1) The largest expense category on the income statement of most merchandising companies is: A) cost of goods sold B) other expenses C) selling expenses D) administrative expenses 2) The following data are for Upholstery Limited for the month of January: Beginning inventory $25,000 Net sales revenue 85,000 Net purchases 35,000 Gross profit percentage 30% What is the company’s estimated cost of goods sold for the month? A) $59,500 B) $25,500 C) $42,000 D) $15,000 3) Which of the following would be included in the Inventory account on a merchandising company’s balance sheet? A) advertising costs B) delivery costs C) shipping costs from the manufacturer to the merchandising company D) sales commissions 4) In a merchandising business, gross profit is equal to sales revenue minus: A) the sum of cost of goods sold, operating expenses, and prepaid expenses B) the sum of cost of goods sold and operating expenses C) cost of goods sold D) the sum of cost of goods sold and sales commissions 5) A perpetual inventory system offers all the following advantages except: A) inventory balances are always current B) it enhances internal control C) it is less expensive than a periodic system D) it helps salespeople determine whether there is a sufficient supply of inventory on hand to fill customer orders 6) Perpetual inventory records provide information helpful in making all the following decisions except: A) whether immediate delivery of merchandise is possible B) when to reorder C) how quickly items of merchandise are selling D) whether to extend credit to a customer 7) Computer software used in a perpetual inventory system: A) still requires an inventory count on hand annually B) completely eliminates the need to physically count inventory C) makes journal entries for inventory purchases unnecessary D) makes journal entries for the cost of goods sold unnecessary 8) Using a perpetual inventory system, which of the following entries would record the cost of merchandise sold on credit? A) Credit Sales and debit Accounts Receivable B) Debit Cost of Goods Sold and credit Purchases C) Debit Cost of Goods Sold and credit Inventory D) Debit Inventory and credit Cost of Goods Sold 9) Under a perpetual inventory system, which of the following entries would record the purchase of merchandise on credit? A) Debit Inventory and credit Accounts Payable B) Credit Purchases and Debit Cost of Goods Sold C) Credit Sales and debit Accounts Receivable D) Debit Purchases and credit Accounts Payable 10) If a company is using a perpetual inventory system, the balance in its inventory account three-quarters of the way through an accounting period would be equal to: A) the total of the beginning inventory plus goods purchased during the accounting period B) the inventory on hand at the beginning of the period C) the amount of inventory on hand at that date D) the amount of goods purchased during the period 11) A business offers credit terms of 2/15, n/30. These terms indicate that: A) the total amount of the invoice must be paid within 15 days of the invoice date B) a discount of 2% can be taken if the invoice is paid within 15 days of the invoice date C) the buyer can take a 2% discount if the bill is paid within 30 days of the invoice date D) no discount is offered for early payment 12) A company has gross revenue of $502,000; sales discounts of $2,900; and sales returns and allowances of $3,300. Net revenue is: A) $495,800 B) $498,700 C) $499,100 D) $502,000 13) On December 2, a customer returned merchandise, with a selling price of $1,200 purchased on account, to a department store. Ignoring cost of goods sold, which journal entry should the department store prepare? Assume no sales discount was offered for early payment. A) Debit Sales Revenue for $1,200 and credit Accounts Receivable for $1,200. B) Debit Sales Revenue for $1,200 and credit Cash for $1,200. C) Debit Sales Revenue for $1,200 and credit Sales Returns and Allowances for $1,200. D) Debit Sales Returns and Allowances for $1,200 and credit Accounts Receivable for $1,200. 14) Given the following data, what is cost of goods sold as determined under the FIFO method? Sales revenue 350 units at $35 per unit Beginning inventory 120 units at $15 per unit Purchases 400 units at $20 per unit A) $6,400 B) $5,250 C) $4,600 D) $7,000