Acctg. 211 – Ch. 5 Practice Exam

which of the following line items will appear on the IS of a merchandiser but not of a service company?
depreciation exp, salaries exp, supplies inventory, cost of goods sold

cost of goods sold (service companies dont sell goods, they provide services)

the term "inventory" for a merchandiser refers to

goods help for sale to customers

an entity that buys goods and sells them to customers at a markup is a

merchandiser

gross profit (GP) is calculated as the difference between net sales revenue and ___

COGS

the main expense of a merchandiser is

COGS

____ are the expenses that occur in an entity’ major line of business

operating expenses

merchandise inventory acctg systems can be broadly categorized into 2 types:

perpetual and periodic

on jan 21 2014, bessant inc received merch. from mullies inc. on that date, it found a few of these goods to be damaged. on jan 22, it returned the damaged goods to the seller. such returns will be treated as _____ by bessant.

purchase returns

under the perpetual inv. system, when a wholesaler returns the goods purchased on acct, the _____ acct. is credited.
merch. inv., acct. payable, AR, COGS

merchandise inventory

the term "freight out" refers to

transportation cost on sales

VB specialty foods, a grocery merchandiser, purchased goods and paid transportation to bring them to the company warehouse. the transportation cost is known as:

freight in

what does "2/10" mean w respect to "credit terms of 2/10. n/30"?

a discount of 2% will be allowed if invoice is paid within 10 days from the date of the invoice

which is true of freight in?

it’s an admin. exp.;
it’s the transportation cost on purchases;
it’s a selling expense;
it’s the transportation cost on sales

it’s the transportation cost on purchases

if goods are sold on terms FOB shipping point, the _____

buyer normally pays the transportation costs

the terms of an invoice are 3/10, n/25. that means that a _____

discount of 3% is allowed if the invoice is paid within 10 days

an invoice for an amoun of $600 for merch purchased is showing 2/15, n/30 as terms of credit. if the invoice is paid on or before the 15th day, the amount to be paid is:
$612;
$600;
$588;
$615

$588 600 * .02 = 12 600 – 12 = 588

under which of the following terms will the buyer be required to pay transportation costs?

FOB shipping point

FOB destination refers to a situation where title to goods while in transit vests with the ____

seller

***under the perpetual inventory system, discounts taken on an invoice by the buyer would be:
debited to COGS;
credited to merch inv;
debited to merch inv;
credited to COGS

credited to merchandise inventory

a company ships goods to a customer, and pays transportation costs. to the seller, the transportation costs so paid are known as:

freight out

a company has purchased inventory and received an invoice that requires the buyer to pay the transportation costs for delivering the merchandise. the terms in this case are:

FOB shipping point

*** the purpose of reviewing FOB terms on the invoice is to:
calculate the amount of freight payable;
to decide and conform the transporter;
identify the person liable to pay freight;
to locate the transporter

identify the person liable to pay freight

a company sold merchandise with a cost of $221 for $350 on account. the seller uses the perpetual inventory system. the entry to record the cost of merchandise sold would include:

a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $221

what is true of net sales revenue

it is calculated by deducting sales discounts and sales returns and allowances from sales

the normal balances of Sales, Sales Discounts, and Sales Returns and Allowance are:

credit, debit, and debit, respectively

under a perpetual inventory system, merchandise returned by a customer to the seller is recorded as a ____ in the books of a seller

sales return

michelin jewelers uses the perpetual inventory system. on april 2, michelin sold merchandise with a cost of $5,500 for $9000 to a customer on account w terms 3/15, n/30. which of the following journal entries correctly records the sales revenue?

AR (debit) 9000 Sales Rev. (credit) 9000

a merchandiser sold merch inv on account. the journal entry to record sales allowances in the books of a merchandiser using the perpetual inventory system would be _____

sales returns and allowances (debit) AR (credit)

under the perpetual inv system, the journal entires to record sales returns (the original sale was on account) would be _____

sales returns and allowances (debit) AR (credit) Merch Inv. (debit) Cogs (credit)

the sales discounts account is a contra account to the

sales revenue account

gross profit is calculated as

total net sales revenue less cost of goods sold

delivery expense is a(n) ______

operating expense

gross profit represents the mark-up on _____

merchandise inventory

under the perpetual inv system, the journal entry to record cost of goods sold when a product is sold is ____

cost of goods sold (debit) merch inv (credit)

the inventory account balance is $50,000. an actual count of inventory reveals that actual inventory is $43,000. which would be included in the adjusting entry? (assume perpetual inv system)

a $7,000 credit to merchandise inventory

the merch inv. account of a company shows a balance of $50,000 but a physical count of inv shows $48,000. which entry is required to record the shrinkage? (Assume perpetual)

cost of goods sold (debit) 2,000 merch inv. (credit) 2,000

the revenue, expenses, Sales Returns and Allowances, and Sales Discounts will be closed via the _______

Income Summary account

the general ledger shows a balance of $67,900 in the merch inv. account at the end of the period. the physical inventory count shows inventory of $65,300. the adjusting entry includes a ______.

debit to cost of goods sold and a credit to merchandise inventory for $2,600.

the income summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. which of the following is to be credited to close the income summary account?

Retained Earnings

sales rev: 230,000
cogs: 150,000
int. rev: 10,000
operating exps. 42,500
sales discounts: 20,000
sales returns and allowances: 5,000

calculate operating income:
12,500
230,000
67,500
35,000

$12,500 operating income = GP – operating expenses GP = net sales rev – cogs 230000 – 20000 – 5000 = 205000 net sales rev 205000 – 150000 = 55000 GP 55000 – 42500 = 12,500 OI

which is subtracted from Net Sales Revenue to arrive at Gross Profit on a multi-step income statement?

cost of goods sold

on a multi-step income statement, the operating expenses are subtracted from ____ to arrive at operating income

gross profit

merchandise inventory and cost of goods sold appear

on the balance sheet and income statement, respectively.

which is added to operating income to arrive at net income?

interest revenue

which is the correct order of subtotals on a multi-step IS?

Gross Profit, Operating Income, Net Income

which of the following is shown on a multi-step IS, but not on a single-step IS?

gross profit

*** in a multi-step income statement, which of the following items is excluded from the calculation of operating income?
interest expense; administrative expense; selling expense; sales revenue

interest expense

what is the correct formula for calculating gross profit percentage?

Gross Profit / Net Sales Revenue

the gross profit percentage is one of the most important measures of

profitability

which is true of the gross profit percentage?

the GP Percentage is one of the most carefully watched measures of profitability