ACCTG 101A PRACTICE SETS

THEORIES
1. Identify which of the following statements are true or false
I. The terms 2/10, n/30 state that a 2% discount is available if the invoice is paid within
the first 10 days of the next month.
II. Under a periodic inventory system, the acquisition of inventory is charged to the
Purchases account
III. Gross profit represents the merchandising profit of a company
a. Two statements are true, one statement is false
b. Two statements are false, one statement is true
c. All statements are true
d. All statements are false

2. The proper journal entry to record the receipt of inventory purchased on account in a periodic
inventory system would be:
a. Jan 1 Inventory 450.00
Accounts Payable 450.00
b. Jan 1 Office Supplies 450.00
Accounts Payable 450.00
c. Jan 1 Purchases 450.00
Accounts Payable 450.00
d. Jan 1 Purchases 450.00
Accounts Receivable 450.00

3. Merchandise is ordered on November 12; the merchandise is shipped by the seller and the
invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is
received by the buyer on November 17; the entry is made in the seller's accounts on
November 15. If the credit terms are 1/10, n/30, the credit period begins with what date?
a. November 12
b. November 15
c. November 17
d. November 22

4. A merchandising company that sells directly to consumers is a

a. Retailer.
b. wholesaler.
c. broker.
d. service company.

5. Detailed records of goods held for resale are not maintained under a
a. perpetual inventory system.
b. periodic inventory system.
c. double entry accounting system.
d. single entry accounting system.

6. All of the statement about trade discounts are not incorrect, except:
a. Used to quote different prices for different quantities purchased
b. Used to avoid frequent changes in catalogues
c. Recorded in the accounts because they are not a means of computing a price.
d. Both a and b

7. The seller actually paid the freight charger but is not legally responsible for the same:
a. FOB shipping point, freight prepaid
b. FOB destination, freight prepaid
c. FOB shipping point, freight collect
d. FOB destination, freight collect
8. Identify which of the following statements are true or false
I. No entry is made to recognize cost of goods sold when inventory is sold under
periodic inventory system
II. Inventory refers to the goods that a merchandising business has purchased with the
main intention of reselling them
III. Under the perpetual inventory system, cost of goods sold is debited when inventory is
sold and credited when there is a sales return
a. Two statements are true, one statement is false
b. Two statements are false, one statement is true
c. All statements are true
d. All statements are false

9. The arrangements between buyer and seller as to when payments for merchandise are to be
made are called
a. credit terms
b. net cash
c. cash on demand
d. gross cash

For items 10&11.

Using the letter preceding each account, arrange the following selected accounts in the order
they would normally appear in a chart of accounts of a company that uses a multiple-step
income statement.
(a)Accounts Payable
(b)Accounts Receivable
(c)Merchandise Inventory
(d)Miscellaneous Selling Expense
(e)Sales Discounts
(f)Interest Expense
(g)Income Summary
(h)Misc. Admin. Expense
(i)Transportation Out
(j)Sales Returns and Allowances

For items 12-13.

Which of the following accounts would be included in the chart of accounts of a
merchandising company using the: (a) periodic inventory system, (b) perpetual inventory
system, or (c) both systems?
(1) Purchases
(2) Freight in
(3) Sales Returns and Allowances
(4) Delivery Expense
(5) Purchases Returns and Allowances

For items 14-15.

What is the normal balance of the following accounts?
a. Sales Tax Payable
b. Merchandise Inventory
c. Delivery Expense
d. Cost of Merchandise Sold
e. Sales Returns and Allowance
f. Sales Discounts g. Sales
PROBLEMS
1. Shown below are different freight terms:

REQUIRED: Indicate on the blank space provided whether it is the BUYER or the SELLER.

2. Powers Company has the following account balances:

Purchases 99,000
Sales Returns and Allowances 12,800
Purchase Discounts 8,000
Freight-In 6,000
Delivery Expense 8,000
The cost of goods purchased for the period is?

3. FOR EACH OF THE FOLLOWING, DETERMINE THE MISSING AMOUNTS

Beginning Purchases Goods Available COGS ENDING
Inventory for Sale iNVENTORY

20,000 ? 40,000 25,000 ?

? 230,000 250,000 ? 40,000

4. FOR EACH OF THE FOLLOWING, DETERMINE THE MISSING AMOUNTS.

SALES COGS GROSS PROFIT EXPENSES NET INCOME

500,000 ? ? 250,000 100,000

? 100,000 150,000 ? 75,000

5. On August 29, Payno Corporation sold merchandise with a list price of P5,000 to Lilo
Company on account. Payno allowed trade discounts of 30% and 20%. The credit terms were
2/15 , n/40 and the sale was made at FOB shipping point. Payno paid the delivery cost of
P200. On September 12, Payno received from Lilo a remittance in full payment amounting to
________.

6. Maxi Company’s perpetual inventory records indicate that $820,300 of merchandise should
be on hand on October 31, 2014. The physical inventory indicates that $781,900 is actually
on hand. Journalize the adjusting entry for the inventory shrinkage for Maxi Company for the
year ended October 31, 2014

7. On March 15, 2020 ABC sold merchandise to Zcompany for P 200,000terms: less 10%; 5%;
2/10, n/45. This is called a series of trade discounts. How much is the invoice price?

For 8-10.
At the beginning of the year, Superior Sales had $7,500 of merchandise inventory. During the
year, the company purchased $72,000 of inventory. At the end of the year, a count of the
inventory revealed that the business had $11,640 of inventory on hand. Superior uses the
periodic inventory system.
(8). What is the cost of goods sold for the year?
(9). What is the amount of goods available for sale?
(10). What amount of inventory will be shown on the year-end balance sheet?
SUGGESTED ANSWER/SOLUTION:

THEORIES
1. a. Two statements are true, one statement is false.
Statement I is false and statements II and III are true
2. c. Jan 1 Purchases 450.00
Accounts Receivable 450.00
3. b. November 15
4. a. Retailers
5. b. periodic inventory system.
6. c. Recorded in the accounts because they are not a means of computing a price.
7. a. FOB shipping point, freight prepaid
8. c. All statements are true
9. a. credit terms
10. &11. (b) (c) (a) (g) (j) (e) (i) (d) (h) (f)
12.&13. (1) a (2) a (3) c (4) c (5)a
14.&15. a. credit b. debit c. debit d. debit e. debit f. debit g. credit

PROBLEMS
1.
BUYER BUYER BUYER

BUYER BUYER SELLER

SELLER SELLER BUYER

SELLER SELLER SELLER

2. Cost of Goods Purchased = 99,000 - 8,000 + 6,000

= 97,000
3. Purchase= Goods Available For Sale - Beg. Inv
= 40,000 - 20,000
= 20,000
Ending Inventory = Beg. Inv. + Goods Available For Sale - COGS
= 20,000 + 40,000 - 25,000
= 15,000
Beginning Inventory = Goods Available FOr Sale - Purchases
= 250,000 - 230,000
= 20,000
COGS = Beg. inv. + Purchases - end. Inv.
= 20,000 + 230,000 - 40,000
= 210,000

4. Gross Profit = expenses + net income

= 250,000 + 100,000
= 350,000

COGS = sales + gross profit

= 500,000 - 350,000
= 150,000
SALES = COGS + gross profit
= 100,000 + 150,000
 = 250,000

EXPENSES = Gross profit - Net Income

= 150,000 - 75, 000
= 75,000

5. For trade discounts: For cash discount:

P5,000 P5000 P3,500 P3,500 P2,800 P2,800

X 30% - P1,500 x 20% - P700 x 2% - P56

P1,500 P3,500 P700 P2,800 P56 P2,744

Final Receivable from Lilo:

P2,744
+P200
P2,944

Journal Entries:

Accounts Receivable 2,800

Sales 2,800
To record the sale of goods on account.

Accounts Receivable 200

Cash 200
To record prepayment of freight.

Cash 2,944
Sales Discount 56
Accounts receivable 3,000
To record collection of receivables with discount.
6. Cost of Merchandise Sold. 38,400
Merchandise Inventory. 38,400
(820,000-781,900)
7. Invoice Price = P200,000 less 10% or P180,000 less 5% then invoice Price is P171,000
8. - 10.
Beginning inventory. $ 7,500
Purchases. 72,000
Goods available for sale. 79,500 9.
Less: Ending invetory. (11,640) 10.
Cost of goods sold. $ 67,860 8.