Accounting Final Exam example #68135

If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30. ? T or F

When merchandise that was sold is returned, a credit to sales returns and allowances is made. ? T or F

Sales returns and allowances is a contra-revenue account. ? T or F

Sales Discounts is a revenue account with a credit balance. ? T or F

Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales. ? T or F

Sales to customers who use nonbank credit cards, such as American Express, are generally treated as credit sales. ? T or F

Retailers record all credit card sales as charge sales. ? T or F

The service fee that credit card companies charge retailers varies and the primary reason why some businesses do not accept all credit cards. ? T or F

A seller may grant a buyer a reduction in selling price and this is called a sale allowance. ? T or F

The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable. ? T or F

Merchandise Inventory normally has a debit balance. ? T or F

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount. ? T or F

Discounts taken by the buyer for early payment of an invoice are credited to Cash Discounts by the buyer. ? T or F

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory. ? T or F

Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. If payment is made within 10 days of the purchase, the entry to record to the payment will include a credit to Cash and a credit to Purchase Discounts. ? T or F

When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade discount. ? T or F

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts. ? T or F

Sellers and buyers are required to record trade discounts. ? T or F

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination. ? T or F

The abbreviation FOB stands for Free On Board. ? T or F

If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination. ? T or F

When the terms of sale are FOB shipping point, the buyer should pay the freight charges. ? T or F

If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight costs of $125, is paid within 10 days, the amount of the purchases discount is $70. ? T or F

The chart of accounts for a merchandise business would include an account called Delivery Expense. ? T or F

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to purchases. ? T or F

The seller may prepay the freight costs even though the terms are FOB shipping point. ? T or F

The seller records the sales tax as part of the sales amount. ? T or F

The buyer will include the sales tax as part of the cost merchandise purchased. ? T or F

Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB shipping point. ? T or F

Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory of the buyer. ? T or F

The accounts Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight In are found on the balance sheet. ? T or F

Which one of the following is not a difference between a retail business and a service business? a. In what is sold b. The inclusion of gross profit in the income statement c. Accounting equation d. Merchandise inventory included in the balance sheet

Net income plus operating expenses is equal to a. Cost of merchandise sold b. Cost of merchandise available for sale c. Net sales d. Gross profit

Generally, the revenue account for a merchandising business is entitled a. Sales b. Net sales c. Gross sales d. Gross profit

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? a. Gross profit b. Income from operations c. Net income d. Gross sales

The term "inventory" indicates a. Merchandise held for sale in the normal course of business b. Materials in the process of production or held for production c. Supplies d. Both (a) and (b)

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as a. Selling expenses b. General expenses c. Other expenses d. Administrative expenses

Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense? a. Selling expense b. Miscellaneous expense c. Administrative expense d. Other expense

The statement of owner's equity shows a. Only net income, beginning and ending capital b. Only total assets, beginning and ending capital c. Only net income, beginning capital and withdrawals d. All the changes in the owner's capital as a result of net income, net loss, additional investments, and withdrawals

Merchandise inventory is classified on the balance sheet as a a. Current Liability b. Current Assets c. Long-Term Asset d. Long-Term Liability

Which account is not classified as a selling expense? a. Sales Salaries b. Freight-Out c. Sales Discounts d. Advertising Expense

The inventory system employing accounting records that continuously disclose the amount of inventory is called a. Retail b. Periodic c. Physical d. Perpetual

When comparing a retail business to a service business, the financial statement that charges the most is the a. Balance Sheet b. Income Statement c. Statement of Owner's Equity d. Statement of Cash Flow

When comparing a retail business to service business, the financial statement that changes the least is the a. Balance Sheet b. Income Statement c. Statement of Owner's Equity d. Statement of Cash Flow

Gross profit is equal to a. Sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold b. Sales plus sales returns and allowances less sales discounts less cost of merchandise sold c. Sales plus sales discounts less sales returns and allowances less cost of merchandise sold d. Sales less (sales discounts and sales returns and allowances) less cost of merchandise sold

Where are selling and administrative expenses found on the multi-step income statement? a. Before gross profit b. After sales and before gross profit c. After net income before expenses d. After gross profit

Which of the following accounts has a normal debit balance? a. Account Payable b. Sales Returns and Allowances c. Sales d. Interest Revenue

If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a a. Sale invoice b. Purchase invoice c. Credit memo d. Debit memo

The arrangements between buyer and seller as to when payments for merchandise are to be made are called a. Credit terms b. Net cash c. Cash on demand d. Gross cash

In credit terms of 3/15, n/45, the "3" represents the a. Number of days in the discount period b. Full amount of the invoice c. Number of days when the entire amount is due d. Percent of the cash discount

Which of the following accounts has a normal credit balance? a. Sales Returns and Allowances b. Sales c. Merchandise Inventory d. Delivery Expense

The entry to record the return of merchandise from a customer would include a a. Debit to Sales b. Credit to Sales c. Debit to Sales and Allowances d. Credit to Sales and Allowances

Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as a. Sales on account b. Sales returns c. Cash sales d. Sales when the credit card company remits the cash

When merchandise is returned under the perpetual inventory system, the buyer would credit a. Merchandise Inventory b. Purchase Returns and Allowances c. Accounts Payable d. Depending on the inventory system used.

Which of the following accounts usually has a debit balance? a. Purchase Discounts b. Sales tax Payable c. Allowance for Doubtful Accounts d. Freight-In

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as a. FOB shipping point b. FOB destination c. FOB n/30 d. FOB buyer

If the seller is to pay the freight costs of delivering merchandise, delivery terms are stated as a. FOB shipping point b. FOB destination c. FOB n/30 d. FOB buyer

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. n/30 b. FOB shipping point c. FOB destination d. Consigned

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as a. Purchases discount b. Sales discount c. Trade discount d. Early payment discount

Who pays the freight costs when the terms are FOB shipping point? a. The ultimate customer b. The buyer c. The seller d. Either the seller or the buyer

Who pays the freight costs when the terms are FOB destination? a. The seller b. The buyer c. The customer d. Either the buyer or the seller

Which of the following accounts, will only be found in the chart of accounts of a merchandising company? a. Sales b. Accounts Receivable c. Merchandise Inventory d. Accounts Payable

Which of the following items would affect the cost of merchandise inventory acquired during the period? a. Quantity discounts b. Cash discounts c. Freight-in d. All of the above

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are a. Consigned b. n/30 c. FOB shipping point d. FOB destination

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. n/30 b. FOB shipping point c. FOB destination d. Consigned

Inventory shortage is recorded when a. Merchandise is returned by a buyer. b. Merchandise purchased from a seller is incomplete or short. c. Merchandise is returned to a seller. d. There is a difference between a physical count of inventory and inventory records.

Which account will be included in both service and merchandising companies closing entries? a. Sales b. Cost of Merchandise Sold c. Sales Discounts d. Sales Returns and Allowances

A merchandising business a. That uses a manual accounting system usually uses only two special journals b. That uses a computerized accounting system usually uses only five special journals c. Is required to use a computerized accounting system because of the volume of journal entries d. That uses a computerized accounting system usually use no special journals

Which of the following accounts will not be found on the Cost of Merchandise Sold section on the Income Statement? a. Purchases b. Freight In c. Sales Returns and Allowances d. Merchandise Inventory

Which of the following accounts should be closed to Income Summary at the end of the fiscal year? a. Merchandise Inventory b. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold