Merchandising Quiz []28.

When preparing closing entries under the periodic

inventory system, Sales and Purchase returns and allowances
1. The difference between revenues from sales and cost of are both closed in the same entry.
sales is operating income. 29. The worksheet of a merchandising company that uses the
2. Discounts offered to the buyer to encourage early payment perpetual inventory system will not have transportation in
are trade discounts. account.
3. The sales discounts account is a contra-income account 30. Freight in is an adjunct account to purchases.
and will have a debit balance.
4. A credit term “2/10, n/30” means that the buyer may II. Matching type
deduct 2% from the invoice if payment is made within 10
A. Purchase requisition G. Invoice
days from the end of the month.
B. Purchase order H. Officila Receipt
5. Purchases returns and allowances is a deduction from
I. Periodic Inventory
purchases. C. Credit Memo System
6. The purchase of equipment not for resale should be J. Perpetual Inventory
debited to the purchases account. D. Debit Memo System
7. If the seller is to shoulder the cost of delivery, the term is E. FOB Destination K. Purchase discount
stated as FOB destination. F. FOB Shipping Point L. Trade Discounts
8. The term freight prepaid or collect will dictate who Required:
shoulders the transportation costs From the list of terms above, select the one that relates to
9. The two main systems for accounting for merchandise are each of the following statements:
periodic and perpetual. 1. This is an authorization made by the buyer to the seller to
10. There is no need for a physical inventory count in the deliver the merchandise as detailed in the form.
perpetual inventory system. 2. It is the discount taken by the buyer for the early payment
11. The ending inventory of one period is the beginning of an invoice.
inventory of the next period. 3. The document issued by the seller authorizing the return of
12. Merchandise inventory could include goods that are in merchandise or the grant of an allowance.
transit 4. This document evidences the receipt of cash by the seller.
13. The income statement of a company that provides 5. This transportation arrangement passes ownership to the
services only will not have cost of goods sold. goods to the buyer only when the buyer receives the
14. Sales returns and allowances is described as a contra- merchandise.
revenue account. 6. Under this inventory system, revenues from sales are
15. A physical inventory is usually taken at the end of the recorded when sales are made, but no attempt is made on
accounting period. the sales date to record the cost of goods sold.
16. Transportation out is included in the cost of goods sold 7. Under this inventory system, both the sales amount and
calculation. the cost of goods sold amount are recorded when each item
17. Advertising expense appears as a selling expense on the of merchandise is sold.
income statement. 8. The document prepared buy the seller of goods and sent to
18. Transportation in is considered a cost of merchandise a buyer detailing the specifics of a sale.
purchased. 9. This discount encourages the buyers to purchase goods
19. When the terms of sale include a sales discount, it usually because of markdowns form the list price
is advisable for the buyer to pay within the discount period 10. This is the shipping term if the buyer shoulders the
20. FOB shipping point means that the seller incurs the shipping costs.
shipping costs.
21. The function of expense method reports gross margin and III. Problem Solving:
income from operations. 1. Replace the lettered blanks with the appropriate amounts.
22. The excess of gross profit over operating expenses is 1 2 3 4 5
called operating profit. Net Sales a d 250,000 290,000 400,000
23. The closing entry for transportation in debits purchases Inventory,
and credits income summary. Beg. b. 50,00 70,000 j 120,000
24. The sales returns and allowances account has a normal Net cost of
debit balance. purchases 80,000 e g 160,000 390,000
25. The purchases account is closed to the merchandise Goods
Available for
inventory account.
sale 110,000 160,000 h k m
26. Both transportation in and transportation out accounts Inventory,
are closed by crediting the accounts. end 40,000 f 30,000 70,000 n
27. In the income statement, operating expenses are Cost of Good
classified as selling expenses, administrative expenses and sold c 140,000 230,000 l 380,000
other operating expenses. Gross Profit 50,000 40,000 i 160,000 0