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University of Alabama ACC 506 Chapter 3 Quiz 1)Which of the following would be considered as primarily a merchandising business? a

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University of Alabama

ACC 506

Chapter 3 Quiz

1)Which of the following would be considered as primarily a merchandising business?

a.            Martin’s Supermarket

b.            Sandridge and Associates Law Offices

c.             KPM Accounting and Tax Service

d.            West Consulting

 

2.            Use the following account numbers and corresponding account titles to answer the following question.

Which accounts would be reported on the balance sheet?

a.            Account numbers 3, 4, 8, and 9

b.            Account numbers 1, 3, 7, and 8

c.             Account numbers 1, 2, 4, and 5 d. Account numbers 1, 2, and 6

3.            The purpose of common size financial statements is to:

a.            Make comparisons between different time periods

b.            Make comparisons between firms of different sizes and between different periods

c.             Make comparisons between firms of different sizes

d.            Compare the amount of common stock to other types of stock

 

4.            What is the chief advantage of the period system?

a.            Better control over inventory

b.            Timely discovery of losses due to theft

c.             Immediate feedback on the inventory on hand at any time during the period

d.            Efficiency and ease of recording

5.            The Cost of Goods Sold is classified as:

a.            An asset

b.            A liability

c.             A contra asset d. An expense

 

 

6.            Use the following account numbers and corresponding account titles to answer the following question.

Which accounts would affect gross margin?

a.            Account numbers 3, 7, 8, and 9

b.            Account numbers 3, 4, 7, and 9

c.             Account numbers 2 and 9 d. Account numbers 3 and 9

7.            Which of the following account titles is normally used in a periodic inventory system?

a.            Purchase returns and allowances

b.            Purchases

c.             Transportation-in

d.            All of these answer choices are normally used

8.            Which of the following is considered a product cost?

a.            Salaries paid to employees of a retailer

b.            Transportation cost on goods shipped to customers

c.             Utility expense for the current month

d.            Transportation cost on goods purchased from suppliers

9.            A discount given to encourage prompt payment is called:

a.            A sales discount by the seller

b.            All of these answer choices are correct

c.             A purchase discount by the buyer

d.            A cash discount

 

10.          What do the credit erms, 2/15, n/30, mean?

a.            A 2% discount can be deducted if the invoice is paid after the 15th day following the sale, but before the 30th day

b.            A 2% discount can be deducted if the invoice is paid before the 15th day following the date of the sale

c.             A 15% discount can be deducted if the invoice is paid within 2 days following the date of sale

d.            A 2% discount can be deducted for a period up to 30 days following the date of sale.

11.          Gomez Company had beginning inventory of $2,600 and ending inventory of

$2,200. The cost of goods sold was $5,000. Based on this information, what is the amount of inventory that was purchased by Gomez Company?

a. $4,600

b. $5,000

c. $9,800

d. $7,200

 

12.          Ramirez Company returns merchandise previously purchased on account. It had not yet been paid for. Ramirez uses the perpetual inventory system. Which of the following answers reflects the effects on the financial statements of only the purchase return?

a.            Option B

b.            Option D

 

c.             Option A

d.            Option C

 

13.          Assume the perpetual inventory method is used.

•             The company purchased $12,500 of merchandise on account under terms 3/10, n/30.

•             The company returned $2,000 of merchandise to the supplier before payment was made.

•             The liability was paid within the discount period.

•             All of the merchandise purchased was sold for $19,000 cash.

What effect will the return of merchandise to the supplier have on the accounting equation?

a.            Assets and liabilities are decreased by $1,940

b.            None. It is an asset exchange transaction.

c.             Assets and liabilities are decreased by $2,000

d.            Assets and stockholders’ equity are decreased by $2,000

14.          Becker's Bookstore shipped merchandise FOB destination to a customer. If the transportation costs are paid in cash, which of the following choices reflects how this transaction will affect the company's financial statements?

a.            Option B

b.            Option D

c.             Option A

d.            Option C

 

15.          What effect will these freight-out costs have on the company's financial statements?

a.            Option A

b.            Option D

c.             Option B

d.            Option C

16.          Anchor Company sold merchandise with a cost of $560 to a customer for $890 on account. Due to an error, neither part of the related two-part transaction was recorded in the accounting records. What effects will the failure to make the necessary entries have on the company’s accounting equation?

a.            Total assets and total stockholders’ equity will be overstated

b.            The accounting equation will not be affected

c.             Total assets will be overstated and total stockholders’ equity will be understated

d.            Total assets and total stockholders’ equity will ve understated

 

17.          Assume the perpetual inventory method is used.

 

1)            The company purchased $12,200 of merchandise on account under terms 2/10, n/30.

2)            The company returned $1,700 of merchandise to the supplier before payment was made.

3)            The liability was paid within the discount period.

4)            All of the merchandise purchased was sold for $18,400 cash.

 

The amount of gross margin from the four transactions is:

a. $6,076

b. $8,110

c. $6,200

d. $8,144

18.          Garnet Company had beginning inventory of $300 and ending inventory of $200. Garnet Company had cost of goods sold amounting to $1,600. Based on this information, Garnet Company must have how much inventory available for

sale (i.e. Cost of Goods Available for Sale): a. $1,800

b. $1,400

c. $2,200

d. $1,600

19.          Galaxy Company sold merchandise costing $3,200 for $5,400 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

a.            Total assets and total stockholders’ equity decrease by $5,400

b.            Total assets and total stockholders’ equity increase by $2,200 c. Total assets and total stockholders’ equity decrease by $2,200

d. Total assets decrease by $5,400 and total stockholders’ equity is decreased by $3,200

20.          Hill Company uses the periodic inventory system. It records a transaction that increases the balances in its purchases and accounts payable accounts. Which of the following is true about Hill Company?

a.            The balance in the account will appear on the balance sheet at year end

 

b.            The manner in which this transaction was recorded indicates that Hill returned merchandise to a supplier

c.             The manner in which this transaction was recorded indicates that Hill purchased inventory on account

d.            When the related merchandise is sold, the purchases account will be decreased by the related cost of goods sold