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DeVry NY ACCT 504 Week 4, Midterm Exam 4




1. Merchandising businesses that sell to retailers are known as;a. brokers;b. companies;c. wholesalers;d. service firms.;2. Which of the following companies would be most likely to use a perpetual inventory system?;a. grain company;b. supermarket;c. clothing store;d. jewellery dealer;3. A merchandiser that sells directly to consumers is a;a. retailer;b. wholesaler;c. broker;d. service enterprise.;4. Two categories of expenses in all merchandising companies are;a. cost of goods sold and financing expenses;b. operating expenses and sales;c. cost of goods sold and operating expenses;d. sales and cost of goods sold.;5. The primary source of revenue for a wholesaler is;a. investment income;b. service revenue;c. the sale of merchandise;d. the sale of plant assets the company owns.;6. The operating cycle of a merchandising company is;a. always one year in length;b. ordinarily longer than that of a service company;c. about the same as that of a service company;d. ordinarily shorter than that of a service company.;7. Sales revenue less cost of goods sold is called;a. gross profit;b. net profit (loss);c. operating expense;d. net sales.;8. After gross profit is calculated, operating expenses are deducted to determine;a. gross margin;b. net profit (loss);c. gross profit on sales;d. sales margin.;9. A perpetual inventory system would most likely be used by a;a. motor vehicle dealership;b. hardware store;c. juice bar;d. supermarket.;10. The primary difference between a periodic and perpetual inventory system is that a periodic system;a. keeps a record showing the inventory on hand at all times;b. provides better control over inventories;c. records the cost of the sale on the date the sale is made;d. determines the inventory on hand only at the end of the accounting period.;11. Under a perpetual inventory system, which of the following accounts would be used to record purchases?;a. Sales;b. Invoices;c. Cost of Goods Sold;d. Inventory;12. Under a perpetual inventory system, acquisition of merchandise for resale is debited to;a. the Inventory account;b. the Sales account;c. the Supplies account;d. the Cost of Goods Sold account.;13. A company using a perpetual inventory system that returns goods previously purchased on credit would;a. debit Accounts Payable and credit Inventory;b. debit Sales and credit Accounts Payable;c. debit Cash and credit Accounts Payable;d. debit Inventory and credit Accounts Payable.;14. Freight costs incurred by a seller on merchandise sold to customers will cause an increase;a. in the selling expenses of the buyer;b. in operating expenses for the seller;c. to the cost of goods sold of the seller;d. to a discount received account of the seller.;15. Hunter Company purchased inventory with an invoice price of $4,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period?;a. $4,000;b. $3,920;c. $3,600;d. $3,680;16. Sales revenues are usually considered earned when;a. cash is received from credit sales;b. an order is received;c. goods are transferred from the seller to the buyer;d. goods are invoiced to the customer.;17. Sales revenue;a. may be recorded before cash is collected;b. will always equal cash collections in a month;c. only results from credit sales;d. is only recorded after cash is collected.;18. The journal entry to record a credit sale is;a. Cash;Sales;b. Cash;Service Revenue;c. Accounts Receivable;Cost of goods sold;d. Accounts Receivable;Sales;19. When sales of merchandise are made for cash, the transaction should be recorded by the following entry;a. debit Sales, credit Cash;b. debit Cash, credit Sales;c. debit Sales, credit Cash Discounts;d. debit Sales, credit Sales Returns and Allowances.;20. A sales invoice is prepared when goods;a. are sold for cash;b. are sold on credit;c. sold on credit are returned;d. are faulty and written-down.;21. The Sales Returns and Allowances account is classified as a(n);a. asset account;b. contra asset account;c. expense account;d. contra revenue account.;22. As an incentive for customers to pay their accounts promptly, a business may offer its customers;a. a cash discount;b. a trade discount;c. a sales allowance;d. a sales return.;23. The credit terms offered to a customer by a business firm are 2/10, n/30, which means;a. the customer must pay the bill within 10 days;b. the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date;c. the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date;d. two sales returns can be made within 10 days of the invoice date and no returns thereafter.;24. Gross profit equals the difference between sales and;a. operating expenses;b. cost of goods sold;c. net profit;d. cost of goods sold plus operating expenses.;25. Expenses that are associated with sales are classified as;a. financial expenses;b. other expenses;c. selling expenses;d. administrative expenses.;26. Interest expense would be classified on an income statement under the heading;a. Other expenses;b. Financial expenses;c. Selling expenses;d. Cost of goods sold.;Section "Income Statement Presentation" ? Financial expenses are those associated with the financing of the firm?s operations and debt collection.;Use the following information to answer questions 27 through 28;Financial information is presented below;Operating expenses $ 45,000;Sales returns and allowances 13,000;Cash discount 6,000;Sales 150,000;Costs of goods sold 77,000;27. The amount of net sales on the statement of financial performance would be;a. $131,000;b. $137,000;c. $144,000;d. $150,000.;28. Gross profit would be;a. $60,000;b. $54,000;c. $76,000;d. $73,000.;29. The gross profit ratio is computed by dividing gross profit by;a. financial expenses;b. cost of goods sold;c. net sales;d. operating expenses.;30. The operating expenses to sales ratio is computed by dividing;a. operating expenses by gross profit;b. operating expenses by selling expenses;c. operating expenses by net sales;d. sales by operating expenses.;31. Z sold goods to X on credit at a price of $4,400 including GST. What is the correct accounting entry to record this transaction in Z?s books?;a. Debit Accounts Receivable $4,400, credit Sales $4,400;b. Debit Accounts Receivable $4,000, credit Sales $4,000;c. Debit Accounts Receivable $4,000, debit GST Collections $400, credit Sales $4,400;d. Debit Accounts Receivable $4,400, credit Sales $4,000, credit GST Collections $400;32. Under the perpetual inventory system what is the correct entry for the credit purchase of 10 electric guitars at $250 per guitar plus GST of $25 each.;a. Debit Inventory $2,750, credit accounts payable $2,500, credit GST $250;b. Debit Inventory $2,500, debit GST $250, credit Accounts Payable $2,750;c. Debit Inventory $2,750, credit Accounts Payable $2,750;d. Debit Accounts Payable $2,750, credit Inventory $2,500, credit GST $250;33. Consumers are not required to pay goods and services tax on the following item.;a. luxury motor vehicles;b. imported textiles;c. commercial rents;d. basic foods


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