Question

1. When a customer returns merchandise purchased on credit, the

A. None of these answer choices are correct

B. Seller should credit sales returns and allowances

C. Customer should credit accounts payable

D. Seller should credit accounts receivable

2. With regard to accounting for a merchandising company versus a service company, which of the following is FALSE.

A. There are just as many steps in the accounting cycle for both types of companies

B. Merchandising companies do not have inventory

C. Service companies do not show a cost of goods sold account on the income statements

3. With regard to the account used to record freight costs,

A. Fright-out is recorded when freight terms are FOB shipping point

B. Freight-out is a contra account to sales

C. Freight-out is added to coat of goods sold

D. Freight-out has a normal balance of credit

4. Which of the following accounts is NOT included in the computation of net sales?

A. Sales returns and allowances

B. Freight-out

C. Sales

D. Sales Discounts

5. A debit to sales returns and allowances is evidence of a

A. Return of goods originally purchased on account

B. Sale paid for with cash

C. Purchase of goods on account

6. Given the following information, compute the amount of cash finally paid by the customer

Oct. 22 — sales on credit, terms of 2/10, n/30 — $6,000

Oct. 27 $600 allowance granted due to some items being damages

Oct. 31 — Payment In full recurved from customer —$?

A. $5,628

B. $6,000

C. $5,280

D. $5,292

7. The ending inventory of large and company, which uses a periodic inventory system, was it understated $7,000 on December 31, 2015. Because of this error, 2015 net income was

A. Understated by $2,000

B. Understated by $7,000

C. Overstated by $5,000

D. Overstated by $7,000

8. The use of a cash register for cash receipts is an example of internal control principle of

A. Physical controls

B. Documentation

C. Segregation of duties

D. Independent internal verification

9. On January 5, EGN company purchased 11 all-terrain vehicles add a cost of $3,600 each. On February 12, they sold 8 vehicles for $4,600 per unit.

If EGN uses a perpetual inventory system, the journal entry to record the sale on February 12th would include all of the following EXCEPT:

A. A credit to inventory for $28,800

B. A debit yo the coat of goods sold for $28,800

C. A credit to sales revenue for $36,800

D. A credit to purchases for $28,800

10. Lack of agreement between the cash balance per bank and the cash balance per books is due to

A. Poor internal controls

B. Time lags, errors, collections and fees

C. Errors and a bang notices of service charges

D. Errors only

11. The FIFO inventory calculation results in

A. And inaccurate ending inventory costs

B. A higher income tax expense

C. A higher ending inventory cost

D. A higher cost of good sold when prices are rising

12. A petty cash fund

A. Does not require monitoring

B. Is only for special expenses

C. Has enough cash to allow advance payments for employees payroll

D. Is a small amount of cash on hand for purchases not needing advance approval

13. Foreman fabricators, Inc. has 10 units in the beginning inventory costing $30 each. It purchased 90 more for $24 each during the month. The company sold 80 units during the month. Using FIFO,

Cost of goods sold = $1,980

Ending inventory = $480

True or false?

14. Foreman fabricators, Inc. Has 10 units in beginning inventory costing $30 each. Your purchase 90 more for $24 each during the month. The company sold 80 units during the month. Calculate cost of good sold and ending inventory using weighted-average cost

Cost of goods sold = $492

Ending inventory = $1,968

True or false?

15. Forman fabricators, Inc. has 10 units in beginning inventory costing $30 each. It purchased 90 more for $24 each tournament. The company sold 80 units during the month. Calculate cost of goods sold in ending inventory using LIFO

Cost of good sold = $1,920

Ending inventory = $540

True or false?

16. Goods held on consignment

A. Should not be included in the owners inventory

B. A more current cost of goods sold

C. Lower income taxes during periods of inflation

D. Lower net income during periods of inflation

17. When merchandise costs are increasing, which inventory method will produce the lowest gross profit?

A. LIFO

B. Weighted average

C. FIFO

D. Not able to determine

Answer 1

Answer 1 : Correct answer is option D = seller should credit accounts receivable When customer returns the merchandise purchased on credit - customer will debit the accounts payable When sold on credit the entry is: accounts receivable a/c..Dr                        To sales Hence on returning the entry will be : Sales return a/c Dr               To accounts receivable a/c. Hence the correct answer is D Answer 2 : Correct answer is option B = Merchandising companies do not have inventory Merchandising companies deals with purchase and sale of goods. Therefore, they should have inventory. Service companies do not deal with goods and they only provide services. Therefore, they do not show cost of goods sold on the income statements. Answer 3 : Answer is option c = Freight out is added to cost ofgoods sold Freight costs are incurred when there is a delivery of goods to customer. It has debit balance and classified under cost of goods sold in income statement. Answer 4 : Answer is option B - Freight out. Freight out is part of cost of goods sold which is not be considered for calculating net sales. sales returns and discounts are to be deducted from gross sales.