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QuestionAnswered step-by-step1.) In a merchandising business, when merchandise is sold on…1.) In a merchandising business, when merchandise is sold on account, a journal entry is booked to Debit to Accounts Receivable and Credit to Sales. In addition:Select one:A. Cost of goods sold is debited and Merchandise inventory is credited.B. Cost of goods sold is credited and Merchandise inventory is debited.C. Accounts Receivable is credited and Sales is debited. D. None of the above.2.) One of the primary objectives of inventory controls is:Select one:A. Safeguarding inventory from damage or theft.B. Selling inventory at an affordable priceC. Both A & BD. None of the above3.) How is Accounts Receivable reported on the balance sheet?Select one:A. In the owner’s equity section.B. In the current liabilities section.C. In the long-term assets section.D. In the current assets section4.) When merchandise is shipped FOB (free on board) Destination:Select one:A. The buyer pays for the shipment.B. Title passes to buyer when merchandise is delivered.C. Title passes to buyer when merchandise is shipped.D. There is no charge for the shipment.5.) Which of the following statement is true regarding inventory costing?Select one:A. Under LIFO, the first units purchased are sold and ending inventory is made up of the most recent purchaseB. The cost of ending inventory is the same Under the LIFO and FIFO methods.C. Both statements are trueD. None of the above statements are true6.) When preparing a bank reconciliation, which of the following items are added to the bank statement cash balance?Select one:A. Outstanding checksB. Deposits not recorded by the bankC. Bank service chargesD. Interests collected by the bank for the company7.) Under the direct write-off method, the entry to write off an account that is determined to be uncollectible is a Debit to Bad Debt Expense and a Credit toSelect one:A. Accounts ReceivableB. CashC. Allowance for Doubtful AccountsD. None of the above8.) What is the entry to write-off an accounts receivable that is past due under the direct method?Select one:A. Credit Bad debt expense, Debit Accounts receivable.B. Debit Bad debt expense, Credit Accounts receivable.C. Debit Bad debt expense, Credit allowance for doubtful accountsD. None of the above9.) Bentley Manufacturing Co. uses the LIFO method of costing its inventory, which indicates that:Select one:A. Merchandise are sold in the order in which they are receivedB. Last merchandise purchased is sold out firstC. There is no specific order in which merchandise is soldD. None of the above10.) If inventory original cost is $4,000, estimated selling price is $3,500, estimated selling expense is $200, using the LCM method, inventory is valued at:Select one:A. $4,000B. $3,500C. $200D. $3,30011.) Petty Cash is reserved for small purchases or repairs that do not cost a lot of money around the officeSelect one:TrueFalse12.) A Credit memo is a note from a seller indicating its intent to credit a customer’s accounts receivable.  Select one:TrueFalse13.) In a period of rising prices, the FIFO method of costing inventory results in income tax savings for companies. Select one:TrueFalse14.) When prices increase, FIFO reports higher gross profit and net income than LIFO.Select one:TrueFalse15.) A debit memo represents a decrease to accounts payable and therefore results in less money owed to the seller.Select one:TrueFalse16.) The service fee charged by a bank is a reduction to the bank account balance and therefore should be listed as a debit entry on the bank statement.Select one:TrueFalse17.) When seller pays for shipping, the cost of freight is added to the cost of inventory by debiting Merchandise Inventory.Select one:TrueFalse18.) In a merchandising business, when merchandise is sold on account, the only journal entry required is a Debit to Accounts Receivable and a Credit to Sales.Select one:TrueFalse19.) A chart of accounts for a merchandising business  Select one:a. usually is the same as the chart of accounts for a service businessb. usually requires more accounts than does the chart of accounts for a service businessc. usually is standardized by the FASB for all merchandising businessesd. always uses a three-digit numbering system20.) A debit or credit memo describing entries in the company’s bank account may be enclosed with the bank statement. An example of a credit memo isSelect one:a. a deposited check returned for insufficient fundsb. collection of a note receivable for the companyc. a service charged. notification that a customer’s check for $375 was recorded by the company as $735 on the deposit ticket21.) Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold was $24,500. Abbey Co. issued a credit memo for $3,600 for defective merchandise, which was not returned to Abbey. Gomez Co. paid the invoice within the discount period. What is the gross profit earned by Abbey Co. on these transactions?Select one:a. $10,500b. $30,772c. $6,272d. $31,40022.) Credit memos from the bankSelect one:a. decrease a bank customer’s accountb. are used to show a bank service chargec. show that a company has deposited a customer’s NSF checkd. show that the bank has collected a note receivable for the customer23.) If merchandise sells for $3,500 on account, with terms of 3/15, n/45, and the cost of the inventory sold is $2,100, the journal entry for the receipt of the customer’s payment on account within the discount period under the gross method would include Select one:a. a credit to Cash for $3,395b. a credit to Accounts Receivable for $3,395c. a debit to Sales of $105d. a credit to Sales Discounts for $10524.) If merchandise sells for $3,500, with terms of 3/15, n/45, and the cost of the inventory sold is $2,100, the amount charged to sales isSelect one:a. $3,395b. $3,500c. $2,037d. $2,10025.) Pierce Company sold merchandise to Stanton Company on account FOB shipping point, 2/10, net 30, for $20,000. Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make for this sale?Select one:a. Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000b. Accounts Receivable—Stanton, debit $19,600; Sales, credit $19,600, andAccounts Receivable—Stanton, debit $500; Cash, credit $500 c. Accounts Receivable—Stanton, debit $20,100; Sales, credit $20,100d. Accounts Receivable—Stanton, debit $20,000; Sales, credit $20,000, andDelivery Expense, debit $500; Cash, credit $50026.) The direct write-off method of accounting for uncollectible accountsSelect one:a. emphasizes balance sheet relationshipsb. is often used by small companies and companies with few receivablesc. emphasizes cash realizable valued. emphasizes the matching of expenses with revenues27.) The inventory costing method that reports the most current prices in ending inventory isSelect one:a. FIFOb. specific identificationc. LIFOd. weighted average cost28.) The inventory method that assigns the most recent costs to cost of merchandise sold isSelect one:a. FIFOb. LIFOc. weighted average costd. specific identification29.) The journal entry for the receipt of inventory purchased for cash in a perpetual inventory system would beSelect one:a. Jan. 1  Merchandise Inventory  1,500        Cash                      1,500 b. Jan. 1  Office Supplies        1,500              Cash                      1,500 c. Jan. 1  Purchases             1,500              Accounts Payable          1,500 d. Jan. 1  Cash                 1,500              Accounts Receivable        1,50030.) Two methods of accounting for uncollectible accounts are theSelect one:a. direct write-off method and the allowance methodb. allowance method and the accrual methodc. allowance method and the net realizable methodd. direct write-off method and the accrual method31.) Under the _____ inventory method, accounting records maintain a continuously updated inventory value.Select one:a. retailb. periodicc. physicald. perpetual32.) What is the major difference between a periodic and a perpetual inventory system?Select one:a. Under the periodic inventory system, the purchase of inventory will be debited to the purchases account.b. Under the periodic inventory system, no journal entry is made at the time of the sale of inventory for the cost of the inventory.c. Under the periodic inventory system, all adjustments such as purchases returns and allowances and discounts are reconciled at the end of the month.d. All of these choices are correct.33.) When comparing a merchandising business to a service business, the financial statement that changes the most is theSelect one:a. balance sheetb. income statementc. statement of owner’s equityd. statement of cash flows34.) When merchandise sold is assumed to be in the order in which the purchases were made, the company is usingSelect one:a. first-in, last-outb. last-in, first-outc. first-in, first-outd. weighted average cost35.) Who is responsible for the freight cost when the terms are FOB destination?Select one:a. the sellerb. the buyerc. the customerd. either the buyer or the seller36.) Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.Select one:TrueFalse37.) FIFO is the inventory costing method that follows the physical flow of the goods.Select one:TrueFalse38.) In preparing a bank reconciliation, the amount indicated by a debit memo for bank service charges is added to the balance per company’s records.Select one:TrueFalse39.) The direct write-off method records bad debt expense in the year the specific account receivable is determined to be uncollectible.Select one:TrueFalse40.) Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory.Select one:TrueFalseBusinessAccountingACC 201Share Question