Merchandising Reviewer PDF

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MERCHANDISING – REVIEW QUESTIONSTRUE OR FALSE The main difference of a merchandising business from a servicing business is the existence of merchandise inventory. In a merchandising business, the main source of revenue is the sale of merchandise. The gross profit from sale is equal to sales minus co...

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MERCHANDISING,–,REVIEW,QUESTIONS, ! TRUE!OR!FALSE! ! 1. The!main!difference!of!a!merchandising!business!from!a!servicing!business!is! the!existence!of!merchandise!inventory.! ! 2. In! a! merchandising! business,! the! main! source! of! revenue! is! the! sale! of! merchandise.! ! 3. The!gross!profit!from!sale!is!equal!to!sales!minus!cost!of!sales.! ! 4. Purchases! of! items! other! than! those! which! form! part! of! inventory! and! intended!for!sale!in!the!normal!course!of!business!are!recorded!as!purchases.! ! 5. Freight-in!expense!is!an!operating!expense.! ! 6. Generally,!sales!are!recorded!only!when!the!sale!is!on!cash!basis.! ! 7. Transportation! expense! under! FOB! destination! paid! by! the! buyer! under! collect!arrangement!is!the!expense!of!the!buyer.! ! 8. Sales!returns!will!decrease!the!total!net!sales!for!the!period.! ! 9. A! debit!note!issued!by!the!supplier!to!the!buyer!will!decrease!the!payables!of! the!buyer.! ! 10. If!the!seller!grants!an!allowance!for!the!reported!defective!merchandise,!the! seller!has!to!issue!a!credit!note!to!the!buyer!for!the!corresponding!amount.! ! 11. Transportation!expenses! on!the! sale!of! merchandise!are! recorded!as!freight! out!and!reported!as!part!of!cost!of!sales.! ! 12. Good!in!transit!under!FOB!shipping!point!arrangement!are!part!of!the!seller’s! inventory.! ! 13. Freight! expenses! under! FOB! destination! arrangement! are! recorded! in! the! books!of!the!buyer!as!cost!of!sales.! ! 14. Freight!expenses! under!FOB! shipping! point!paid! by!the! buyer!is! an!expense! of!the!buyer.! ! 15. As!a!rule,!cash!discount!is!given!only!when!the!accounts!are!fully!paid!within! the!discount!period.! ! !

16. Under! the! perpetual! inventory! system,! the! cost! of! sale! is! determined! every! time!a!sale!is!made.! ! 17. Under!the!physical!inventory! system,!the!cost!of!sale! is!computed!only!after! the! physical! count! of! the! unsold! merchandise! at! the! end! of! the! period! is! conducted.! ! 18. The! amount! of! purchase! discount! is! computed! based! on! the! net! account! payable!and!not!on!net!purchases.! ! 19. In! determining! the! cost! of! sale! under! the! periodic! inventory! system,! the! freight!in!is!added!to!purchases.! ! 20. Under! the! perpetual! inventory! system,! the! cost! of! sale! is! taken! from! the! record!which!is!known!as!subsidiary!ledger!or!stock!card.! ! 21. All! credit! sales! are! recorded!in! the! same! manner! regardless! of! whether! the! available!discount!is!taken!or!not.! ! 22. If! a! customer! returns! merchandise! after! taking! a! cash! discount! with! the! payment,!the!customer!will!receive!credit!equal!to!the!original!invoice!value! of!the!merchandise.! ! 23. The!sales!returns!and!allowances!account!is!a!contra-revenue!account.! ! 24. A!cash!discount!is!another!name!for!trade!discount.! ! 25. A!trade!discount!is!taken!in!the!book!of!the!seller!as!expense.! ! 26. Corresponding! to! freight! expense! chargeable! to! the! buyer,! the! seller! advances!the!payment!and!issued!a!debit!note!for!the!amount.! ! 27. Periodic!inventory!system!is!the!same!as!physical!inventory!system.! ! MULTIPLE,CHOICE, ! 1. The!following!discounts!are!usually!recorded!in!the!journal!and!posted!to!the! ledger,!except:! A. Trade!discount.! B. Cash!discount.! C. Purchase!discount.! D. Discount!due!to!defect!of!products.! ! 2. Which!of!the!following!is!period!cost!that!is!not!directly!related!to!revenue! earned?! A. Cost!of!sales.!

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B. Operating!expenses.! C. Both!of!the!choices.! D. None!of!the!choices.! ! This!system!of!recording!goods!intended!for!sale!maintains!the!merchandise! inventory!account!in!every!transaction.! A. Periodic!inventory!system.! B. Perpetual!inventory!system.! C. Just-in-time!inventory!system.! D. Maintenance!inventory.! ! Which!of!the!following!is!the!income!representing!the!difference!between!the! sales!and!cost!of!sales?! A. Gross!profit.! B. Operating!income.! C. Net!operating!income.! D. Net!income!before!tax.! ! The!difference!between!the!accounts!receivable!and!the!cash!collection!may! be!due!to!the!following!reasons!except:! A. Trade!discount.! B. Cash!discount.! C. Sales!allowances.! D. Sales!returns.! ! This! cost! includes! the! purchase! price! of! goods! and! the! related! expenses! incurred!to!prepare!the!goods!ready!for!sale.! A. Cost!of!purchases.! B. Cost!of!good!available!for!sale.! C. Cost!of!goods!sold.! D. Cost!of!goods!sold!and!operating!expenses.! ! Which!of!the!following!is!reported!as!part!of!the!operating!expenses?! A. Cost!of!sales.! B. Freight-in.! C. Freight-out.! D. Sales!allowance.! ! Which!of!the!following!is!reported!as!selling!expense?! A. Sales!discount.! B. Sales!return.! C. Sales!allowance.! D. Freight-out! ! All!descriptions!reveal!the!characteristics!of!a!periodic!inventory!system,! except:!

A. B. C. D.

Cost!of!goods!sold!is!determined!at!the!end!of!the!period.! Purchases!are!recoded!at!cost.! Inventory!record!is!always!up-to-date.! Merchandise!inventory!account!is!set-up!at!the!beginning!and!ending!of! the!accounting!period.! ! 10. In!which!of!the!following!arrangements!does!the!freight!become!the!expense! of!the!buyer?! A. FOB!destination,!collect.! B. FOB!shipping!point,!collect.! C. FOB!destination,!prepaid.! D. None!of!the!choices.! ! 11. The!following!accounts!will!not!affect!the!amount!of!cost!of!goods!available! for!sale,!except:! A. Cost!of!goods!sold.! B. Freight-in.! C. Merchandise!inventory,!ending! D. Undelivered!purchases.! ! 12. This!discount!is!granted!because!of!bulk!buying.! A. Trade!discount.! B. Purchase!discount.! C. Sales!discount.! D. Discount!card.! ! 13. Which!of!the!following!will!increase!the!gross!profit!of!the!merchandising! business?! A. Increase!in!purchase!discount.! B. Increase!in!freight-in.! C. Decrease!in!freight-out.! D. Decrease!in!purchase!return.! ! 14. One!of!the!accounts!is!not!included!in!the!computation!of!net!purchases!but! included!in!determining!the!amount!of!total!purchases.! A. Purchase!returns.! B. Purchase!allowances.! C. Purchase!discounts.! D. Freight-in.! ! 15. In!which!of!the!following!will!the!supplier!be!issuing!a!credit!note?! A. Granting!of!trade!discount!to!buyer.! B. Granting!of!allowance!to!buyer!for!defective!merchandise.! C. Granting!of!volume!discount!to!the!buyer.! D. All!of!the!choices.! !

16. Which!of!the!following!is!to!be!included!in!the!inventory!of!the!seller?! A. Goods!in!transit!sold!under!FOB!destination.! B. Goods!in!transit!sold!under!FOB!shipping!point.! C. Both!A!and!B.! D. None!of!the!choices.! ! 17. Under!which!inventory!system!is!a!stock!card!or!subsidiary!ledger! necessary?! A. Perpetual!inventory!system.! B. Physical!inventory!system.! C. Periodic!inventory!system.! D. All!of!the!choices.! ! 18. Which!of!the!following!is!not!recorded!in!the!books!of!accounts?! A. Cash!discount.! B. Sales!discount.! C. Purchase!discount.! D. Volume!discount.! ! 19. Which!of!the!following!is!being!adjusted!by!a!purchase!discount?! A. Purchases.! B. Accounts!receivable.! C. Sales! D. All!of!the!choices.! ! 20. Which!of!the!following!accounts!is!used!in!merchandising!but!not!in! servicing?! A. Depreciation!expense.! B. Allowance!for!bad!debts.! C. Salaries!expense.! D. Purchase!discount.! ! 21. Which!of!the!following!is!equal!to!gross!profit!plus!cost!of!sales?! A. Beginning!inventory.! B. Goods!available!for!sale.! C. Ending!inventory.! D. Sales.!! ! 22. Which!of!the!following!is!equal!to!cost!of!sale!plus!ending!inventory?! A. Beginning!inventory.! B. Goods!available!for!sale.! C. Gross!profit.! D. Sales.! ! , ,

MULTIPLE,CHOICE, , 1. A! is! using! a! periodic! inventory! system.! For! the! year,! its! total! purchases! amounted! to! P250,000.! Its! unsold! merchandise! at! the! end! of! the! year! has! a! cost!of!P5,000!which!is!80%!of!its!beginning!inventory.!X’s!cost!of!sale!is! A. P250,000! B. P251,250! C. 249,000! D. 248,750! ! Derivation:+ ! Merchandise!Inventory! 251,250& Beg.! 6,250! ! COGS! Purchases! 250,000! ! End.! 5,000! ! ! Merchandise!Inventory,!Beg.!(P5,000!/!80%)! P6,250! ! ! OR,! ! ! Let!x!! =!Beg.!Inv.! ! 0.80x! =!!P5,000! ! x! =!P6,250 ! ! ! ! COGS!! =!Beg.!Inv.!+!Purchases!–!End.!Inv.! ! ! ! COGS! =!P6,250!+!P250,000!–!P5,000! ! ! =!P251,250! ! ! ! 2. B’s! purchases! per! purchase! invoice! amount! to! P150,000.! The! purchase! discount!is!2/10,!n/30.!Freight!is!P500,!FOB!shipping!point!collect.!Using!the! net!method,!the!amount!of!net!purchases!would!be! A. P147,000! B. P147,500! C. P148,500! D. P150,500! ! Derivation:! Net!purchases!(P150,000!x!0.98!+!P500)! P147,500! ! ! ! ! !

3. The!purchase!invoice!shows!the!amount!of!P250,000,!2/10,!1/20,!n/30;!FOB! destination!collect,!P200.!If!the!account!is!paid!15!days!after!the!invoice!date,! the!net!payment!should!be! A. P245,000! B. P247,500! C. P247,300! D. P244,800! ! Derivation:! Net!payment!(P250,000!x!0.99)! P247,500! ! 4. C! purchased! merchandise! for! P5,000! and! paid! P200! for! freight,! FOB! destination! collect.! The! merchandise! was! sold! at! 120%! of! cost.! The! gross! profit!is! A. P1,000! B. P1,040! C. P6,000! D. P6,240! ! Derivation:+ ! Sales!(P5,200!x!120%)! P6,240! Less;!Cost!of!goods!sold! !!!!!!5,200! Gross!profit! P1,040! ! ! 5. The! total! purchase! is! P1,176,! net! of! 2%! cash! discount.! Unsold! portion! of! purchase!is!P176.!The!sale!is!mark-up!of!10%.!The!gross!profit!is!! A. P117.60! B. P88.24! C. P125.25! D. P100! ! Derivation:! Gross!profit!(P1,176!–!P176)!x!!10%! P100! ! ! ! ! ! ! ! ! !

6. The!term!of!a!P300,000!purchase!is!2/30,!n/60;!FOB!shipping!point!prepaid,! P300.! If! the! account! is! paid! on! the! 20th! day! from! the! invoice! date,! the! total! payment!would!be! A. P294,000! B. P299,700! C. P294,300! D. P300,300! ! Derivation:! Total!payment!(P300,000!x!0.98)!+!P300!! ! P294,300! ! 7. The!following!items!are!taken!from!the!records!of!D!Enterprise:! ! Purchases! P10,000! Sales!discount! P1,000! Purchase!returns! 100! Freight-in! 400! Sales! 15,000! Freight-out! 500! ! No!beginning!and!ending!inventory.!The!gross!profit!is! ! Derivation:+ ! Sales! P15,000! Sales!discount! (1,000)! Purchases! (10,000)! Purchases!returns! 100! Freight-in! !!!!!!(400)! Gross!profit! P!!3,700! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !

8. The!following!data!pertain!to!the!two-year!operation!of!F!Business! ! ! Year,1, Year,2, Sales! P200,000! P250,000! Purchases! 250,000! 150,000! Ending!inventory! 90,000! 40,000! ! F’s!gross!profit!is! ! Derivation:+ + Sales! ! P250,000! Less:!COGS:! ! ! ! Beg.!Inventory! P!!!90,000! ! ! Purchases! !!!!!150,000! ! ! TGAS! P240,000! ! ! Less:!End.!Inventory! !!!!!!!40,000! !!!200,000! Gross!Profit! ! P!!50,000! ! ! 9. The!purchases!of!G!has!a!list!price!of!P250,000;!terms!10,!5;!n/30.!To!record! the!purchase,!the!journal!entry!would!be! ! A.! Purchases! 213,750! ! ! ! Cash! ! 213,750! ! ! ! ! ! B.! Purchases! 212,500! ! ! ! Accounts!payable! ! 212,500! ! ! ! ! ! C.! Purchases! 213,750! ! ! ! Accounts!payable! ! 213,750! ! ! ! ! ! D.! Purchases!! 191,250! ! ! ! Accounts!payable! ! 191,250! ! Derivation:+ Invoice!price!(P250,000!x!0.90!x!0.95)! P213,750! ! ! ! ! ! ! ! !

10. M!purchased!on!account,!P150,000.!Inspection!of!merchandise!revealed!that! P20,000!worth!of!merchandise!are!defective.!M!received!a!credit!memo!from! supplier! for! P20,000! damage.! The! journal! entry! in! the! books! of! M! for! the! credit!memo!is!! ! A.! Cash! 20,000! ! ! ! Accounts!payable! ! 20,000! ! ! ! ! ! B.! Accounts!payable! 20,000! ! ! ! Purchase!returns! ! 20,000! ! ! ! ! ! C.! Accounts!payable! 20,000! ! ! ! Cash! ! 20,000! ! ! ! ! ! D.! Accounts!payable! 20,000! ! ! ! Accounts!payable! ! 20,000! ! 11. N!is!selling!at!list!price!of!P80,000;!5;!1/30;!n/60.!To!record!the!sales,!the! debit!would!be! A. Cash,!P76,000! B. Accounts!receivable,!P80,000! C. Accounts!receivable,!P75,240! D. Accounts!receivable,!P76,000! ! Derivation:! Invoice!price!(P80,000!x!0.95)! P76,000! ! 12. O!sold!merchandise!at!a!list!price!of!P150,000;!10;!1/10,!n/30.!If!the!account! is!collected!8!days!from!the!invoice!date,!O!will!receive! A. P148,500! B. P133,650! C. P135,000! D. P133,500! ! Derivation:! Cash!received!(P150,000!x!0.90!x!0.99)! P133,650! ! ! ! ! ! ! ! !

13. P! sold! merchandise! at! a! list! price! of! P250,000;! 10,! 5;! n/30.! Part! of! the! sale! amounting! to! P10,000! was! returned! due! to! defect.! The! amount! to! be! collected!by!P!is!! A. P205,200! B. P203,750! C. P204,000! D. P195,200! ! Derivation:+ ! Amount!collected!(P250,000!x!0.90!x!0.95)!–!P10,000! P203,750! ! 14. The! cost! of! sale! is! P250,000.! Total! purchases! amounted! to! P300,000! which! increased! the! total! goods! available! for! sale! to! P310,000.! The! ending! inventory!is! A. P10,000! B. P70,000! C. P50,000! D. P60,000! ! Derivation:+ ! TGAS! P310,000! Less:!COGS! !!!250,000! End.!Inventory! P!!60,000! ! 15. The!gross!profit!is!P100,000;!goods!available!for!sale,!P1,100,000;!beginning! inventory,! P100,000;! purchases! P1,000,000! and! sales! P1,000,000.! The! ending!inventory!is! A. P300,000! B. P200,000! C. P100,000! D. None! ! Derivation:+ + Sales! P1,000,000! Less:!Gross!profit! !!!!!!!!100,000! Cost!of!goods!sold! P!!!900,000! ! ! Beg,!inventory! P!!!100,000! Add:!Purchases! !!!!!1,000,000! Total!Goods!Available!for!Sale!(TGAS)! P1,100,000! Less:!Cost!of!goods!sold! !!!!!!!!900,000! End.!Inventory! P!!!200,000! !

! 16. The!following!data!pertains!to!the!inventory!of!Q:! ! Purchases! P1,200,000! Purchase!returns! 200,000! Purchase!discounts! 20,000! Freight-in! 250,000! Freight-out! 300,000! Cost!of!sales! 930,000! Actual!inventory!per!count! 275,000! ! The!actual!physical!count!indicates!a!(an)! ! A. shortage!of!P600,000.! B. Overage!of!P25,000.! C. Shortage!of!P25,000.! D. Overage!of!P325,000.! ! Derivation:+ ! Purchases! P1,200,000! Purchase!returns! (200,000)! Purchase!discounts! (20,000)! Freight-in! !!!!!!250,000! TGAS! P1,230,000! Cost!of!sales! !!!(930,000)! End.!Inventory!per!book! P!!!300,000! Actual!inventory!per!count! !!!(275,000)! Inventory!Shortage! P!!!!!25,000! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !

17. The!beginning!inventory!was!100!units!at!P1,000!per!unit.!Purchases!for!the! period!were!as!follows:! ! First!batch,!900!units!at!P1,100!per!unit! P99,000! Second!batch,!500!units!at!P1,200!per!unit! 600,000! ! Physical!count!at!the!end!of!the!period!was!50!units.!Under!FIFO!costing,!the! value!of!ending!inventory!would!be! ! A. P60,000! B. P55,000! C. P50,000! D. P45,000! ! Derivation:+ ! End.!Inventory!(50!units!x!P1,200)!! P60,000! ! !...