BKAN_CHAP 5 (up to Transportation costs)

A ________ is a business that sells merchandise, or goods, to customers.

• vendor

• manufacturer

• merchandiser

• wholesaler

Which of the following line items will appear on the income statement of a merchandiser but not of a service company?

• Salaries Expense

• Depreciation Expense

• Cost of Goods Sold

• Supplies expense

Gross profit is calculated as the difference between net sales revenue and ________.

• purchase expense

• cost of goods sold

• cost of merchandise inventory

• operating expenses

On the statement of financial position of a retailer, the Merchandise Inventory account ________.

• is not included because it is an income statement account

• is included in the current assets section

• is listed after prepaid assets

• represents the value of inventory that has been sold during the period

Merchandise inventory accounting systems can be broadly categorized into two types. They are:

• FIFO and LIFO

• wholesale and retail

• perpetual and periodic

• manufacturer and producer

Which of the following is NOT recorded in perpetual inventory system?

• units purchased and cost amounts

• units sold and sales and cost amounts

• timeliness of vendor deliveries

• the quantity of merchandise inventory on hand and its cost

Under the perpetual inventory system, when a buyer returns goods purchased on account, the ________ account is credited.

• Accounts Receivable

• Cost of Goods Sold

• Accounts Payable

• Merchandise Inventory

A company using the perpetual inventory system purchased inventory worth $21,000 on account with terms of 2/10, n/30. Defective inventory of $1,000 was returned two days later, and the accounts were appropriately adjusted. If the invoice is paid 9 days after the invoice date, the amount of the purchase discount that would be available to the company is ________.

•  $400

• $440

• $420

• $410

Answer explanation

= RM21K-1K

= 20K x 2%

= RM400

A company using the perpetual inventory system purchased inventory worth $520,000 on account with credit terms of 2/15, n/45. Defective inventory of $70,000 was returned 2 days later, and the accounts were appropriately adjusted. If the company paid the invoice 25 days later, the journal entry to record the payment would be ________.

• $520,000 debit to Accounts Payable and $520,000 credit to Cash

• $450,000 debit to Accounts Payable and $450,000 credit to Cash

• $520,000 debit to Accounts Payable, $511,000 credit to Cash, and $9,000 credit to Merchandise Inventory

• $459,000 debit to Accounts Payable, $9,000 credit to Merchandise Inventory, and $450,000 credit to Cash

Answer explanation

= RM520K - 70K

= RM450K

The terms of an invoice are 3/10, n/25. This means that a ________.

• discount of 10 percent is allowed if the invoice is paid within three days after the invoice date

• discount of 3 percent is allowed if the invoice is paid after 25 days after the invoice date

• discount of 25 percent is allowed if the invoice is paid within 10 days after the invoice date

• discount of 3 percent is allowed if the invoice is paid within 10 days after the invoice