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Chapters 1-4The Accounting Cycle
Chapters 5-8Current Assets
Chapters 9-11Long-Term Assets
Chapters 12-14Liabilities/Equities
Chapters 15-16Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20Managerial/Cost
Chapters 21-24Budgeting/Decisions

Chapters 1-4The Accounting Cycle
Chapters 5-8Current Assets
Chapters 9-11Long-Term Assets
Chapters 12-14Liabilities/Equities
Chapters 15-16Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20Managerial/Cost
Chapters 21-24Budgeting/Decisions

Chapter 5 – Multiple Choice

By admin / July 30, 2015

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Question 1 of 8

1. Question
The Sales account and Purchases account should include:
- only cash sales and cash purchases of merchandise.
- only credit sales and credit purchases of merchandise.
- both cash and credit sales and cash and credit purchases of merchandise.
- not only merchandise transactions, but also purchases and sales of other assets used in the business.
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Question 2 of 8

2. Question
Purchasers of merchandise may be dissatisfied with the quality of goods purchased on account and return the goods to the seller with an indication that payment will not be forthcoming. In this case, the document prepared by the purchaser is called:
- a debit memorandum.
- a credit memorandum.
- a receiving report.
- an invoice.
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Question 3 of 8

3. Question
Bergstrom accepted the return of merchandise by a customer. The merchandise had been sold on account, and payment had not been received on the date of return. The returned goods retailed for $400 but cost Bergstrom only $300. The appropriate journal entry for Bergstrom is:
- Accounts Receivable 400
  
  Sales Returns & Allowances 400
- Sales Returns & Allowances 400
  
  Accounts Receivable 400
- Sales      400
  
              Purchases      300
  
              Accounts Receivable      100
- Sales Returns & Allowances      400
  
               Purchases      300
  
              Accounts Receivable      100
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Question 4 of 8

4. Question
Which of the following statements is true?
- Cash discounts are used to reduce the invoice price below the stated list price.
- The expression 2/30, n/60, means that a 2% cash discount is available if the invoice is paid within 30 to 60 days.
- Cash discounts may not be used in conjunction with trade discounts.
- Cash discounts normally apply to the invoice price of the merchandise, excluding freight charges.
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Question 5 of 8

5. Question
Lux had net purchases of $50,000, ending inventory of $25,000, net sales of $100,000, and gross profit of $32,000. How much was Lux’s beginning inventory?
- $7,000
- $43,000
- $93,000
- $143,000
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Question 6 of 8

6. Question
On February 1, Crown Company purchased $2,000 of merchandise, terms 2/10, n/30. Crown uses the gross method of recording purchases. Payment of the accounts payable was made on February 26. Which of the following journal entries is appropriate for the February 26 transaction?
- Purchases 2,000
  
  Accounts Payable 2,000
- Accounts Payable 1,960
  
  Cash 1,960
- Accounts Payable   1,960
  
  Purchases Discounts Lost   40
  
              Cash       2,000
- Accounts Payable 2,000
  
  Cash 2,000
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Question 7 of 8

7. Question
On March 1, Zekew Company purchased $1,000 of merchandise, terms 1/10, n/30. Zekew uses the net method of recording purchases. Payment of the accounts payable was made on March 4. Which of the following journal entries is appropriate for the March 4 transaction?
- Purchases 990
  
  Cash 990
- Accounts Payable 990
  
  Cash 990
- Accounts Payable      1,000
  
              Purchases Discounts       10
  
              Cash      990
- Accounts Payable 1,000
  
  Cash 1,000
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Question 8 of 8

8. Question
Dodd Company utilizes the periodic inventory accounting system. Dodd had beginning inventory of $59,000, ending inventory of $37,000, and net purchases of $123,000. Which of the following components should be included in the year-end closing entries prepared by Dodd?
- Purchases 123,000
  
  Inventory 123,000
- Income Summary 37,000
  
  Inventory 37,000
- Income Summary 59,000
  
  Inventory 59,000
- All of the above
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