Quiz Week 6 MBA Professionals Section A Financial Accounting I

1. When merchandise inventory is purchased with credit terms of 2/10, n/60, the credit period is 60 days from date of the invoice.

True / False

2. Merchandise purchased on June 8 with credit terms of 2/10, n/30, must be paid sooner than with credit terms of n/10 EOM.

True / False

3. under the periodic inventory system, inventory shrinkage, theft, and spoilage are accounted for in a special account.

True / False

4. An inventory system in which the business has up-to-date data as to the quantity of goods on hand is called a periodic inventory system.

True / False

5. A deduction allowed from the invoice price of goods if payment is made within a specified period of time is called a trade discount.

True / False

6. Merchandise with a list price of $100, subject to a trade discount of 40 percent and sold with credit terms of 2/10, n/60, would cost the buyer $58.80 if payment is made within the discount period.

True / False

7. When goods are shipped under freight terms of FOB shipping point (FOB factory), the buyer of the goods pays the freight charges.

True / False

8. When a return of merchandise requires the buyer to notify the seller of the reduction in the invoice due to the return, the memorandum sent by the buyer is called a debit memorandum.

True / False

9. The cost of goods sold is determined by adding the cost of purchases to the beginning merchandise inventory and subtracting the ending merchandise inventory.

True / False

10. An income statement in which the details of the cost of goods sold are shown is called a single-step income statement.

True / False

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Quiz Week 6 MBA Professionals Section A Financial Accounting I

11. In a periodic inventory system, transportation charges for merchandise are added to net purchases to determine the cost of goods purchased.

True / False

12. In a perpetual inventory system, transportation charges are recorded with a debit to the merchandise inventory account.

True / False

13. Transportation-In, Freight-In, and Delivery Expense are all the same account.

True / False

14. Under a periodic system with inventory included in the closing entry procedure, the Credit column of the Income Statement columns of the work sheet will likely contain more than revenue account balances.

True / False

15. The purpose of including the Merchandise Inventory account (a real account) in the closing procedure is to close the beginning balance to the Income Summary account and enter the unsold balance in the Merchandise Inventory account (periodic system).

True / False

16. The steps in the accounting cycle are different for a merchandising business than they are for a service business.True / False

17. If net sales for the business totals $150,000, gross profit is $65,000, and net income is $40,000, then the cost of goods sold will total $25,000.

True / False

18. If net sales for the business total $50,000, gross margin is $24,000, and net income is $4,000, then the operating expenses for this company will total $20,000.

True / False

19. The income statement for the period shows a net loss for the year of $4,500. When the closing entries are prepared, this net loss will be closed into the Capital account of a proprietorship business with a debit to the Income Summary account and a credit to the Retained Earnings account.

True / False

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Quiz Week 6 MBA Professionals Section A Financial Accounting I

20. Operating expenses include general expenses, administrative expenses, and cost of goods sold.

True / False

21. Merchandise with a list price of $2,000 is sold with a trade discount of 30% and cash terms of 2/10, n/30. If the merchandise is paid for within the discount period, the total cost will be $1,372.

True / False

22. Merchandise is purchased FOB shipping point. The seller will pay the freight charges.

True / False

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