Chapter 8

Question 1

Operating Cycle of Merchandising or Trading Business

Answer 1

1. Purchase of Merchandise
2. Slaes of Merchandise
3. Collection of Accounts Receivable

Question 2

income account which is credited when goods or merchandise are sold
either for cash or on account basis

Answer 2

Sales

Question 3

a deduction from sales and is debited when
defective goods are returned by the buyer.

Answer 3

Sales Returns and Allowances

Question 4

a deduction from the regular price of goods that is granted for
early payment

Answer 4

Sales Discount

Question 5

consist of gross sales less sales returns,
allowances and discounts

Answer 5

Revenue from Sales or Net Sales

Question 6

derived by deducting cost of sales from net sales

Answer 6

Gross profit from sales

Question 7

accumulated cost of all the merchandise bought for resale during
an accounting period. It is debited when goods or merchandise are bought
either on account or on cash basis

Answer 7

Purchases

Question 8

deduction from purchases, credited when
defective merchandise are returned to the supplier

Answer 8

Purchase Returns and Allowances

Question 9

deduction from purchases for early or prompt payment of
merchandise bought on account; credited when the buyer fulfill the condition
of the discount term.

Answer 9

Purchase Discount

Question 10

debited if the business shoulders the
payment for the delivery of goods bought. This is added to purchases and a
part of cost of sales

Answer 10

Freight-In or Transport-In

Question 11

considered as one of the operating
expenses of the business; debited upon payment for the delivery of goods sold

Answer 11

Freight-Out or Transportation-Out

Question 12

consist of cost of merchandise on hand at the beginning of
the accounting period,

net cost of merchandise purchased including cost of
transporting the goods bought during the period and

cost of unsold
merchandise at the end of the accounting period.

Answer 12

Cost of Goods Sold

Question 13

consist of cost of merchandise on hand at the beginning of
the accounting period,

net cost of merchandise purchased including cost of
transporting the goods bought during the period and

cost of unsold
merchandise at the end of the accounting period.

Answer 13

Cost of Goods Sold

Question 14

consists of initial inventory of the business if
it is the first year of the business operation.

Answer 14

Merchandise Inventory

Question 15

If the business has been going on for
quite some time, the inventory beginning of the period consists of the unsold goods in
the previous year of operation

Answer 15

Merchandise Inventory Beginning

Question 16

includes those unsold goods at the current period
of operation. This will eventually be the beginning inventory of the next accounting
period.

Answer 16

Merchandise Inventory End

Question 17

Purchase of Merchandise and Related Considerations

Answer 17

Purchase Requisition
Canvassing
Purchase Order
Purchase Receipt

Question 18

Details the product requirements to be purchased in terms of :
Product Type, Specifications and Quantity

Answer 18

Purchase Requisition

Question 19

Outsourcing for the best possible price or bargain for the requested product

Answer 19

Canvassing

Question 20

Formal endorsement to purchase to the selected supplier

Answer 20

Purchase Order

Question 21

Formal endorsement to purchase to the selected supplier

Answer 21

Purchase Order

Question 22

Receipt of purchase goods

Answer 22

Purchase Receipt

Question 23

Journal Entries for a Merchandising Operation

Answer 23

A. Purchase of Merchandise and other Assets
B. Purchase Returns and Allowances
C. Discounts on Purchases
D. Cash Discount on Partial Payments
E. Trade Discount
F. Sales transactions
G. Sale of Assets other than Merchandise
H. Payments of account & expenses
I. Payments of Accounts

Question 24

two discounts granted to the purchaser of the goods

Answer 24

Cash Discount
Trade Discount

Question 25

means that the seller pays for the
transportation expenses of the merchandise up to the point of shipping

Answer 25

FOB (free on board) Shipping Point

Question 26

means freight is shouldered by the seller up to the point
of destination

Answer 26

FOB Destination

Question 27

The amount of payment given
to this note is equal to the face or principal value of the note.

Answer 27

Payment of Non-Interest-Bearing Note.

Question 28

the maker has to pay
the debt upon maturity of the note, the principal and the corresponding interest
from the issuance date to the due date of the note

Answer 28

Payment of Interest-bearing Note.