PART I – THEORY (1 pt. each)
1.The expression 3/20, n/60 means
a. The invoice must be paid in 3 to 20 days, otherwise interest
for 60 days will be charge.
b. A 30% discount is available if the invoice is paid in 20 to 60
days; otherwise, the total invoice price is due.
c. A 3% discount is available if the invoice is paid within 20
days, otherwise, the total invoice price is due in 60days.
d. A 15% (3/4 of 20) is available if the invoice is paid within 60
days.
9. Which of the following is not a contra account?
a. Sales discount c. Purchase returns and allowances
b. Purchase discounts
d. Freight – in
2. These are expenses incurred in storing, promoting,
packaging and delivering the merchandise such as Freight
Out, Sales Salaries, Advertising and Sales Commission.
a. Distribution expenses/Selling expenses
b. Financing Charges
c. administrative expenses
d. Cost of Sales
11.In a merchandising operation, the sales account should
include _______.
a. Only credit of merchandise.
b. Only cash sales of merchandise.
c. Both cash and credit sales of merchandise.
d. Sales of both merchandise and other receivables of the
business.
3.The normal balance of sales discount is on ______ side of Taccount.
a. Debit c. Either debit or credit depending on circumstances.
b. Credit d. No normal balance.
12.Which of the following statement is false?
a. The difference between list price and invoice price is equal
to the amount of trade discount.
b. Trade discounts are convenient means of reducing list price
to the invoice price.
c. Trade discounts are not entered in the accounting records.
d. Trade discounts are identical to cash discounts.
4.For a merchandise entity, the purchases accounts include
_________.
a. All items acquired for both short term and long-term use.
b. Acquisition of item for resale.
c. Acquisition of short-term asset.
d. Acquisition of supplies.
5.What does FOB destination mean:
a. Title passes at shipping point; seller pays transportation
cost.
b. Title passes at shipping point; buyer pay transportation
cost.
c. Title does not pass at shipping point; however, seller is
responsible for the transportation cost.
d. Title does not pass at shipping point and seller is not
responsible for the transportation cost.
6.Which of the following has no account of its own and
requires no special accounting entry?
a. Freight out
c. Trade discount
b. Purchase discount
d. Freight – in
7. When comparing the statement of financial position of a
service type of business to a merchandising one, the main
difference is on the recognition of ___________ in the latter.
a. Inventory account
c. Accounts Receivable
b. Cash
d. Accounts Payable
8.This method of inventory system records continuously the
movement of the merchandise and shows the inventory
balance at any point of time.
a. Periodic inventory system
c. Inventory count system
b. Weighted average
inventory system
d. Perpetual inventory system
10.A purchase discount results from ___________.
a. Returning goods to seller.
b. Receiving a purchase allowance from seller.
c. Buying large enough quantity of merchandise to get the
discount.
d. Paying within the discount period.
13.The major revenue for a merchandising business comes
from selling goods or merchandise and is called
_____________.
a. Sales Revenue
c. Merchandise inventory
b. other revenues d. Cost of Sales
14.In the eyes of the seller under the terms FOB shipping
point - Collect for the merchandise purchased, who paid the
freight at the point of shipment?
a. Buyer
c. Freight company
b. Seller
d. No one paid for the freight
15.In the eyes of the buyer under the terms FOB shipping
point - Collect for the merchandise purchase, who must pay
for the freight at the point of shipment?
a. Buyer
c. Freight company
b. Seller
d. No one must pay for the freight
16.When a seller of merchandise allowed a customer a
reduction from the original price for defective goods, the
seller will issue to a customer a
a. Debit memorandum
c. Sales invoice
b. Credit memorandum d. Official receipt
17.When the seller advances the transportation costs and the
terms of sale are FOB shipping point, the seller records the
payment of the transportation costs by debiting
a. Accounts receivable
c. Transportation-in
b. Sales
d. Accounts payable
18.The account that appears in the chart of account for a
merchandising entity but not for a service activity is
a. Accounts receivable
c. Sales returns and allowances
b. Advertising expense
d. Accounts payable
19.The excess of net sales over the cost of goods sold is called
a. Gross profit
c. Net income
b. Operating profit
d. Merchandising income
20.The amount of cost of goods sold available for sale during
the year depends on the amounts of
a. Beginning merchandise inventory and cost of goods sold
b. Beginning merchandise inventory, net purchases, and
ending merchandise inventory
c. Beginning merchandise inventory, cost of goods sold, and
ending merchandise inventory
d. Beginning merchandise inventory and net purchase
21.An item for P50,000 subject to a trade discount of 15% is
paid within the discount period on terms 5/10, n/30. What is
the amount of payment?
a. P40,375
c. P42,500
b. P 57,500
d. P50,000
27.During the year, Sad Store purchased goods worth
P150,000. There were P40,000 unsold goods at the end of the
year but the old stock brought forward from last year’s
purchases was P10,000. Cost of sale was _____________.
a. P160,000
c. P110,000
b. P120,000
d. P190,000
28.On October 1, Ace Company purchased P6,000 worth of
goods on terms 2/15,n/30. Freight of P500 was prepaid bythe
seller under the term FOB Shipping Point, goods worth P1,000
were returned and the account was paid onOctober 3. How
much cash was paid to the seller?
a.P5,400
c. P5,380
b.P5,390
d. P5,500
29.Net Sales amounted to P50,000 with cost of sales
representing 75%. If operating expenses is 10% of sales, net
income will be ___________.
a. P5,000
c. P17,500
b. P12,500
d. P7,500
For items 30 to 33, use the following information:
Tamaraw Company reported the following information for the
month ended October 2018:
22.Big Company had the following data for the period ended.
Cash sales P200,000; credit sales of P140,000; sales discounts
P12,500; sales return P10,000; freight in P7,500 and freight
out P8,000. The company would report Gross Sales Revenue
on its income statement of _________.
a. P340,000
c. P317,500
b. P326,500
d. P310,000
23.BA Company recorded the sale of P6,000. If the sale was
subjected to a 20% trade discount, how much is the invoice
price?
a. P4,500
c. P7,500
b.P4,800
d. P6,000
24.Smile Company reported a net income of P40,000. If the
net sales were P150,000 and a gross profit of 80,000,
operating expenses amounted to ______.
a. P70,000
c. P110,000
b. P40,000
d. P80,000
25.Happy Company paid an account with a list price of
P15,625 which was purchased 8 days ago. Term of the
purchase are 4% trade discount, 3/10, n/30, FOB destination.
The amount paid by Happy is _______.
a. P15,250
c. P15,000
b. P14,550
d. P14,500
26.During the year, Shy Store purchased goods worth
P150,000. There were P40,000 unsold goods at the end of
theyear but the old stock brought forward from last year’s
purchases was P10,000. Cost of goods available for sale was
_____________.
a.P160,000
c. P110,000
b.P120,000
d. P190,000
30. How much is the Cost of Goods Available for Sale?
a. P26,034
c. P20,114
b. P28,034
d. P 20,144
31.How much is the operating expenses?
a.P28,000
c. P56,
b. P30,000
d. P58,000
32.How much is the gross sales?
a. P200,000
c. P189,741
b. P171,650
d. P161, 391
33.How much is the gross profit?
a. P202,675
c. P141,247
b. P161,391
d. P144,685
34.An item retailing for P50,000 subject to a trade discount of
15% is paid for within the discount period on terms 5/10,
n/30. What is the amount of payment?
a. P 40,375
c. P 42,500
b. P 57,500
d. P 50,000
35.Blue Company had the following data for the period
ended. Cash sales P200,000; credit sales of P140,000, sales
discounts P12,500; sales return P10,000; freight in P7,500 and
freight out P8,000. The company would report net sales
revenue on its income statement for the amount of?
a. P 340,000
c. P 317,500
b. P 326,500
d. P 310,000
ANSWER KEY:
1. C
2. A
3. A
4. B
5. C
6. C
7. A
8. D
9. D
10. D
11. C
12. D
13. A
14. A
15. A
16. B
17. C
18. C
19. A
20. D
21. A
22. A
23. D
24. B
25. B
26. A
27. B
28. A
29. D
30. B
31. D
32. A
33. C
34. A
35 C.