Question

1. Gore Inc. sold $7,200 of merchandise on account, terms 2/10,n/30. If the

customer paid the amount owed within the discount period, the entry to record the receipt of cash would include a:

1. debit to cash of $7,200
2. debit to sales discount of $144
3. credit to accounts receivable of $144
4. credit to accounts payable of $7,056

      2.   Cost of goods sold:

            A) Is another term for sales.

            B)   Is the term used for the cost of buying and preparing merchandise.

            C)   Are operating expenses.

            D) Is also called gross margin.

            E)   Both B and C.

      3.   Z-Mart had sales of $358,500. Its cost of goods sold was $143,400. Its gross margin was:

            A) $215,100.

            B)   $501,900.

            C)   $214,600.

            D) $354,700.

            E)   40%.

      4.   Z-Mart had sales of $569,300. Its gross profit was $239,106. Its cost of goods sold was:

            A) $808,406.

            B)   42%.

            C)   $330,194.

            D) $276,194.

            E)   $357,194.

      5.   Merchandise inventory:

            A) Is a long-term asset.

            B)   Is a current asset.

            C)   Can include supplies.

            D) Is an invested asset.

            E)   Both B and C.

      6.   A perpetual system:

            A) Gives a continual record of the amount of inventory on hand.

            B)   Uses a purchases account for the cost of new purchases.

            C)   Was historically used by companies that sold large quantities of low-balance items.

            D) Both A and B.

            E)   All of the above.

      7.   Z-Mart recorded the following journal entry:

           

            Accounts Payable                                            2,500

                  Merchandise Inventory                                                 50

                  Cash                                                                         2,450

           

            The transaction was:

            A) A purchase.

            B)   A return.

            C)   A return and payment of the account payable.

            D) A payment of the account payable and recognition of a cash discount taken.

            E)   A purchase and recognition of a cash discount taken.

     8.   Sales returns and allowances:

            A) Provide information about dissatisfied customers and the possibility of lost future sales.

            B)   Are recorded in separate contra-revenue accounts.

            C)   Are omitted from published statements.

            D) Both A and B.

            E)   All of the above.

      9.   A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

            A)   Should be a credit to Sales Returns and Allowances and a debit to Accounts Receivable.

            B)   Recognizes that a customer returned merchandise.

            C)   Requires a debit memorandum to recognize the customer's return.

            D)   Both A and B.

            E)   All of the above.

10. The buyer is responsible for the shipping costs when the shipping terms are:

1. FOB destination
2. COD destination
3. FOB shipping point
4. COD shipping point

Answer 1