Question 1

A perpetual inventory system gives a continuous record of the amount of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 2

If a merchandising company ends a period with a larger inventory than it owned at the beginning of the period, then,

Accepted Answer

A)   The cost of goods sold was larger than net purchases.
B)   Profit was larger than gross profit.
C)   The cost of goods sold was smaller than net purchases.
D)   The cost of goods available for sale was smaller than the cost of goods sold.
E)   Gross profit was larger than the cost of goods sold.F) None of the above
G) D) and E)

Question 3

Z-Mart did not take advantage of a supplier's offer of 2/10, n/30, and paid the invoice at the end of the month. By not taking the discount Z-Mart lost the equivalent of 18% annual interest on the amount of the purchase.

Accepted Answer

A) True 
 B)False

Question 4

Operating expenses are classified into two categories: selling expenses and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 5

Merchandise inventory is included in the Plant and Equipment section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 6

Gross profit is derived from

Accepted Answer

A)   Sales
B)   Beginning inventory
C)   Ending inventory
D)   Cost of goods sold
E)   All of the aboveF) B) and D)
G) B) and C)

Question 7

A periodic inventory system

Accepted Answer

A)   Gives more timely information
B)   Is widely used in practice
C)   Was historically used by companies that sold large quantities of low-value items
D)   Provides point of sale data
E)   Does not use a Purchases accountF) A) and B)
G) C) and D)

Question 8

A business sold some inventory that had cost $5,000 before taxes. The sale is subject to 5% goods and services tax (GST)  and 7% provincial sales tax (PST) . The business uses a perpetual inventory system. How much will be credited to the Merchandise Inventory account as a result of this sale?

Accepted Answer

A)   $5,000
B)   $5,300
C)   $5,350
D)   $5,600
E)   None of these answers is correct.F) C) and E)
G) C) and D)

Question 9

Describe the recording process for purchases of merchandise inventory using a perpetual inventory system.

Accepted Answer

Purchases net of trade discounts are add...

Question 10

A debit to Sales Returns and Allowances and a credit to Accounts Receivable mean that a customer may have returned merchandise.

Accepted Answer

A) True 
 B)False

Question 11

Merchandise inventory refers to products a company owns for purposes of selling to customers.

Accepted Answer

A) True 
 B)False

Question 12

Accounts and their balances from the trial balance of Blade Runner Store for the year ended December 31, 2020 are below.
 
-Calculate the gross profit ratio for the year ended December 31, 2020. Interpret the ratio.

Accepted Answer

Gross profit ratio = GP ratio ...

Question 13

The normal balance of the following accounts is a debit

Accepted Answer

A)   Sales discounts and interest revenue
B)   Sales returns and allowances and purchase discounts.
C)   Sales returns and allowances, cost of goods sold
D)   Transportation-in and income summary
E)   Cost of goods sold, and purchase discountsF) C) and D)
G) None of the above

Question 14

Z-Mart uses the perpetual inventory system and recorded the following journal entry:  The transaction was

Accepted Answer

A)   A purchase
B)   A return
C)   A return and payment of the account payable
D)   A payment of the account payable and recognition of a cash discount taken
E)   A purchase and recognition of a cash discount takenF) C) and E)
G) All of the above

Question 15

Accounts and their balances from the trial balance of Blade Runner Store for the year ended December 31, 2020 are below.
 
-Is Blade Runner Store using a periodic or perpetual inventory system? Explain.

Accepted Answer

A perpetual system is used sin...

Question 16

The purchaser usually records a purchase return by a credit memorandum.

Accepted Answer

A) True 
 B)False

Question 17

Transportation-in increases cost of goods purchased.

Accepted Answer

A) True 
 B)False

Question 18

Businesses normally get a full credit for both the goods and services tax (GST) and/or Harmonized Sales Tax (HST), and the provincial sales tax (PST) that they have paid.

Accepted Answer

A) True 
 B)False

Question 19

In a perpetual inventory system, the cost of inventory purchased is recorded in the Purchases account.

Accepted Answer

A) True 
 B)False

Question 20

Describe the recording process for sales of merchandise inventory using a perpetual inventory system.

Accepted Answer

Sales are recorded at list price less an...

Exam 5: Accounting for Merchandising Activities

Gross profit is derived from

Correct AnswerverifiedShow Answer

Describe the recording process for sales of merchandise inventory using a perpetual inventory system.

Correct AnswerverifiedSales are recorded at list price less an...View AnswerShow Answer

Z-Mart did not take advantage of a supplier's offer of 2/10, n/30, and paid the invoice at the end of the month. By not taking the discount Z-Mart lost the equivalent of 18% annual interest on the amount of the purchase.

Correct AnswerverifiedShow Answer

Describe the recording process for purchases of merchandise inventory using a perpetual inventory system.

Correct AnswerverifiedPurchases net of trade discounts are add...View AnswerShow Answer

Merchandise inventory refers to products a company owns for purposes of selling to customers.

Correct AnswerverifiedShow Answer

The purchaser usually records a purchase return by a credit memorandum.

Correct AnswerverifiedShow Answer

The normal balance of the following accounts is a debit

Correct AnswerverifiedShow Answer

Operating expenses are classified into two categories: selling expenses and cost of goods sold.

Correct AnswerverifiedShow Answer

A periodic inventory system

Correct AnswerverifiedShow Answer

Z-Mart uses the perpetual inventory system and recorded the following journal entry: The transaction was

Correct AnswerverifiedShow Answer

If a merchandising company ends a period with a larger inventory than it owned at the beginning of the period, then,

Correct AnswerverifiedShow Answer

Transportation-in increases cost of goods purchased.

Correct AnswerverifiedShow Answer

Businesses normally get a full credit for both the goods and services tax (GST) and/or Harmonized Sales Tax (HST), and the provincial sales tax (PST) that they have paid.

Correct AnswerverifiedShow Answer

A business sold some inventory that had cost $5,000 before taxes. The sale is subject to 5% goods and services tax (GST) and 7% provincial sales tax (PST) . The business uses a perpetual inventory system. How much will be credited to the Merchandise Inventory account as a result of this sale?

Correct AnswerverifiedShow Answer

Merchandise inventory is included in the Plant and Equipment section of the balance sheet.

Correct AnswerverifiedShow Answer

In a perpetual inventory system, the cost of inventory purchased is recorded in the Purchases account.

Correct AnswerverifiedShow Answer

Accounts and their balances from the trial balance of Blade Runner Store for the year ended December 31, 2020 are below. -Calculate the gross profit ratio for the year ended December 31, 2020. Interpret the ratio.

Correct AnswerverifiedGross profit ratio = GP ratio ...View AnswerShow Answer

Accounts and their balances from the trial balance of Blade Runner Store for the year ended December 31, 2020 are below. -Is Blade Runner Store using a periodic or perpetual inventory system? Explain.

Correct AnswerverifiedA perpetual system is used sin...View AnswerShow Answer

A debit to Sales Returns and Allowances and a credit to Accounts Receivable mean that a customer may have returned merchandise.

Correct AnswerverifiedShow Answer

A perpetual inventory system gives a continuous record of the amount of inventory on hand.

Correct AnswerverifiedShow Answer

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Sales are recorded at list price less an...
View Answer

Correct Answer
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Correct Answer
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Purchases net of trade discounts are add...
View Answer

Correct Answer
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Correct Answer
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Gross profit ratio = GP ratio ...
View Answer

Correct Answer
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A perpetual system is used sin...
View Answer

Correct Answer
verified

Correct Answer
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