Question 1: The difference between net sales and cost of merchandise sold for a merchandising business is:
i) Sales.
ii) Net Sales.
iii) Gross Profit.
iv) Gross Sales.
Question 2: When purchases of merchandise are made on account then the transaction would be recorded with the given entry:
i) Debit Accounts Payable, credit Merchandise Inventory.
ii) Debit Merchandise Inventory, credit Accounts Payable.
iii) Debit Merchandise Inventory, credit Cash .
iv) Debit Cash, credit Merchandise Inventory.
Question 3: When a corporation sells merchandise and the terms are FOB shipping point and pays the shipping costs then the seller would record the transportation costs with the given entry:
i) Debit Cash, credit Accounts Receivable.
ii) Debit Accounts Receivable, credit Cash.
iii) Debit Accounts Receivable, credit Sales.
iv) Debit Merchandise Inventory, credit Accounts Payable.
Question 4: Which of the given would be reported on the retained earnings statement for the present year?
i) Dividends for the current year.
ii) Sales.
iii) Cost of merchandise sold.
iv) Merchandise inventory.
Question 5: The sales invoice comprised the given information: merchandise price, P12,000; transportation, P500; terms 2/10, n/eom, FOB shipping point. Supposing that a credit for merchandise returned of P600 is granted prior to payment, that the transportation is prepaid via the seller, and that the invoice is paid in the discount period, what is the amount of cash received by the seller?
i) 11,662
ii) 11,672
iii) 12,250
iv) 11,172
Question 6: Merchandise with an invoice price of P7,000 is purchased with terms of 2/10, n/30, FOB shipping point. Transportation costs paid through the seller were P125. Determine the cost of the merchandise purchased if payment is made throughout the discount period?
i) 6,860.00
ii) 6,982.50
iii) 7,000.00
iv) 6,985.00
Question 7: Cost of Merchandise Sold would be categorized as what type of account?
i) Asset
ii) Expense
iii) Liability
iv) Revenue
Question 8: Discount terms 2/10, n/30 mean that a 10% cash discount is available if payment is made in 30 days.
i) True
ii) False
Question 9: Sales Returns and Allowances is a contra-revenue account.
i) True
ii) False
Question 10: Ownership of the merchandise passes to the buyer whenever the merchandise is delivered to the shipper under F.O.B. Destination.
i) True
ii) False
Question 11: When credit terms of 1/10, n/30 are offered, the discount period is:
i) 1 day.
ii) 10 days.
iii) 20 days.
iv) 30 days.
Question 12: Freight costs incurred through the seller are recorded in the:
i) Sales account.
ii) Cost of merchandise sold account.
iii) Transportation In account .
iv) Transportation Out account.
Question 13: Which of the given would be categorized in an income statement as Other Income or Other Expense?
i) Transportation Out.
ii) Advertising Expense.
iii) Cost of merchandise sold.
iv) Interest Expense.
Question 14: The sales discount is based on:
i) Invoice price plus transportation costs.
ii) Invoice price less discount.
iii) Invoice price plus transportation costs less returns and allowances.
iv) Invoice price less returns and allowances
Question 15: MAyAr and Company sold P1,800 of merchandise on account to Oscar, Inc. on March 1 with credit terms of 2/10, n/30. Oscar returned P500 of the merchandise due to poor quality on March 3. If Oscar pays for the purchase on March 11, what entry does Myers make to record receipt of the payment?
i) Debit Cash, 1,764; credit A/R, 1,764.
ii) Debit Cash, 1,800; credit Sales Returns and allowances, 500; credit A/R, 1,300.
iii) Debit Cash, 1,274; debit Sales Discounts 26; credit A/R, 1,300.
iv) Debit Cash, 1,800; credit Sales Discounts 36; credit A/R, 1,764.