BKAL1013 (A172)

DUE DATE: 12 APRIL 2018

(TOPIC 5: ACCOUNTING FOR MERCHANDISING BUSINESS)

PART A: 20 MULTIPLE CHOICE QUESTIONS

1. Cost of merchandise sold would be classified as a (an):

A. asset.
B. expense.
C. liability.
D. revenue.

2. Freight costs incurred by the seller are recorded in the:

A. sales account.
B. cost of merchandise sold account.
C. transportation out account.
D. transportation in account.

3. A sales invoice included the following information: merchandise price, RM24,000;

transportation, RM1,000; terms 2/10, n60, FOB shipping point. Assuming that a credit
for merchandise returned of RM1,200 is granted prior to payment, that the
transportation is prepaid by the seller, and that the invoice is paid within the discount
period, what is the amount of cash received by the seller?

A. RM23,324
B. RM24,500
C. RM22,344
D. RM23,344

4. Merchandise with an invoice price of RM15,000 is purchased with terms of 3/10, n/45,
FOB shipping point. Transportation costs paid by the buyer were RM162. What is the
cost of the merchandise purchased if payment is made during the discount period?

A. RM14,712.00
B. RM14,707.14
C. RM15,162.00
D. RM15,000.00

5. When a corporation sells merchandise and the terms are FOB shipping point and pays
the shipping costs, the seller would record the transportation costs with the following
entry:

A. debit Accounts Receivable, credit Cash.

B. debit Cash, credit Accounts Receivable.
C. debit Accounts Receivable, credit Sales.
D. debit Merchandise Inventory, credit Accounts Payable.
 BKAL1013 (A172)

6. A merchandiser purchases inventory on account under a perpetual inventory system

with terms of 3/15, n/45. The merchandiser would :

A. Debit Purchase Discounts on date of purchase if the discount is not taken

B. Credit Inventory on date of payment if discount is taken
C. Debit Purchase Discounts on date of purchase if the discount is taken
D. Credit Inventory on date of payment if discount is not taken

7. Merchandise subject terms 2/10, n/ 30, FOB destination, is sold on account to a

customer for RM25,000. The purchaser returns RM1,000 of merchandise immediately
after the purchasing date. Assuming payment is made within the discount period, what
is the amount of cash discount allowable?

A. RM500
B. RM20
C. RM480
D. RM520

8. A purchase return or allowance under a perpetual inventory system is credited to:

A. Account Receivable
B. Account Payable
C. Purchases
D. Inventory

9. The major revenue of merchandiser is ______while the major expense(s) is (are) _____.

A. gross profit, operating expenses

B. sales revenue, cost of goods sold
C. sales revenue, operating expenses
D. income from operation, cost of goods sold

10. The sales discount is based on:

A. invoice price plus transportation costs.

B. invoice price less discount.
C. invoice price plus transportation costs less returns and allowances.
D. invoice price less returns and allowances.

11. The buyer is responsible for the shipping costs when the shipping is:

A. FOB shipping point

B. COD shopping point
C. FOB destination
D. COD destination
 BKAL1013 (A172)

12. Which of the following account would the seller debit when the purchaser takes
advantage of credit terms within the discount period?

A. Purchase Discount
B. Purchase Returns and Allowances
C. Sales Returns and Allowances
D. Sales Discount

13. Under a perpetual inventory system, the entry to record the cost of goods sold would
include a debit to:

A. Inventory and credit to Sales Revenue for the retail price of the inventory
B. Cost of Goods Sold and credit to Inventory for the retail price of the inventory
C. Cost of Goods Sold and credit to Inventory for the cost of the inventory
D. Inventory and credit to Sales Revenue for the cost of the inventory

14. In a perpetual inventory system, what accounts are credited when a customer returns
merchandise to the seller?

A. Sales Returns and Allowances and Accounts Receivable

B. Accounts Receivable and Cost of Merchandise Sold
C. Merchandise Inventory and Cost of Merchandise Sold
D. Sales Returns and Allowances and Merchandise Inventory

15. Credit terms are 3/12, n/30 indicates that the buyer is:

A. Allowed a 30% discount if payment is made within 12 days

B. Allowed a 12% discount if payment is made within 30 days
C. Allowed a 3% discount if payment is made within 12 days
D. Allowed a 3% discount if payment is made within 30 days

Use the following data for Questions 16 to 18.

MyGoodfellas Trading has the following information:

RM
Net sales 1,300,000
Gross purchases 910,000
Gross profit 520,000
Ending inventory 130,000
Sales return 13,000
Purchases returns 9,100
 BKAL1013 (A172)

16. What is the gross sales amount?

A. RM1,309,100
B. RM1,313,000
C. RM1,430,000
D. RM1,820,000

17. What is the net purchases amount?

A. RM900,900
B. RM780,000
C. RM897,000
D. RM919,100

18. What is the cost of goods sold?

A. RM780,000
B. RM757,900
C. RM770,900
D. RM1,277,900

19. If merchandised sold on account is returned, the seller may inform the buyer of the
reduction on the item by issuing:

A. an invoice
B. a receipt
C. a debit notes
D. a credit notes

20. Which of the following is a FALSE statement about a multiple-step income statement?

A. Operating expenses are often classified as selling and administrative expenses

B. There may be a section for operating assets
C. There may be a section for non-operating activities
D. There is a section for cost of goods sold
 BKAL1013 (A172)

Structured Question: (do please refer to your main textbook)

1. The following were selected from among the transactions completed by Aish Works
during December of the current year.

Dec 3. Purchased merchandise on account from Tania Enterprise, list price RM24,000,
trade discount 25%, term FOB shipping point, 2/10, n30, with prepaid
transportation cost of RM615 added to the invoice.

5. Purchased merchandise on account from Mama Enterprise, RM10,250, terms

FOB destination, 2/10, n30.

6. Sold merchandise on account to MelatiBorong, list price RM18,000, trade

discount 35%, terms 2/10, n30. The cost of merchandise sold was RM8,250.

7. Returned RM1,800 of merchandise purchased on 5 December from Mama

Enterprise.

13. Paid Tania Enterprise on account for purchase of 3 December, less discount.

15. Paid Mama Enterprise on account for purchase of 5 December, less return of
December 7 and discount.

16. Received cash on account from sale of 6 December to MelatiBorong, less

discount.

19. Sold merchandise on MasterCard, RM39,500. The cost of the merchandise sold
was RM23,700.

22. Sold merchandise on account to LCW Resources, RM11,300, terms 2/10, n30.
The cost of the merchandise sold was RM6,700.

23. Sold merchandise for cash, RM17,680. The cost of the merchandise sold was
RM9,100.

28. Received merchandise returned by LCW Resources from sale of 22 December,

RM2,000. The cost of the returned merchandise was RM1,100.

31. Paid MasterCard service fee of RM1,050.

REQUIRED:

Journalize the transactions.

 BKAL1013 (A172)

JOURNAL
Date Description Debit (RM) Credit (RM)
Dec.3 Merchandise Inventory 18615
Account Payable- Tania Enterprise 18615
5 Merchandise Inventory 10250
Account Payable- Mama Enterprise 10250
6 Account Receivable - Melati Borong 11700
Sales 11700
6 Cost of merchandise sold 8250
Merchandise Inventory 8250
7 Account Receivable - Mama Enterprise 1800
Merchandise Inventory 1800
13 Account Payable - Tania Enterprise 18615
Merchandise Inventory 360
Cash 18255
15 Account Payable - Mama Enterprise 8450
Merchandise Inventory 169
Cash 8281
16 Cash 11466
Sale Discount 234
Account Receivable - Melati Borong 11700
19 Cash 39500
Sales 39500
Cost of merchandise sold 23700
Merchandise Inventory 23700
22 Account Receivable - LCW Resources 11300
Sales 11300
Cost of merchandise sold 6700
Merchandise Inventory 6700
23 Cash 17680
Sales 17680
Cost of merchandise sold 9100
Merchandise Inventory 9100
28 Sale Return and Allowances 2000
Account Receivable - LCW Resources 2000
Merchandise Inventory 1100
Cost of Merchandise Sold 1100
31 Credit card expenses 1050
Cash 1050
 BKAL1013 (A172)

2. On 30 April 2018, the balances of the accounts appearing in the ledger of Headwinds
SdnBhd are as follows:
Cash RM18,300 Sales discounts RM9,375
Accounts receivable 72,125 Purchases 536,500
Inventory, 1/5/2017 87,725 Purchases return and
6,000
allowances
Office supplies 3,025 Purchase discounts 4,500
Prepaid insurance 4,500 Transportation in 10,900
Land 35,000 Salaries sales expense 156,250
Store equipment 170,775 Advertising expense 55,000
Accumulated depreciation Depreciation expense – store
55,900 5,900
– store equipment equipment
Office equipment 78,500 Delivery expense 9,000
Accumulated depreciation Miscellaneous selling
16,250 10,700
– office equipment expense
Accounts payable 27,825 Office salaries expense 100,000
Salaries payable 2,950 Rent expense 31,250
Unearned rent 8,300 Insurance expense 3,000
Notes payable 12,500 Office supplies expense 2,300
Mat Aman, Capital 190,050 Administrative expense 5,850
Mat Aman, Drawing 18,750 Rent revenue 6,250
Sales 1,106,450 Interest expense 750
Sales return and Depreciation expense – office
10,000 1,500
allowances equipment

The inventory as of 30 April 2018 was RM94,100.

REQUIRED:

(a) Prepare a statement of comprehensive income for Headwinds SdnBhd for the year
ended 30 April 2018.
(b) Prepare a statement of financial position for Headwinds SdnBhd as at 30 April 2018.
 BKAL1013 (A172)

Headwinds SdnBhd
Prepare a statement of comprehensive income for the year ended 30 April 2018.
RM RM RM
Sales 1,106,450
(-) Sales Discount 9,375
Sales return and allowances 10,000 19,375
1,087,075
Beginning Inventory 87,725
Purchase 536,500
(-) Purchase return and allowances 6,000
Purchase discount 4,500 10,500
613,725
(+) Transportation In 10,900
(-) Ending Inventory 94,100 530,525
Gross Profit 556,550

(+) Revenue
Rent Revenue 6,250
562,800
(-) Expenses
Salaries Sale Expense 156,250
Advertising Expense 55,000
Depreciation Expense - Store Equipment 5,900
Delivery Expense 9,000
Miscellaneous Selling Expense 10,700
Office Salaries Expense 100,000
Rent Expense 31,250
Insurance Expense 3,000
Office Supplies Expense 2,300
Administrative Expense 5,850
Interest Expense 750
Depreciation Expense - Office Equipment 1,500
381,500
Net Profit 181,300
 BKAL1013 (A172)

Headwinds Sdn. Bhd .

Statement of financial position for the year ended 30 April 2018
RM RM
Property, Plant and Equipment
Land 35000
Store Equipment 170775
(-) Accumulated Depreciation - Store Equipment 55900 114875
Office Equipment 78500
(-) Accumulated Depreciation - Office Equipment 16250 62250
212125
Current Asset
Office Supplies 3025
Cash 18300
Account Receivable 72125
Ending Inventory 94100
Prepaid Insurance 4500 192050
404175
Liabilities
Notes Payable 12500
Unearned Rent 8300
Account Payable 27825
Salaries Payable 2950
51575
Owner's Equity
Mat Aman, Capital 190050
(+)Net Profit 181300
(-) Mat Aman Drawing -18750 390100
441675
 BKAL1013 (A172)

TUTORIAL #3 DUE DATE: 12 APRIL 2018

MATRIC NO: 245634 GROUP: B POSITION NO: ______

NAME: HEAP KE XIN

ANSWER:

1. B 16. B

2. C 17. A

3. D 18. A

4. A 19. D

5. D 20. B

6. B 21. -

7. C 22. -

8. D 23. -

9. B 24. -

10. D 25. -

11. A 26. -

12. D 27. -

13. C 28. -

14. B 29. -

15. C 30. -