SET 1

3. The perpetual inventory system is used most commonly by companies that sell

a. Low-priced, high-volume merchandise

b. Low-priced, low-volume merchandise
c. High priced, low-volume merchandise
d. High priced, high-volume merchandise

4. A merchandiser will earn a net income of exactly zero when

a. Net sales equals cost of goods sold

b. Cost of goods sold equals gross margin
c. Operating expenses equals net sales
d. Gross profit equals operating expenses

5. Net income will result if gross profit exceeds

a. Cost of goods sold c. Purchases

b. Operating expenses d. Sales

6. Which of the following is not considered an operating expense?

a. Cost of goods sold c. Transportation out

b. Advertising expenses d. Administrative expenses

7. Which of the following purchased goods would not be included in the merchandise inventory for a purchasing
company?

a. Goods in transit shipped FOB shipping point

b. Goods in transit shipped FOB destination
c. Goods ordered and received from supplier
d. Goods on hand in the showroom

8. A sale on March 21 with terms of n/10 is due to be collected by

a. March 31 c. April 10
b. April 1 d. No terms

9. An amount deducted from the list price/catalog price for an item of merchandise is called a

a. Trade discount c. Customer discount

b. Sales discount d. Purchase discount

10. Under perpetual inventory system, in addition to making the entry to record a sale, a company would

a. Debit Merchandise Inventory and credit Cost of Goods sold

b. Debit Cost of Goods sold and credit Purchases
c. Debit Cost of Goods sold and credit Merchandise Inventory
d. Make no additional entry until the end of the period

11. Under perpetual inventory system, in addition to making the entry to record a sales returns, a company would

a. Debit Merchandise Inventory and credit Cost of Goods sold

b. Debit Cost of Goods sold and credit Purchases
c. Debit Cost of Goods sold and credit Merchandise Inventory
d. Make no additional entry until the end of the period

12. The entry to record the return of goods from a customer would include a

a. Debit to Sales
b. Credit to Sales
c. Debit to Sales returns and Allowances
d. Credit to Sales returns and Allowances

Galatians 6: 9 "Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up."
SET 1

13. Under perpetual inventory system, the entry to record a purchase return would include a credit to

a. Accounts Payable c. Cost of Goods sold

b. Purchases returns and Allowances d. Merchandise Inventory

14. Merchandise inventory becomes a part of cost of goods sold when a company

a. Pays for the inventory c. Sells the Inventory

b. Purchases the inventory d. Received payment from the Customer

15. Which of the following is not considered in computing the net cost of purchases?

a. Purchase returns and allowances c. Transportation paid on purchased goods

b. Purchases d. Transportation paid on goods shipped to customer

16. The entry to record a sale of P7,500 with terms of 2/10, n/30 would include a

a. Debit to Sales discounts for P150 c. Credit to Accounts receivable for P7,500
b. Debit to Sales for P7,350 d. Credit to Sales for P7,500

17. The collection of a P4,000 account within the 2% discount period would result in a

a. Debit to Sales discounts for P80 c. Credit to cash for P3,920

b. Debit to Accounts receivable for P3,920 d. Credit to Accounts receivable for P3,920

18. The collection of a P5,000 account BEYOND the 2% discount period would result in a

a. Debit to Cash for P4,900 c. Credit to Cash for P5,000

b. Credit to Accounts receivable for P5,000 d. Debit to Sales discounts for P100

19. Goods totaling P50,000 were purchased February 2 with terms of 2/10, n/30. Returns of P10,000 were made on
February 10. What discounts, if any, can be availed of if the invoice was paid on February 12?

a. None c. P800
b. P1,000 d. P200

20. The entry to record payment on a P15,000 account within the 2% discount period would include a

a. Debit to Cash for P15,000 c. Credit to Purchases Discounts for P300

b. Debit to Accounts payable for P14,700 d. Credit to Accounts Payable for P15,000

PART II – PROBLEMS (1.5 point each)

21. Tee Co. recorded the sale of P6,000. If the sale was subject to a 20% trade discount and credit terms of 5/10, n/60,
the list price was___________.
a. P 4,500 c. P 7,500

Galatians 6: 9 "Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up."
SET 1

b. P 4,800 d. P 7,700

22. What sales price should be recorded when an item having a P90,000 list price is sold with 15% trade discount? The
sales invoice includes the terms 2/10, n/30.
a. P 74,700 c. P 78.300
b. P 76,500 d. P 80,000

23. On October 1, Green Company purchased P6,000 worth of goods on terms of 2/15, n/30. Freight of P500 was
prepaid by the seller under the term FOB shipping point, goods worth P1,000 were returned and the account was
paid October 3. How much discount was received from the seller?
a. P100 c. P 90
b. P 110 d. P 120

24. Tams Company reported a net loss of P40,000. Its net sales was P150,000 and a gross profit was 20% of net sales.
Operating expenses amounted to how much?
a. P 130,000 c. P 70,000
b. P 110,000 d. P 50,000

25. S Company sold merchandise to B Company on October 6, 2018 at a list price of P150,000, trade discounts of 5%
and 8%, FOB shipping point. Cash discount terms: 2/eom, n/60. Because defective merchandise amounting to
P10,000 was erroneously delivered, S Company issued a credit memorandum to the buyer on October 11, 2018. B
Company paid in full the balance due on October 25, 2018. The invoice price of goods purchased on October 6,
2018 is:

a. P131,100 c. P150,000
b. P130,500 d. P122,360

26. The following data are available for the months of April and May of the current year:
April May
Merchandise Inventory, beg P7,000 ?
Merchandise Inventory, end 6,500 7,500
Net Purchases 19,500 18,500
Net Sales 36,000 38,500
Operating expenses 12,200 14,900

27. How much is the gross profit/ gross margin for the month of April?
a. P17,000
b. P16,000
c. P4,800
d. P17,500

28. The cost of goods sold for the month of May is:
a. P13,000
b. P18,000
c. P17,500
d. P18,500

29. A buyer received an invoice for P6,000 dated June 10. If the terms were 2/10, n/30, and the buyer paid the invoice
within the discount period, what amount will the seller receive?

a. P 6,000 c. P 4,800
b. P 5,880 d. P 120

30. Rivera Company purchased merchandise from Dimatulac Suppliers for P3,600 list price, subject to a trade discount
of 25%. The goods were purchased on terms of 2/10, n/30, F.O.B. destination. Rivera paid P100 transportation costs.
Rivera returned P400 (list price) of the merchandise to Dimatulac and later paid the amount due within the discount
period. The amount paid is

a. 2,254 c. 2,246
b. 2,252 d. 2,352

31. Garcia Company which uses periodic inventory system, bought merchandise for P8,000, terms of 2/10, n/30. If
Garcia returns P2,000 of the goods to the vendor, the entry to record the return should include:

Galatians 6: 9 "Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up."
SET 1

a. Debit to accounts payable of P2,000

b. Debit to Merchandise Inventory P2,000
c. Credit to purchases returns and allowances of P1,960
d. Debit to purchases returns and allowances P1,960

32. The December 31, 2018 trial balance for Rueda Company included the following: Purchases, P40,000; Purchase
returns and allowances, P2,000; Transportation in, P3,000; ending inventory was P8,000. What was the cost of
goods sold for 2018?

a. 39,000 c. 38,000
b. 33,000 d. none of the above

33. On September 1, 2018, V Co. bought merchandise inventory worth P14,600 from R Co., terms of 2/10, n/20. On
September 6, 2018, the firm received a credit memorandum of P2,400 for defective merchandise returned. On
September 8, the company made a partial payment of P3,800. How much will V Co. pay to settle its account on
September 11,
2018?

a. P8,180 c. P8,156
b. P8,400 d. P8,232

34. Given the following data: Net Sales of P160,000; Sales returns of P15,000; Cost of Goods available for sale of
120,000; Purchase returns of P20,000. How much is the cost of goods sold if Gross profit is 30% of Net Sales.

a. P112,000 c. 101,500
b. P48,000 d. Impossible to determine

35. Given the following data: Net Sales of P156,000; Sales returns of P15,000; Cost of Goods available for sale of
120,000; Purchase returns of P20,000. How much is the Gross profit if Gross profit is 30% of Cost of goods sold.

a. P120,000 c. 101,500
b. P36,000 d. Impossible to determine

ANSWER KEY:

1. C

2. A

3. C

Galatians 6: 9 "Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up."
SET 1

4. D

5. B

6. A

7. B

8. A

9. A

10. C
11. A
12. C
13. D
14. C
15. D 16. D
17. A
18. B 19. C 20. C 21. C
22. B
23. A
24. C
25. A
26.
27. B
28. C
29. B
30. B
31. A
32. B
33. D
34. A
35. A

Galatians 6: 9 "Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up."