In a periodic system, inventory balances and the cost of goods sold for the current period are determined:

	A.	at the time of sale.
	B.	on a frequent basis.
	C.	on the first day of each year.
	D.	when a physical inventory count is taken.

QUESTION 2

A purchase return of goods purchased on credit is recorded by the purchasing company as a debit to what account?

QUESTION 3

Which of the following is TRUE about freight in?

	A.	Freight in is added to the cost of merchandise inventory.
	B.	Freight in is a selling expense.
	C.	Freight in is an operating expense.
	D.	Freight in is deducted from Accounts payable.

QUESTION 4

A company that uses the perpetual inventory method purchases inventory of $1,000 on account with terms of 2/10, n/30. Defective inventory of $200 is returned 2 days later and the accounts are appropriately adjusted. If the company paid the vendor 25 days later, which of the following entries would be made to record the payment?

	A.	$800 debit to Accounts payable and an $800 credit to Cash
	B.	$784 debit to Accounts payable, a $16 debit to Inventory and an $800 credit to Cash
	C.	$16 debit to Inventory, an $800 debit to Accounts payable and an $816 credit to Cash
	D.	$800 debit to Accounts payable, a $16 credit to Inventory and a $784 credit to Cash

QUESTION 5

Which of the following assets MUST a merchandising company have for daily operations?

	A.	Accounts receivable
	B.	Prepaid insurance
	C.	Merchandise inventory
	D.	Equipment

QUESTION 6

A company that uses the perpetual inventory method purchases inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid the shipper $100 cash for freight in. Which of the following entries would be made to record payment to the vendor if the payment is made within 10 days?

	A.	$1,960 debit to Accounts payable and a $1,960 credit to Cash
	B.	$2,000 debit to Accounts payable, a $100 debit to Inventory and a $1,960 credit to Cash
	C.	$2,000 debit to Accounts payable, a $40 credit to Inventory and a $1,960 credit to Cash
	D.	$1,960 debit to Accounts payable, a $40 debit to Inventory and a $2,000 credit to Cash

QUESTION 7

In the credit terms of 2/10, n/30, what does the 2/10 mean?

	A.	The invoice must be paid in 2 days or a 10% late charge will be assessed.
	B.	The invoice was printed 2 days after the sale and is due in 10 days.
	C.	The goods shipped took 2 days to arrive and the charge was $10.00.
	D.	The purchaser may take a 2% discount if the invoice is paid in 10 days.

QUESTION 8

A company that uses the perpetual inventory method purchases inventory of $1,000 on account with terms of 2/10, n/30. Which of the following entries would be made to record the payment if it is made within 10 days?

	A.	$1,000 debit to Accounts payable and a $1,000 credit to Cash
	B.	$1,000 debit to Accounts payable, a $20 credit to Inventory and a $980 credit to Cash
	C.	$20 debit to Inventory, a $1,000 debit to Accounts payable and a $1,020 credit to Cash
	D.	$980 debit to Accounts payable, a $20 debit to Inventory and a $1,000 credit to Cash

QUESTION 9

FOB Destination means that the:

	A.	seller normally pays the transportation costs.
	B.	buyer normally pays the transportation costs.
	C.	buyer and the seller split the shipping costs.
	D.	shipping costs are billed to the buyer.

QUESTION 10

Avery Supplies uses a periodic inventory system. Please refer to the following data: Beginning inventory $3,000 Ending inventory 2,100 Purchases 24,000 Purchase discounts 800 Purchase returns & allowances 1,200 Freight in 4,200 How much is Cost of goods sold?

	A.	$26,000
	B.	$22,000
	C.	$27,100
	D.	$29,200