Tutorial 3

Topic: Accounting for Merchandising Business

Due Date: 25 April 2013 (Thursday) 12 pm (noon).

1. Credit terms are 3/12, n/30 indicates that the buyer is:

A. Allowed a 30% discount if payment is made within 12 days

B. Allowed a 12% discount if payment is made within 30 days
C. Allowed a 3% discount if payment is made within 12 days
D. Allowed a 3% discount if payment is made within 30 days

2. A merchandiser purchases inventory on account under a perpetual inventory system

with terms of 3/15, n/45. The merchandiser would :

A. Debit Purchase Discounts on date of purchase if the discount is not taken

B. Debit Purchase Discounts on date of purchase if the discount is taken
C. Credit Inventory on date of payment if discount is not taken
D. Credit Inventory on date of payment if discount is taken

3. Merchandise subject terms 2/10, n/ 30, FOB destination, is sold on account to a

customer for RM15,000. The purchaser returns RM2,000 of merchandise within the
discount period. Assuming payment is made within the discount period, what is the
amount of cash discount allowable?

A. RM300
B. RM260
C. RM400
D. RM150

4. A purchase return or allowance under a perpetual inventory system is credited to:

A. Inventory
B. Account Receivable
C. Account Payable
D. Purchases

5. The major revenue of merchandiser is _________ while the major expense(s) is (are)
____________.

A. sales revenue, cost of goods sold

B. gross profit, operating expenses
C. sales revenue, operating expenses
 D. income from operation, cost of goods sold

6. The buyer is responsible for the shipping costs when the shipping is:

A. FOB shipping point

B. COD shopping point
C. FOB destination
D. COD destination

7. Which of the following account would the seller debit when the purchaser takes
advantage of credit terms within the discount period?

A. Purchase Discount
B. Purchase Returns and Allowances
C. Sales Returns and Allowances
D. Sales Discount

8. Under a perpetual inventory system, the entry to record the cost of goods sold would
include a debit to:

A. Cost of Goods Sold and credit to Inventory for the cost of the inventory
B. Inventory and credit to Sales Revenue for the retail price of the inventory
C. Cost of Goods Sold and credit to Inventory for the retail price of the inventory
D. Inventory and credit to Sales Revenue for the cost of the inventory

9. If the shipping terms are FOB shipping point and the freight bill is RM650, the
purchaser would record payment with a debit to:

A. Purchase Discounts and credit to Inventory for RM650

B. Inventory and credit to Cash for RM650
C. Inventory and credit to Purchase Discount for RM650
D. Accounts Payable and credit to Inventory for RM650

10. When goods are shipped under the FOB destination term, the buyer would:

A. Debit Inventory for the amount of the transportations charges

B. Make no journal entry for the transportation charges
C. Debit Freight-in for the amount of the transportation charges
D. Debit Delivery Expenses for the amount of the transportation charges

11. Two categories of expenses in merchandising companies are:

A. operating expenses and financing expenses

B. cost of goods sold and financing expenses
C. cost of goods sold and operating expenses
D. sales and operating expenses

12. Under a perpetual inventory system, purchase of goods is debited to the:

A. inventory account
B. supplies account
C. cost of goods sold account
D. purchase account

13. Lie Company sells goods on account for RM14,500 to Ida Company with credit term
2/10, n/30. The goods sold had cost RM10,000. Which of the following entries does
Lie Company make to record this sale if the company uses the perpetual inventory
system?

Debit (RM) Credit (RM)

A. Accounts Receivable 10,000

Sales 10,000

Cost of Goods Sold 14,500

Inventory 14,500

B. Accounts Receivable 14,500

Sales 14,500

C. Accounts Receivable 10,000

Sales 10,000

D. Accounts Receivable 14,500

Sales 14,500

Cost of Goods Sold 10,000

Inventory 10,000

14. If a company determines cost of goods sold each time a sale occurs, it:

A. uses a combination of the perpetual and periodic inventory systems

B. uses a perpetual inventory system
C. must have a computer accounting system
D. uses a periodic inventory system

Use the following data for Questions 15 to 17.

MyGoodfellas Trading has the following information:

RM
Net sales 1,000,000
Gross purchases 700,000
Gross profit 400,000
Ending inventory 100,000
Sales return 10,000
Purchases returns 7,000

15. What is the gross sales amount?

A. RM1,007,000
B. RM1,010,000
C. RM1,100,000
D. RM1,400,000

16. What is the net purchases amount?

A. RM600,000
B. RM690,000
C. RM693,000
D. RM707,000

17. What is the cost of goods sold?

A. RM300,000
B. RM400,000
C. RM600,000
D. RM900,000

18. Herry Pottery Maker Enterprise purchased goods having a list price of RM36,000, a
trade discount of 30%, and a cash discount of 5%. The cash payment to settle the
account within the discount period is:

A. RM23,400
B. RM23,940
C. RM25,200
D. RM34,200

19. If merchandised sold on account is returned, the seller may inform the buyer of the
reduction on the item by issuing:

A. an invoice
B. a receipt
 C. a credit note
D. a debit note

20. Which of the following is a FALSE statement about a multiple-step income

statement?

A. Operating expenses are often classified as selling and administrative expenses

B. There may be a section for operating assets
C. There may be a section for non-operating activities
D. There is a section for cost of goods sold

END OF QUESTIONS