Quiz 2

Question 1

The inventory system employing accounting records that continuously disclose the amount of inventory is
called
A. retail
B. periodic
C. physical
D. Perpetual

Answer 1

D. Perpetual

Question 2

When comparing a retail business to a service business, the financial statement that changes the most is the
A. Statement of Financial Position
B. Income Statement
C. Statement of Changes in Owner’s Equity
D. Statement of Cash Flows

Answer 2

B. Income Statement

Question 3

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a
A. debit to sales
B. debit to Merchandise Inventory
C. credit to Merchandise Inventory
D. credit to Accounts Receivable

Answer 3

C. credit to Merchandise Inventory

Question 4

Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is
prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17;
the entry is made in the buyer’s accounts on November 18. The credit period begins what date?
A. November 12
B. November 15
C. November 17
D. November 18

Answer 4

B. November 15

Question 5

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on
account includes a
A. Credit to Sales Returns and Allowances
B. Debit to Merchandise Inventory
C. Credit to Merchandise Inventory
D. Debit to Cost of Goods Sold

Answer 5

B. Debit to Merchandise Inventory

Question 6

If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by
issuing a
A. Debit memo
B. Sales invoice
C. Purchase invoice
D. Credit memorandum

Answer 6

D. Credit memorandum

Question 7

The arrangements between buyer and seller as to when payments for merchandise are to be made are
called
A. Credit terms
B. Freight terms
C. Terms of endearment
D. COD

Answer 7

A. Credit terms

Question 8

The entry to record the return of merchandise from a customer would include a
A. Debit to Sales
B. Credit to Sales
C. Debit to Sales Returns & Allowances
D. Credit to Sales Returns & Allowances

Answer 8

C. Debit to Sales Returns & Allowances

Question 9

When merchandise is returned, the buyer would credit
A. Merchandise Inventory
B. Purchase Returns and Allowances
C. Accounts Payable
D. A or B depending on the inventory system used

Answer 9

D. A or B depending on the inventory system used

Question 10

If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as
A. FOB shipping point
B. FOB collect
C. FOB n/30
D. FOB destination point

Answer 10

A. FOB shipping point

Question 11

When goods are shipped FOB destination and the seller pays the transaction charges, the buyer
A. journalizes a reduction for the cost of the merchandise.
B. journalizes a reimbursement to the seller.
C. does not take a discount.
D. makes no journal entry for the transportation

Answer 11

D. makes no journal entry for the transportation

Question 12

A book of original entry that is used to record and post transactions of a similar type is a:
A. General ledger
B. Subsidiary ledger
C. General journal
D. Special journal

Answer 12

D. Special journal

Question 13

Which of the following can be recorded in the general journal when special journals are used?
A. Adjusting / correcting entries
B. Closing entries
C. Reversing entries
D. All of the above

Answer 13

D. All of the above

Question 14

The controlling accounts in the general ledger that summarizes the debits and credits to the individual
accounts in the customers’ ledger is called
A. Supplies
B. Accounts Payable
C. Accounts Receivable
D. Sales

Answer 14

C. Accounts Receivable

Question 15

A sales return for credit on account would be recorded in the:
A. General journal
B. Accounts receivable ledger
C. Sales journal
D. Cash receipts journal

Answer 15

A. General journal

Question 16

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to customer for ₱15,000. The
seller paid transportation costs of ₱1,000 and issued a credit memorandum for ₱5,000 prior to payment. What is
the amount of the cash discount allowable? ____________

Answer 16

15000 – 5000 = 10000 x 0.10 = ₱100

Question 17

A sales invoice includes the following information: merchandise price ₱4,000; transportation, ₱300; terms 1/10,
n/eom, FOB shipping point. Assuming that a credit for merchandise returned of ₱600 is granted prior to payment,
that the transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the
amount of cash received by the seller? ____________

Answer 17

4000 + 300 – 600 – 34 = ₱3,666

Question 18

Merchandise with an invoice price ₱ 4,000 is purchased on June 2 subject to terms of 2/10, n/30, FOB destination.
Transportation costs paid by the seller totaled ₱ 150. What is the cost of the merchandise paid on June 12,
assuming the discount is taken? _____________

Answer 18

4,000 x 0.98 = ₱3,920

Question 19

A retailer acquires merchandise with a catalog price of ₱ 10,000 less trade discounts of 25% and 10%, respectively.
The credit terms agreed upon is term 5/10, n/30. What amount will the retailer be able to save if it pays the
accounts in full within the discount period? _____________

Answer 19

10000 x 0.75 = 7,500 x 0.90 = 6,750 x 0.05 = ₱337.50

Question 20

A used machine with a purchase price of ₱ 77,000, requiring an overhaul costing of ₱ 8,000, installation costs of ₱
5,000, and a special acquisition fees of ₱ 2,000, would be recorded at a cost of ___________

Answer 20

77,000 + 8,000 + 5,000 + 2,000 = ₱92,000