A company which sells goods to customers is known as a A) proprietorship. B) corporation. C) merchandising company. D) service company.

Q 65

Which of the following companies would NOT be considered a merchandising company? A) Mountain Equipment Co-op B) Walmart C) Air Canada D) Microsoft

Q 66

A merchandiser differs from a service type business in that it A) sells goods to customers. B) has more employees. C) only operates in one country. D) requires more government regulation.

Q 67

Two categories of expenses in merchandising companies are A) cost of goods sold and financing expenses. B) operating expenses and financing expenses. C) cost of goods sold and operating expenses. D) sales and cost of goods sold.

Q 68

Which of the following statements is correct? A) Under a periodic system, the inventory account is only updated once per period. B) Under a perpetual system, the inventory account is only updated once per period. C) Cost of goods sold computed under a periodic system would be higher than under a perpetual system. D) The value of inventory computed under a periodic system would be lower than under a perpetual system.

Q 69

Sales revenue less the cost of goods sold equals A) operating expenses. B) gross profit. C) ending inventory D) profit.

Q 70

In a periodic inventory system, the inventory is adjusted A) each time inventory is purchased. B) each time inventory is sold. C) when inventory is counted at the end of the accounting period. D) at the end of each month.

Q 71

If a company determines cost of goods sold each time a sale occurs, it A) must have a computer accounting system. B) must have a service business. C) uses a periodic inventory system. D) uses a perpetual inventory system.

Q 72

The operating cycle of a merchandising company differs from that of a service company in that it A) is usually longer in days. B) is usually shorter in days. C) involves the purchase of inventory. D) involves the sale of merchandise.

Q 73

When contrasting a perpetual inventory system to a periodic system, the A) perpetual system requires less clerical work. B) perpetual system provides better control over inventories. C) periodic system requires more clerical work. D) periodic system provides better control over inventories.

Q 74

Operating expenses are A) expenses incurred to pay employees. B) expenses avoided to make a sale. C) expenses incurred in the process of earning revenue. D) expenses incurred to calculate gross profit.

Q 75

Which of the following statements is correct? A) A service company does not have Cost of Goods Sold account because it does not sell goods. B) A service company does have a Cost of Goods Sold account because it sells a service. C) A merchandising company does not have a Cost of Goods Sold account because it does not sell goods. D) A merchandising company does not have a Cost of Goods Sold account because it only sells a service.

Q 76

Which of the following is a true statement about inventory systems? A) Periodic inventory systems require more detailed inventory records. B) Perpetual inventory systems require more detailed inventory records. C) A periodic system requires cost of goods sold be determined after each sale. D) A perpetual system is specifically designed for companies that sell low unit-value items.

Q 77

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit A) Accounts Payable. B) Purchase Returns and Allowances. C) Purchase Discounts. D) Merchandise Inventory.

Q 78

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the A) Merchandise Inventory account. B) Cost of Goods Sold account. C) Purchase Returns and Allowances account. D) Purchases account.

Q 79

In a perpetual inventory system, cost of goods sold is recorded A) on a daily basis. B) at the end of the accounting period. C) on an annual basis. D) with each sale.

Q 80

Under a perpetual inventory system, the following entry would be made to record the purchase of inventory on account:

Q 81

Under a perpetual inventory system, the following entry would be made to record the return of merchandise purchased on account:

Q 82

In a perpetual inventory system, a merchandiser will record the purchase of individual inventory items in a (an) ____________ account. A) control B) subsidiary C) expense D) general ledger

Q 83

The detailed individual data from the inventory subsidiary ledger are summarized in the A) gross profit. B) cost of goods sold. C) merchandise inventory control account. D) accounts payable control account.

Q 84

GST/HST paid on the purchase of inventory is A) an additional cost that must be absorbed by the merchandise company. B) not included in inventory because it is recoverable. C) recorded as an operating expense on the income statement. D) recorded as additional freight costs and included in the calculation of the cost of goods sold.

Q 85

In a perpetual inventory system, the entry to record the purchase of merchandise inventory on account would require a A) debit to the Merchandise Inventory account and a credit to the Accounts Payable account. B) debit to the Accounts Payable account and a credit to the Merchandise Inventory account. C) debit to the Merchandise Inventory account and a credit to the Cash account. D) credit to the Merchandise Inventory account and a debit to the Accounts Receivable account.

Q 86

Sackville Company purchased merchandise from Amherst Company with freight terms of FOB shipping point. The freight costs will be paid by the A) seller. B) buyer. C) transportation company. D) buyer and the seller.

Q 87

Woodpoint Company purchased merchandise from Rockport Company with freight terms of FOB destination point. The freight costs will be paid by the A) seller. B) buyer. C) transportation company. D) buyer and the seller.

Q 88

Using a perpetual inventory system, the cost of freight in A) increases the cost of merchandise inventory. B) is always paid by the seller. C) is reflected in an expense account called Freight In. D) reflects the cost of delivering goods to customers.

Q 89

Wright Company recently made a $10,000 purchase from a major supplier. Shipping costs were $200, terms FOB shipping point. To record this purchase, Wright Company will need to debit the A) Merchandise Inventory account for $10,000. B) Cost of Goods Sold account for $200. C) Merchandise Inventory account for $10,200. D) Cost of Goods Sold account for $10,200.

Q 90

Westcock Company recently made a $20,000 purchase from a major supplier. Shipping costs were $400, terms FOB destination point. To record this purchase, Westcock Company will need to debit the A) Merchandise Inventory account for $20,000. B) Cost of Goods Sold account for $400. C) Merchandise Inventory account for $20,400. D) Cost of Goods Sold account for $20,400.

Q 91

If a purchaser returns goods purchased on account to the supplier under a perpetual inventory system, the purchaser would debit A) Cost of Goods Sold. B) Accounts Payable. C) Merchandise Inventory. D) Purchase Returns.

Q 92

In a perpetual inventory system, a separate account is maintained for each separate inventory item. These separate accounts are referred to as A) contra accounts. B) subsidiary accounts. C) control accounts. D) purchase accounts.

Q 93

Selling terms 2/10, net 30 indicates which of the following? A) The purchaser is required to pay the entire bill within 10 days. B) The purchaser can take a 20% discount if they pay within 30 days. C) The purchaser can take a 2% discount if they pay within 10 days. D) The purchaser can take a 2% discount if they pay within 30 days.

Q 94

The term n/30 means A) the entire bill must be paid within 30 days. B) the purchaser must pay 3% interest if their payment is late. C) the seller is offering a 30% discount for early payment. D) the seller is expected to deliver the goods within 30 days.

Q 95

Bendo Company receives a discount from its largest supplier for each order that exceeds 100 units. This discount is referred to as a A) sales discount. B) purchase discount. C) quantity discount. D) merchandise discount.

Q 96

FOB means A) Free on board. B) Freight on board. C) Freight on back order. D) Free on buyer.

Q 97

A company buys merchandise costing $25,000 with terms of 2/10 n/30. The adjustment to the Merchandise Inventory account, assuming the discount is taken, will be A) $250. B) $300. C) $500. D) $0.

Q 98

A company makes a purchase for $250 on December 1, terms 2/10 n/30. How much will the discount be if the amount is paid on December 16? A) $5 B) $0 C) $10 D) $25

Q 99

Harvest Company has an offer to purchase 100 seeds for $100, 200 seeds for $150 or 300 seeds for $175. This offer is called a(n) A) purchase discount. B) quantity discount. C) purchase return. D) special merchandise terms.

Q 100

The Sales Returns and Allowances account is classified as A) an asset account. B) a contra asset account. C) an expense account. D) a contra revenue account.