Question

5. A seller that pays delivery costs for merchandise sold: a. includes the delivery costs in cost of goods sold. b. allocates the delivery costs between cost of goods sold and ending inventory. c. adds the delivery costs to ending inventory. d. records the delivery costs as a selling expense.

6. If your company uses the periodic method, you record a sale by: a. crediting Sales, but do not make an entry in Inventory. b. crediting Sales and debiting COGS. c. debiting Sales and crediting COGS. d. crediting Sales and debiting Inventory.

7. AcmeCo, which uses the periodic method, purchases inventory for $10,000, 2/10, n/30, debiting Purchases for $9,800 and crediting Accounts Payable for $9,800. If AcmeCo pays for the merchandise after the discount period has lapsed, you will: a. debit Accounts Payable for $10,000. b. debit Purchase Discounts Lost for $200. c. credit Cash for $9,800. d. credit Merchandise Inventory for $200.

8. MobilCo, which uses the periodic method, has beginning inventory of $100,000. During the fiscal year, it purchases $200,000 of inventory, FOB shipping point with the seller paying the $8,000 shipping costs. What is the balance in MobilCo's Purchases account at year end? a. $308,000 b. $300,000 c. $208,000 d. $200,000

9. If a company uses the periodic method, which of the following accounts should have a zero balance after the end-of-period adjusting entry is made? a. Freight-in b. Beginning Inventory c. Purchase Returns d. All of the above

Answer 1

Answer:

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Correct Answer D: record the delivery cost as a selling expense

Explanation: Delivery cost is selling or distribution cost which doesn’t pertained to product cost. Hence, it will not be allocated to product cost or at inventory cost. It must be recorded as delivery cost as expenses.

6-

Correct Answer A: crediting Sales, but do not make an entry in Inventory

Explanation: When company uses periodic inventory method then cost of goods sold is not determined at the time of each sale.

7-

Correct Answer B: debit Purchase Discounts Lost for $200

Explanation: In the periodic inventory method, cost of goods sold account is not used to record sales transactions/purchase transaction. Although, in the given case purchase must be recorded for $10,000 initially but company has not recorded then further purchases may record or debit purchase discount lost for $200

8-

Correct Answer B: $300,000

Explanation: Shipping cost of $8,000 is paid by seller which is free on board, hence become part of purchase cost.

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Correct Answer D: All of above

Explanation: All expenses related to purchase will part of purchase such freight in, Purchase return should be transferred to purchase account.