1. Gross profit will result if: a. sales are greater than expenses b. sales are greater than cost of goods sold. c. operating expenses exceed gross margin. d. operating expenses exceed cost of goods sold. 2. Revenue accounts that normally have a credit balance include: a. Sales Revenue b. Sales Returns and Allowances c. Sales Discounts d. All of the above 3. You sold $2,100 of merchandise on credit on June 13, terms 2/10, net/30. A return of $100 is granted on June 16th. The amount received as payment in full on June 23 is: a. $2,058 b. $2,000 c. $1,960 d. $1,958 4. You bought a Ferrari in L.A. and it is being shipped to you here in OKC via the Acme Shipping Company. Acme Shipping assumes no responsibility for losses during shipping. Your invoice from the dealership reads "FOB shipping point", and the car is stolen on the way here. Who has legal title and bears the financial loss for the car? a. The dealership in Los Angeles b. Ferrari North America c. The dealership's insurance company d. You 5. One of your long-time clients calls you up and tells you your current shipment of goods to them is not up to the standards they expect from you. As this is the first time this client has complained, and the goods you shipped him came from a new vendor you just started using you tell him that you will knock 50% off his bill and he can keep the goods. Part of the journal entry to record this transaction will include: a. a debit to Sales Revenue. b. a debit to Sales Returns and Allowances. c. a debit to Merchandise Inventory. d. a debit to Accounts Receivable. 6. XYZ Company had sales of $100,000, sales returns of $3,500, sales allowances of $1,500, sales discounts of $3,000, operating expenses of $25,000 and cost of goods sold of $42,000. What is your gross profit? a. S50,000 b. $51,500 c. $54,500 d. $58,000 7. Which of the following is a contra account? a. Income Summary b. Cost of Goods Sold c. Sales Discounts d. Depreciation Expense 8. Your company purchased merchandise inventory for $10,000 on January 27. Terms are "4/7, net 30". After returning $500 worth of the merchandise on January 29, you pay your bill on February 1. What amount will be paid? a. $9,600 c. $9,300 b. $9,500 d. $9,120 9. Purposes for recording sales discounts and sales returns & allowances include: a. To use as a measurement of customer satisfaction with items sold. b. To determine the impact on profits from promotional sales. c. To monitor price reductions due to damaged or defective merchandise sold. d. All of the above are good reasons for recording discounts, and returns & allowances. PREPARE JOURNAL ENTRIES FOR VIRGINIA COMPANY FOR THE FOLLOWING TRANSACTIONS: 1. April 15: Purchased $5,000 of goods from Riley Corporation. Terms were 2/10, 1/60 FOB shipping point. 2. April 16: Virginia paid shipping costs of $250 to Old Dominion Freight on the goods purchased from Riley on April 15th. 3. April 20: Sold $4,500 of goods to Farris Corporation Terms of the sale were 1/15, 1/60, FOB shipping point. The goods cost Virginia $2,500. 4. April 21: Sold $3,200 of goods to Dunker. Inc. for cash: cost of the goods was $1,800. 5. April 24: Virginia Company paid for the goods purchased on April 15 6. April 25: Farris Corporation returned S540 of goods they purchased April 20h. The cost of the goods sold was $300. 7. April 26: Farris Corporation asked for a reduction of price on the goods sold to them on April 20th. Some of the goods were the wrong color. Virginia Company granted an allowance of $360 on the goods. 8. April 30: Purchased $6.000 of goods from Burch Company. Terms were 3/10, n/45, FOB destination. 9. May 1: Virginia Company received payment on the amount due from the Farris Corporation, net of all transactions. 10. May 13: Virginia Company paid for the goods purchased on April 30" GENERAL JOURNAL Date Account Titles and Explanation P.R. Debit Credit 1. If gross profit is $22,000, sales returns are $6,000, other expenses are $10,000 and sales are $68,000, then cost of goods sold is: a. $46,000 b. $40,000 c. $36,000 d. $30,000 Use the following information to answer questions 2 through 5: Beginning inventory is $10,000, merchandise purchases are $40,000, purchases discounts are $5,000, sales are $60,000, sales returns are $3,000, sales discounts are $1,000, other expenses are $8,000 and ending inventory is $20,000. 2. Cost of goods sold is: a. $50,000 b. S45,000 c. $30,000 d. $25,000 3. Net Sales are: a. S60,000 b. $57,000 c. $56,000 d. $51,000 4. Gross Profit is: a. $35,000 b. $31,000 c. $27,000 d. $26,000 5. Net Income before tax is: a. $35,000 b. $27,000 c. $23,000 d. $19,000 6. Ending inventory is $1,000, cost of merchandise purchased is $5,000; sales discounts are $1,000. If beginning inventory is $2,000, cost of goods sold is: a. $7,000 c. $5,000 b. $6,000 d. $4,000 7. Ending inventory is $1,000, cost of merchandise purchased is $5,000; purchase discounts are $1,000. If beginning inventory is $2,000, cost of goods sold is a. $7,000 c. $5,000 b. $6,000 d. $4,000 8. Net Sales are $1,500,000, Cost of Goods Sold is $900,000, Selling Expenses are $300,000, and General and Administrative expenses are $100,000. What is net income after taxes if the tax rate is 20%? a. $200,000 c. $40,000 b. $160,000 d. $35,200 Use the following information to answer questions 10 through 13: Sales $150,000 Beginning inventory $20,000 Purchase Returns $ 3,000 Purchases $ 80,000 Sales Allowances $ 2,000 Ending Inventory $10,000 Purchase Discounts $4,000 Sales Discounts $ 7,000 9. Net Sales for the period are: a. $159,000 b. $145,000 c. $143,000 d. $141,000 10. Cost of Goods Available for Sale are: a. $93,000 b. $89,000 c. $83,000 d. $81,000 11. Cost of Goods Sold is: a. $90,000 b. $87,000 c. $83,000 d. $73,000 12. Gross Profit for the period is: a. $58,000 b. $60,000 c. $65,000 d. $69,000