Question 1

All of the following are the goals of internal controls over merchandising transactions except

Accepted Answer

A)   To keep credit losses at a minimum
B)   To retain enough cash to take advantage of cash discounts
C)   To keep the appropriate amount of inventory on hand
D)   To decide on the quality of materials to be purchasedE) A) and B)
F) B) and D)

Question 2

On June 3,Win-Tel Company sold merchandise worth $800 on credit,terms 2/10,n/30.The merchandise sold had cost $550.The customer paid the amount on June 10. What is the required journal entry to record the payment received under the periodic inventory system?

Accepted Answer

A)   Accounts Receivable 784Sales Discounts 16Cash 800
B)   Accounts Receivable 800Sales Discounts 16Cash 784
C)   Cash 784Sales Discounts 16Accounts Receivable 800
D)   Cash 800Sales Discounts 16Accounts Receivable 816E) A) and B)
F) A) and C)

Question 3

A purchase order is sent from a company's

Accepted Answer

A)   accounting department to the supplier.
B)   treasurer to the supplier.
C)   supplier to its accounting department.
D)   purchasing department to the supplier.E) A) and D)
F) All of the above

Question 4

Profitability means having enough cash on hand to pay bills when they become due.

Accepted Answer

A) True 
 B)False

Question 5

A physical inventory is usually taken

Accepted Answer

A)   at the beginning of the fiscal year.
B)   at the end of the busy season.
C)   at the end of the fiscal year.
D)   when the perpetual inventory system,but not the periodic inventory system,is being used.E) B) and C)
F) A) and B)

Question 6

Freight-in is not considered a cost of merchandise purchased.

Accepted Answer

A) True 
 B)False

Question 7

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.   The total amount of working capital of Layton Novelties is

Accepted Answer

A)   $8,000
B)   $28,000
C)   $12,000
D)   $4,000E) A) and B)
F) B) and C)

Question 8

The fee paid by a retailer to a credit card company is considered an expense account by the retailer.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would not be found in a good system of internal control?

Accepted Answer

A)   Establishing a system of checks and balances
B)   Having one person handle all the responsibilities of a department
C)   Establishing an internal audit staff
D)   Requiring all employees to take earned vacationsE) B) and D)
F) All of the above

Question 10

Using the following information,calculate for 2013 (a)net sales,(b)cost of goods sold,(c)gross margin,and (d)net income.

Accepted Answer

a.$320,000 - $11,000 = $309,00...

Question 11

Which of the following documents remains within the originating company in a purchase transaction?

Accepted Answer

A)   Purchase order
B)   Receiving report
C)   Check
D)   InvoiceE) A) and B)
F) All of the above

Question 12

The entry to record a purchase of $12,000 in merchandise assuming terms of 2/10,n/30 and a periodic inventory system would include a(n)

Accepted Answer

A)   increase to Accounts Payable for $12,000.
B)   increase to Purchases Discounts for $240.
C)   decrease to Purchases for $12,000.
D)   decrease to Accounts Payable for $11,760.E) A) and C)
F) A) and D)

Question 13

Match each definition with the correct term below.
-FOB shipping point

Accepted Answer

A)  An inventory system in which the inventory not yet sold or on hand is counted periodically.
B)  Management's regular assessment of the quality of internal control.
C)  An account that accumulates the total cost of merchandise purchased for resale during an accounting period.
D)  The policies and procedures that management puts into place to see that its directives are carried out.
E)  The seller bears the transportation costs to the place where merchandise is delivered and title passes at the time it is delivered.F) An inventory system in which continuous records are kept of the quantity and cost of individual items as they are bought and sold.G) The total cost of merchandise that could be sold in an accounting period.H) The buyer bears the shipping costs of merchandise and title passes at the time it is shipped.I) An account that gives management a readily available measure of unsatisfactory products and dissatisfied customers.J) Controls that limit access to assets.K) D) and E)
L) E) and I)

Question 14

Management's regular assessment of its internal controls is called monitoring.

Accepted Answer

A) True 
 B)False

Question 15

The purchasing department prepares a purchase requisition addressed to the vendor (seller)containing instructions related to the items ordered.

Accepted Answer

A) True 
 B)False

Question 16

Match each definition with the correct term below.
-Control activities

Accepted Answer

A)  An inventory system in which the inventory not yet sold or on hand is counted periodically.
B)  Management's regular assessment of the quality of internal control.
C)  An account that accumulates the total cost of merchandise purchased for resale during an accounting period.
D)  The policies and procedures that management puts into place to see that its directives are carried out.
E)  The seller bears the transportation costs to the place where merchandise is delivered and title passes at the time it is delivered.F) An inventory system in which continuous records are kept of the quantity and cost of individual items as they are bought and sold.G) The total cost of merchandise that could be sold in an accounting period.H) The buyer bears the shipping costs of merchandise and title passes at the time it is shipped.I) An account that gives management a readily available measure of unsatisfactory products and dissatisfied customers.J) Controls that limit access to assets.K) C) and E)
L) C) and J)

Question 17

A purchase on account with an invoice price of $1,500 has been made.The entry to record the payment after the 2 percent discount period would include a(n)

Accepted Answer

A)   decrease to Accounts Payable for $1,500.
B)   decrease to Purchases Discounts for $30.
C)   increase to Accounts Payable for $1,470.
D)   decrease to Cash for $1,470.E) A) and B)
F) None of the above

Question 18

When a business is able to deposit its credit card sales invoices directly into a special bank account,it debits Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is necessary for computing cost of goods sold but not necessary for computing goods available for sale?

Accepted Answer

A)   Freight-in
B)   Purchases
C)   Ending merchandise inventory
D)   Beginning merchandise inventoryE) A) and B)
F) None of the above

Question 20

Match each definition with the correct term below.
-Perpetual inventory system

Accepted Answer

A)  An inventory system in which the inventory not yet sold or on hand is counted periodically.
B)  Management's regular assessment of the quality of internal control.
C)  An account that accumulates the total cost of merchandise purchased for resale during an accounting period.
D)  The policies and procedures that management puts into place to see that its directives are carried out.
E)  The seller bears the transportation costs to the place where merchandise is delivered and title passes at the time it is delivered.F) An inventory system in which continuous records are kept of the quantity and cost of individual items as they are bought and sold.G) The total cost of merchandise that could be sold in an accounting period.H) The buyer bears the shipping costs of merchandise and title passes at the time it is shipped.I) An account that gives management a readily available measure of unsatisfactory products and dissatisfied customers.J) Controls that limit access to assets.K) B) and F)
L) D) and E)

Exam 6: The Operating Cycle and Merchandising Operations

On June 3,Win-Tel Company sold merchandise worth $800 on credit,terms 2/10,n/30.The merchandise sold had cost $550.The customer paid the amount on June 10. What is the required journal entry to record the payment received under the periodic inventory system?

Correct AnswerverifiedShow Answer

Match each definition with the correct term below. -Perpetual inventory system

Correct AnswerverifiedShow Answer

Management's regular assessment of its internal controls is called monitoring.

Correct AnswerverifiedShow Answer

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question. The total amount of working capital of Layton Novelties is

Correct AnswerverifiedShow Answer

Using the following information,calculate for 2013 (a)net sales,(b)cost of goods sold,(c)gross margin,and (d)net income.

Correct Answerverifieda.$320,000 - $11,000 = $309,00...View AnswerShow Answer

All of the following are the goals of internal controls over merchandising transactions except

Correct AnswerverifiedShow Answer

A purchase on account with an invoice price of $1,500 has been made.The entry to record the payment after the 2 percent discount period would include a(n)

Correct AnswerverifiedShow Answer

Profitability means having enough cash on hand to pay bills when they become due.

Correct AnswerverifiedShow Answer

Which of the following would not be found in a good system of internal control?

Correct AnswerverifiedShow Answer

Which of the following is necessary for computing cost of goods sold but not necessary for computing goods available for sale?

Correct AnswerverifiedShow Answer

Match each definition with the correct term below. -FOB shipping point

Correct AnswerverifiedShow Answer

Freight-in is not considered a cost of merchandise purchased.

Correct AnswerverifiedShow Answer

A physical inventory is usually taken

Correct AnswerverifiedShow Answer

When a business is able to deposit its credit card sales invoices directly into a special bank account,it debits Accounts Receivable.

Correct AnswerverifiedShow Answer

Match each definition with the correct term below. -Control activities

Correct AnswerverifiedShow Answer

The purchasing department prepares a purchase requisition addressed to the vendor (seller)containing instructions related to the items ordered.

Correct AnswerverifiedShow Answer

The fee paid by a retailer to a credit card company is considered an expense account by the retailer.

Correct AnswerverifiedShow Answer

The entry to record a purchase of $12,000 in merchandise assuming terms of 2/10,n/30 and a periodic inventory system would include a(n)

Correct AnswerverifiedShow Answer

Which of the following documents remains within the originating company in a purchase transaction?

Correct AnswerverifiedShow Answer

A purchase order is sent from a company's

Correct AnswerverifiedShow Answer

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a.$320,000 - $11,000 = $309,00...
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