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The Account Purchase Discount Is Used When Availing Trade Discount For Goods Bought

The document contains multiple choice questions about accounting concepts for merchandising businesses. While the steps in the accounting cycle are the same for merchandising and service businesses, the balance sheet and inventory reporting differs between the two. Goods shipped FOB destination are excluded from ending inventory, while goods shipped FOB shipping point are included in ending inventory.

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Emanuel Cenidoza
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50 views2 pages

The Account Purchase Discount Is Used When Availing Trade Discount For Goods Bought

The document contains multiple choice questions about accounting concepts for merchandising businesses. While the steps in the accounting cycle are the same for merchandising and service businesses, the balance sheet and inventory reporting differs between the two. Goods shipped FOB destination are excluded from ending inventory, while goods shipped FOB shipping point are included in ending inventory.

Uploaded by

Emanuel Cenidoza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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The account Purchase discount is used when availing trade discount for goods bought.

The
correct answer is: FALSE
When purchase of goods is granted 10%, 20% discount, the amount of purchase should be
recorded at net of 30%. The correct answer is: FALSE
Cash discount should be computed based on the amount of goods sold net of returns and
partial payments. The correct answer is: FALSE
The title to the goods under FOB shipping point is transferred upon receipt of shipment by the
buyer. The correct answer is: FALSE
A merchandising business is engaged in buying of goods, processing it and selling it in another
form. The correct answer is: FALSE
The owner of the goods in transit is determined by the terms of shipment. The correct answer is:
TRUE
The steps in the accounting cycle for merchandising business is the same with the service
concern. The correct answer is: TRUE
The operating cycle involves the purchase and sale of inventory as well as the subsequent
payments for purchases and collection of cash. The correct answer is: True
Under the periodic inventory system, cost of goods sold is treated as an account The correct
answer is: False
Sales returns and allowances is described as a contra revenue account The correct answer is:
True
FOB Shipping point means that the seller incurs the shipping costs. The correct answer is:
False
The debit balance of the inventory account in the unadjusted trial balance under the periodic
inventory system is the amount of the inventory at the end of the current year The correct
answer is: False
Merchandise inventory could include goods that are in transit The correct answer is: True
Ending inventory is added to Total Goods Available for Sale when computing for Cost of Goods
Sold. The correct answer is: False
For a merchandising entity, the difference between net sales and operating expenses is called
gross margin The correct answer is: False

Statement 1: As we compare a merchandising business to a service business, the financial


statement that changes the most is the Balance Sheet.

Statement 2: When a merchandising business is compared to a service business, the financial


statement that is least affected by the change is the income Statement. The correct answer is:
Both statements are false.
Statement 1: Sold goods in transit shipped FOB Destination should be excluded in the ending
inventory.

Statement 2: Purchased goods in transit that are shipped FOB Shipping Point should be
included in the ending inventory. The correct answer is: statement 2 is true; statement 1 is false

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