Financial Accouting Midterm Practice Part 3

38 Questions | Total Attempts: 46

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Midterm Quizzes & Trivia

Quizs 5 and 6Quiz 5 is from #1 to #37


Questions and Answers
  • 1. 
    When a merchandising business purchases goods for resale, those goods get recorded as
    • A. 

      Cost of goods sold on the income statement

    • B. 

      Cost of goods sold on the balance sheet

    • C. 

      Inventory on the balance sheet

    • D. 

      Raw materials on the balance sheet

  • 2. 
    Which term indicates that the buyer will be responsible for transportation charges for goods purchased?
    • A. 

      FOB destination

    • B. 

      Freight-in

    • C. 

      Transportation-in

    • D. 

      FOB shipping point

  • 3. 
    The following entry was taken from James Merchandising Company:Cost of goods sold $3,000Merchandise Inventory $3,000What affect does this transaction have on the accounting equation?
    • A. 

      Assets and equity will decrease

    • B. 

      Assets and equity will increase

    • C. 

      Assets will decrease and equity will increase

    • D. 

      None of the above

  • 4. 
    Sales revenues are usually considered earned when
    • A. 

      The goods leave the seller's business

    • B. 

      Cash is received from a sale on account

    • C. 

      A sales order has been received

    • D. 

      Legal ownership of goods has been transferred from the seller to the buyer

  • 5. 
    Selected account information from Aphrodite Corporation is presented below:Cost of Goods Sold $77,000 Sales $150,000Sales Returns & Allowances 13,000 Sales Discount 6,000Selling Expenses 15,000 Administrative Expenses 30,000Based on the information presented above for Aphrodite Corporation, the amount of net sales shown on the company's income statement would be
    • A. 

      $144,000

    • B. 

      $131,000

    • C. 

      $137,000

    • D. 

      $169,000

  • 6. 
    Gibbson Company sold inventory that cost $4,000 to Garrison Company for $6,000. The inventory was sold under the terms 1/10, n/30. The receivable was collected within the discount period. The goods were delivered FOB destination and freight costs of $200 were paid in cash. Based on this information alone (and assuming that the company uses a perpetual inventory system), what amount would Gibbson Company collect from garrison Company?
    • A. 

      $6,000

    • B. 

      $6,140

    • C. 

      $2,000

    • D. 

      $5,940

  • 7. 
    Boyd Company recorded the following transactions during 2006:Note: Boyd uses a perpetual inventory system.1. Started the period with $2,000 worth of merchandise inventory2. Purchased $4,000 worth of merchandise on account with the terms 3/10, n/4553. Paid $225 in shipping costs of goods purchased which were shipped FOB destination4. Returned $400 worth of damaged goods5. Paid for merchandise within the discount period and after the return of the merchandise6. Had $8,000 in sales for the period7. Ended the year with $492 worth of merchandiseBased on the record of transactions provided by Boyd Company, what was cost of goods sold for this period?
    • A. 

      $4,988

    • B. 

      $5,108

    • C. 

      $5,508

    • D. 

      $5,000

  • 8. 
    On June 6, 2006, Kohen Sales Company purchased merchandise on account for $1,900 with the terms 2/15, n/30. The goods were paid for within the discount period. On June 26, 2006, Kohen returned $200 worth of defective merchandise. If Kohen uses the perpetual inventory method, what entry would it post in the accounting records for the payment of the goods?
    • A. 

      Debit accounts payable for $1,900, credit merchandise inventory for $38 and credit cash for $1,862

    • B. 

      Debit accounts payable for $1,862 and credit cash for $1,862

    • C. 

      Debit accounts payable for $1,900, credit merchandise inventory for $1,862 and credit purchase discount for $38

    • D. 

      Debit accounts payable, credit merchandise inventory for $1,900

  • 9. 
    Which term indicates to a buyer that mechandise is free of transportation charges?
    • A. 

      Transportation-in

    • B. 

      FOB Destination

    • C. 

      Freight-In

    • D. 

      FOB shipping point

  • 10. 
    Since merchandise inventory is normally sold within one year or one operating cycle, it is reported on the balance sheet as
    • A. 

      Cost of goods sold inventory

    • B. 

      A current asset

    • C. 

      Work in process inventory

    • D. 

      Property plant and equipment

  • 11. 
    Sales revenue less cost of goods sold is called
    • A. 

      Net operating income

    • B. 

      Gross margin

    • C. 

      Contribution margin

    • D. 

      Net income

  • 12. 
    Which of the following accounts would most likely appear on the income statement for a merchandising company, but not on the income statement for a service company?
    • A. 

      Payroll Tax Expense

    • B. 

      Selling & Administrative Expenses

    • C. 

      Revenue

    • D. 

      Cost of Goods Sold

  • 13. 
    Gross profit is calculated by sales less
    • A. 

      Cost of goods sold

    • B. 

      Inventory

    • C. 

      Expenses

    • D. 

      Selling expenses

  • 14. 
    Since merchandise inventory is normally sold within one year or one operating cycle, it is reported on the balance sheet as
    • A. 

      Cost of goods sold inventory

    • B. 

      A current asset

    • C. 

      Work in process inventory

    • D. 

      Property plant and equipment

  • 15. 
    Sales revenue less cost of goods sold is called
    • A. 

      Net operating income

    • B. 

      Gross margin

    • C. 

      Contribution margin

    • D. 

      Net income

  • 16. 
    Sebastian Merfchandising purchased $1,000 worth of goods from Nemo Incorporated for cash. Sebastian returned $300 worth of those items after immediately realizing that it had purchased too much. How would Sebastian record the return of the goods assuming that the company uses a perpetual inventory system?
    • A. 

      Debit inventory, credit purchase returns

    • B. 

      Credit inventory, debit accounts payable

    • C. 

      Debit inventory, credit accounts payable

    • D. 

      Credit inventory, debit purchase returns

  • 17. 
    Boyd Company recorded the following transactions during 2006: Note: Boyd uses a perpetual inventory system. 1. Started the period with $2,000 worth of merchandise inventory 2. Purchased $4,000 worth of merchandise on account with the terms 3/10, n/455 3. Paid $225 in shipping costs of goods purchased which were shipped FOB destination 4. Returned $400 worth of damaged goods 5. Paid for merchandise within the discount period and after the return of the merchandise 6. Had $8,000 in sales for the period 7. Ended the year with $492 worth of merchandiseBased on the information provided by Boyd Company, its gross profit ratio (rounded) is:
    • A. 

      63%

    • B. 

      38%

    • C. 

      36%

    • D. 

      31%

  • 18. 
    Sebastian Merchandising purchased goods on acount from Nemo Incorporated. The goods were purchased FOB shipping point for $200. How would these freight charges be recorded in Sebastian's accounting records assuming the company uses a perpetual inventory system?
    • A. 

      Debit freight-expense, credit accounts payable

    • B. 

      Debit inventory and credit cash

    • C. 

      Debit freight-out, credit accounts payable

    • D. 

      They would not be included in Sebastian's accounting records.

  • 19. 
    Gibbson Company sold inventory that cost $4,000 to Garrison Company for $6,000. The inventory was sold under the terms 1/10, n/30. The receivable was collected within the discount period. The goods were delivered FOB destination and freight costs of $200 were paid in cash. Based on this information alone (and assuming that the company uses a perpetual inventory system), what would be the amount of gross margin that would show up on Gibbson's income statement?
    • A. 

      $1,800

    • B. 

      $2,000

    • C. 

      $1,740

    • D. 

      $1,940

  • 20. 
    Using a perpetual inventory system requires that each side be recorded in the accounting records immediately. In addition to the record of sale, a company must also make which of the following entries simultaneously?
    • A. 

      Debit merchandise inventory, credit cost of goods sold

    • B. 

      No additional entry is needed

    • C. 

      Debit cost of goods sold and credit merchandise inventory

    • D. 

      Credit purchases, debit merchandise inventory

  • 21. 
    Jacob Company purchased $200 worth of merchandise on account from Jones Company. How would Jones Company record this transaction in its accounting records assuming that it uses a perpetual inventory system?
    • A. 

      Debit accounts receivable and credit revenue, debit cost of goods sold and credit inventory

    • B. 

      Credit revenue and debit accounts receivable, debit inventory and credit cost of goods sold

    • C. 

      Credit accounts receivable and debit revenue, debit cost of goods sold and credit inventory.

    • D. 

      Debit cash and credit revenue, debit inventory and credit cost of goods sold

  • 22. 
    The gross sales for Jezzie Corporation in 2006 was $675,000. Gross profit from thsoe sales accounted to $270,000. Based on this information, the cost of goods sold and gross profit ratio for Jezzie Corporation is
    • A. 

      $270,000, 60%

    • B. 

      $405,000, 60%

    • C. 

      $405,000, 40%

    • D. 

      $270,000, 40%

  • 23. 
    Holland Company and Tilburg Company sell the same type of merchandise. The following represents information from their accounting records:Holland TilburgSales $1,300,000 $1,600,000Cost of Goods Sold 1,100,000 1,200,000Net Income 100,000 100,000Based on the information for both companies presented above, which of the following statements is true?
    • A. 

      Holland has higher operating expenses that Tilburg does.

    • B. 

      Tilburg has higher gross margin percentage than Holland does.

    • C. 

      Tilburg's products cost less than Holland's do.

    • D. 

      Holland has a higher gross margin percentage than Tilburg does.

  • 24. 
    Sebastian Company sold $750 worth of merchandise to Sam with the terms 2/10, n/30. In recording this sale, Sebastian company would include a
    • A. 

      Debit to accounts receivable for $750

    • B. 

      Debit to sales discounts for $15

    • C. 

      Credit sales for $735

    • D. 

      Credit to sales for $765

  • 25. 
    The discount period is a
    • A. 

      Specified amount and timing of payments that a customer agrees to in return for being allowed to purchase goods on account

    • B. 

      Period of time during which, if payment is made, a cash discount may be deducted from the invoice price

    • C. 

      Deduction in the invoice price granted to a customer due to a slight flaw in the product

    • D. 

      Deduction in the price of a product because of a sale

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