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Matric no: ________ Name: _________________Group: ____

Tutorial 4: Chapter 5 – ACCOUNTING FOR MERCHANDISING


BUSINESS
DUE DATE: 18 NOVEMBER 2015

1) Which statement best describes merchandise inventory?

a) Merchandise inventory is the merchandise that have been sold during an


accounting period.
b) Merchandise inventory is the merchandise that will be bought in the next
accounting period.
c) Merchandise inventory is the merchandise that is on hand at the end of an
accounting period.
d) Merchandise inventory is the merchandise that is rotten and will be disposed.

2) Merchandise inventory is reported as

a) Current asset on the balance sheet


b) Long-term asset on the balance sheet
c) Cost of merchandise on the income statement
d) Revenue on the income statement

3) Which of the following statement is correct?

a) Net income of service company equals to the total of fees earned during an
accounting period.
b) Gross profit of merchandise company is gained after substracting cost of
merchandise sold and operating expenses from the total sales of an accounting
period.
c) Net profit of merchandise company is equals to sales deduct cost of merchandise
sold.
d) Net profit of merchandise company is equals to sales deduct cost of merchandise
sold and operating expenses.

4) Cost of merchandise sold is reported as:

a) Expense
b) Current asset
c) Current liability
d) Equity

5) In January 2015, the cash sales for merchandise is RM123,000 and the sales on
account is RM56,000. The cost of the merchandise sold is one quarter of the total
sales. Other expenses is RM15,000. What is the amount of the gross profit for January
2015?
a) RM134,250
b) RM92,250
c) RM119,250
d) RM164,000

6) Cost of merchandise sold is calculated by

a) Adding beginning merchandise inventory, cost of purchases and ending


merchandise inventory.
b) Adding ending merchandise inventory and cot of purchases less beginning
merchandise inventory.
c) Adding beginning merchandise inventory and cost of purchases less ending
merchandise inventory.
d) Adding beginning merchandise inventory and ending merchansise inventory less
cot of purchases.

7) Afgan Interior Deco Company has two sales transactions in March 2015. The
company sold a set of cosy sofa to Yuna Hotel for RM6,000 on account for term 2/10,
n/30. The company also sold a set of 12 unit stylish desk lamp for RM29.00 per unit
to UNI-tekno College on cash basis. What is the net sales for Afgan Interior Deco
Company if Yuna Hotel pays within the discount period?

a) RM5880
b) RM6348
c) RM6228
d) RM5748

8) Which of the following statements are correct?

i. The steps in the accounting cycle for merchandising company and service
company are different from each other.
ii. Sales minus operating expenses equals gross profit.
iii. The main difference between the balance sheets of a service company and a
merchandising company is inventory.
iv. For a merchandising company, all accounts that affect the determination of
income are closed to the Income Summary.
v. Freight terms of FOB Destination means that the seller pays the freight costs.
vi. Under a perpetual inventory system, the cost of good sold is determined each
time a sale occurs.

a) i, ii and iii
b) i,ii and iv
c) iii, iv, v and vi
d) iii, iv and v

9) Sales revenue

a) is only collected after cash is received.


b) may be recorded before cash is collected.
c) only results from cash sales.
d) Only results from credit sales.
10) The journal entry to record a credit sales is

a) Cash
Sales
b) Sales
Cash
c) Accounts receivable
Sales
d) Sales
Accounts receivable

11) Which of the following is not a true statement about multiple-step income statement?

a) There is a section for cost of merchandise sold


b) Operating expenses consist of selling and administrative expenses.
c) There is a section for operating assets.
d) Sales discounts and sales returns and allowances are deducted from sales to gain
net sales.

Use the following information for question 12-15.

In 2014, Fairy Salon generates revenues of RM56,000. The cost of goods sold was
RM14,000 and the operating expenses was RM7,000. The company also has a loss on
sale of equipment of RM2,000.

12) The gross profit for Fairy Salon is

a) RM42,000
b) RM35,000
c) RM33,000
d) RM56,000

13) The income from operation for Fairy Salon is

a) RM56,000
b) RM35,000
c) RM33,000
d) RM5,000

14) The net income for Fairy Salon is

a) RM54,000
b) RM42,000
c) RM35,000
d) RM33,000

15) A credit memorandum is issued when

a) customers refused to pay.


b) goods that were sold on credit are returned.
c) goods are sold on credit.
d) buyer pays on time.

16) A credit memorandum involves a journal entry that needs a debit to

a) Cash and credit to Accounts Receivable


b) Sales Returns and Allowance and credit to Accounts Receivable
c) Accounts Receivable and credit to Sales Returns and Allowance
d) Sales Returns and Allowance and credit to Sales

17) The credit terms of 3/20, n/30 means

a) customer needs to pay in full amount within 30 days.


b) customer can get purchase discounts of 3% of the purchase amount if payment is
made within 20 days from the invoice date and if no early payment is made, full
amount need to be paid within 30 days from the invoice date.
c) three sales returns can be made within 20 days from the invoice date and no
returns therafter.
d) No sales discount been offered to buyers.

18) The respective account balances of Sales, Sales Returns and Allowances and Sales
Discounts are:

a) credit, debit, debit


b) debit, credit, credit
c) credit, credit, debit
d) debit, credit, debit

19) What is the meaning of FOB shipping point?

a) Buyer will pay the cost of shipping starting from the shipping point to the
destination.
b) Seller will pay the cost of shipping starting from the shipping point to the
destination.
c) Seller and buyer will pay the transportation cost.
d) There is no transportation cost incurred to both seller and buyer.

20) August 2015 All Green Enterprise sold 4 units of environmental-friendly garbage bin
to D-Mart Mall on account. The cost for each bin is RM150. 6% of tax are chargable
to the selling transaction. What is the journal entry for the selling transaction?
a) Accounts receivable – D-Mart Mall 636
Sales 600
Sales tax payable 36
b) Cash – D-Mart 636
Sales 600
Sales receivable 36
c) Sales receivable – D-Mart 636
Sales tax payable 636
d) Cash 636
Sales 636
21) How many entries involved in closing temporary accounts?

a) One
b) Two
c) Three
d) Four

22) Which of the item is not a temporary account?

a) Revenue
b) Telephone expenses
c) Income summary
d) Capital

23) Which of the following transaction is recorded with the same journal entry for both
perpetuan and periodic inventiry system?

i) Sales discounts
ii) Cash sales
iii) Cash received on account with a discount
iv) Return of merchandise sold
v) Credit sales

a) i and iii
b) iii only
c) i, ii and iii
d) none of the above

24) Easy Dot Company has the following account balances:

Purchases RM78,300
Sales 112,000
Purchase discounts 10,000
Sales returns and allowances 15,000
Freight-in (FOB shipping point) 5,000

The cost of goods purchased for the period is

a) RM33,700
b) RM23,700
c) RM73,300
d) RM97,000

25) Go-Go Bike Accessories Enterprise has a beginning merchandise inventory of


RM45,000. During the period, new purchases were RM13,000, purchase discounts
were RM1,500, sales discounts were RM2,500, freight-in RM850. A physical count
of inventory at the end of period revelated that RM24,300 was still on hand. What is
the cost of goods available for sale and cost of good sold, respectively?

a) RM54,850; RM30,550
b) RM55,650; RM31,350
c) RM58,000; RM28,850
d) RM56,850; RM32,550

26) Which of the following has a normal credit account balance?

a) Purchases
b) Purchase discounts
c) Sales returns and allowances
d) Sales discounts

27) With respect to income statement

a) Sales discounts and sales returns and allowances increase the amount of sales.
b) Sales discounts are included in the calculation of gross profit.
c) The capital account balance are included in the calculation of net income.
d) Sales discounts and purchase discounts are included in the calculation of gross
profit.

28) The collection of RM500 account after the 2 percent discount period will result in a

a) debit to Cash of RM500


b) debit to Cash of RM490
c) debit to Sales Discounts of RM10
d) debit to Accounts Receivable of RM490

29) A sales invoice is a document that

a) serves only as a customer receipt.


b) provide evidence of credit sales transactions.
c) provide evidence of cash sales transactions.
d) Provide evidence of all sales transactions.

30) A customer received a product which she ordered from a seller. There is however a
slight defect to the product. After making a complaint to the seller, the customer
willing to retain the product after the seller agrees to give a price reduction. This
transaction is known as a sales

a) discount
b) return
c) allowances
d) tax

PLEASE COMPLETE THE ANSWERS AND SUBMIT THE PAPERS (HARDCOPY) TO


MY ROOM. (SOA 2.93) ON WEDNESDAY 18 NOVEMBER 2015.