BAT Ch 5 Review

Which of the following statements is an advantage of a perpetual inventory system?

• It is not necessary to calculate and record the cost of goods sold with each sale.

• The perpetual inventory system provides better control over inventory, because shortages can be more easily identified.

• It is not necessary to do a physical count of the inventory in a perpetual inventory system.

• A perpetual inventory system results in less clerical work and is less costly than a periodic inventory system.

Which of the following statements is correct?

• If an inventory subsidiary ledger is used then it is not necessary to have a merchandise inventory account in the general ledger.

• An inventory subsidiary ledger is used to track the quantity of each inventory item; the merchandise inventory account in the general ledger is used to track the cost of each inventory item.

• It is common for companies to have a separate subsidiary ledger for each of their current assets.

• An inventory subsidiary ledger is used in a perpetual inventory system to organize and track the quantity and cost of individual inventory items.

A $750 purchase of merchandise inventory is made on June 13, terms 2/10, n/30. On June 16, merchandise costing $50 is returned. What amount will be paid as payment in full on June 22?

• $686

• $700

• $735

• $750

When goods are shipped with the freight terms FOB shipping point:

• the buyer pays the freight costs and debits Merchandise Inventory

• the buyer pays the freight costs and debits Freight Expense

• the seller pays the freight costs and debits Freight Out

• the seller pays the freight costs and debits Cost of Goods Sold

Discounts offered to customers for early payment of the balance due:

• will reduce the cost of the merchandise for the purchaser and increase the COGS for the seller

• reduce the cash paid by the purchaser, and the cash received by the seller, by the same amount

• are required by provincial law

• benefit the seller but generally do not benefit the purchaser

To record the sale of goods for cash in a perpetual inventory system:

• only one journal entry is necessary to record the COGS and reduction of inventory

• only one journal entry is necessary to record the receipt of cash and the sales revenue

• two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the COGS and reduction of inventory

• two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the COGS and sales revenue

Which of the following is a contra revenue account that normally has a debit balance?

• Sales Returns & Allowances

• Sales

• Freight Out

• COGS

The steps in the accounting cycle for a merchandising company are the same as those for a service company except:

• closing journal entries aren't required for a merchandising company

• a post-closing trial balance is not required for a merchandising company

• an additional adjusting journal entry for inventory may be needed in a merchandising company

• a multiple-step income statement is required for a merchandising company

Which of the following appears on both a single-step and a multiple-step income statement for a merchandising company?

• Merchandising Inventory

• Gross Profit

• Profit from Operations

• COGS

Net sales are $400, COGS is $310, operating expenses are $60, and other revenues are $5. What are the gross profit margin and profit margin?

• 7.5% and 8.8%

• 22.5% and 7.4%

• 22.5% and 8.8%

• 77.5% and 8.8%