correct? The 20X6 Statement of Retained Earnings will not be affected by this transaction None of the others alternatives are correct The 20X6 income statement will report the $25,000 as cost of goods sold The statement of cash flows for 20X5 will report an operating cash outflow of $25,000 The company will report accounts payable of $25,000 in 20X5 Balance Sheet 33. The ending balance of the Accounts Receivable account was $12,000. Services billed to customers for the period were $21,500, and collections on account from customers were $23,600. What was the beginning balance of Accounts Receivable? $14,100 $9,900 $33,100 None of the others alternatives are correct $33,500

34. The cost of goods sold (COGS) in a periodic inventory system is found by deducting the cost of ending inventory from the cost of goods available for sale None of the others alternatives are correct adding the net cost of purchases to the ending inventory deducting the cost of the ending inventory from the net cost of purchases deducting the cost of beginning inventory from the cost of goods available for sale 35. A company that makes the following journal entry at the time of purchasing inventory is using which of the following inventory systems? Dr. Inventory and Cr. Accounts Payable Just-in-time system Perpetual system Periodic system Specific identification system None of the others alternatives are correct 36. A company that makes the following journal entry at the time of purchasing inventory is using which of the following inventory systems? Dr. Purchases and Cr. Accounts Payable Just-in-time system Periodic system Specific identification system Perpetual system None of the others alternatives are correct 37. A company purchases $25,000 of inventory in January 20X6, pays for it in March 20X6 and sells them in May 20X6. The accounting period ends on December 31st. Which of the following statements is correct? The statement of cash flows for 20X5 will report an operating cash outflow of $25,000 The company will report accounts payable of $25,000 in 20X6 Balance Sheet None of the others alternatives are correct The 20X5 Statement of Retained Earnings will not be affected by this transaction The 20X5 income statement will report the $25,000 as cost of goods sold

38. The following amounts have been extracted from the accounts of Sell-It at its year-end, December 31, 20x9: Sales $50,000 Cost of Goods Sold $45,000 Inventory $10,000 Account Payable $8,000 The gross profit which Sell-it would report is $50,000 $40,000 None of the others alternatives are correct

$42,000 $5,000 39. Which of the following is a contra account? Freight out (delivery expense) Bad debts expense None of the above Petty cash Trade discounts given from list price for volume purchases 40. A company purchases $25,000 of inventory in November 20X6, pays for it in December 20X6 and sells them in March 20X7. The accounting period ends on December 31st. Which of the following statements is correct?

None of the others alternatives are correct The statement of cash flows for 20X7 will report an operating cash outflow of $25,000 The 20X6 Statement of Retained Earnings will be affected by this transaction The 20X7 income statement will report the $25,000 as cost of goods sold The company will report accounts payable of $25,000 in 20X7 Balance Sheet 41. The 20X5 records of Western Company showed beginning inventory, $100,000; purchases $550,000; and ending inventory, $200,000. The amount of cost of goods sold to be reported in the Income Statement of 20X5 is: $250,000 $350,000 $450,000 $150,000 $550,000 42. At the end of the month Main Ltd. determined that the ending balance of inventory was $125,000. How might this information be recorded? None of the others alternatives are correct The information is not recorded as no economic event had taken place. A decrease in inventory of $125,000 and an increase in expenses of $125,000 An increase in inventory of $125,000 and a decrease in cash of $125,000. An increase in expenses of $125,000 and an increase in accounts payable of $125,000 43. If a company returns an item to a supplier, the supplier will record the return as: shrinkage. sales discounts sales returns and allowances none of the above purchase returns and allowances 44. A company purchases $25,000 of inventory in January 20X6 and will pay for it in March 20X6, which of the following statements is false? The statement of cash flows will report an operating cash outflow of $25,000 in March 2016 The company will report accounts payable of $25,000 in February 2016 None of the others alternatives are correct None of the others specific alternatives are correct

The income statement will report the $25,000 as cost of goods sold in January 2016 when they are purchased 45. On November 30, Bargain City has the following financial information relating to November:

Sales $10,000 Sales returns & allowances $1,000 Purchases $4,000 Freight-in $500 Purchase Returns & Allowances $400 Purchase discounts $200 What are the Net Purchases for the month of November? $3,900 $3,800 Some other amount $3,600 $3,100 46. A company purchases $25,000 of inventory in November 20X6, pays for it in December 20X6 and sells them in March 20X7. The accounting period ends on December 31st. Which of the following statements is correct? The 20X6 Statement of Retained Earnings will not be affected by this transaction The 20X6 income statement will report the $25,000 as cost of goods sold The statement of cash flows for 20X7 will report an operating cash outflow of $25,000 The company will report accounts payable of $25,000 in 20X6 Balance Sheet None of the others alternatives are correct 47. On January 1, 20X7, the ledger of Conglomo Corporation correctly showed supplies inventory of $1,000. During 20X7, supplies purchases amounted to $6,000. A count (inventory) of supplies on hand at December 31, 20X7, showed $2,000. The 20X7 Income Statement should report cost of goods sold amounting to: $7,000 $6,000 $2,000 $5,000 None of the others alternatives are correct 48. The 20X5 records of Western Company showed beginning inventory, $100,000; cost of goods sold, $400,000; and ending inventory, $200,000. The amount of inventory to be reported in the Balance Sheet of 20X5 is: $400,000 $100,000 $300,000 $500,000 $200,000 49. Which of the following documents does not initiate an entry being made in the accounts Purchase order Purchase invoice Sales invoice

None of the others alternatives are correct Credit memo 50. On January 15, Frazier Company received merchandise for resale from its normal supplier. The invoice price was $5,000 with terms of 5/10, n/30 for 100 units of Part #345. The invoice was paid on January 19. Freight costs were $200 and the company paid $120 of interest on a loan to buy the inventory. What is the unit cost that should be recorded for each of the 100 units of Part # 345? None of the others alternatives are correct $51.20 $48.70 $48.20 $49.50 51. The following amounts have been extracted from the accounts of Sell-It at its year-end, December 31, 20x9: Sales $50,000 Cost of Goods Sold $35,000 Inventory $10,000 Account Payable $8,000 If an error were made computing Sell-its ending inventory and in...