Mid Exam for Prepare Financial Report and Merchandising Business

Name: __________________________________________

Part I : Choose the best answer from the given alternatives

1. ___________ is the process of allocating to expense the cost of a plant asset over its
useful (service) life in a rational and systematic manner.
A. Depreciation B. Depletion C. Amortization D. All
2. Net Solutions sold merchandise on account for $18,000 terms of 2/10, n/30. What is the
discount?
A. 36 B. 30. C. 10 D. 360
3. If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending
inventory is $50,000, cost of goods sold is:
A. $390,000 B. $330,000 C. $370,000 D. $420,000
4. Assume that equipment was purchased on January 1, 2011 as follows: initial cost $24,000
expected useful life 5 years estimated residual value $2,000. Compute the Accumulated
depreciation of equipment in December 31, 2011 by using DOUBLE DECLINE
BALANCE Method.
A. $ 4,400 B. $8,800 C. $9,600 D. $17,200
5. A company purchased a new truck at a cost of $42,000 on January 1, 2004. The truck is
estimated to have a useful life of 6 years and a salvage value of $3,000. Which of the
following will be included in the journal entry recorded on December 31, 2004?
A. Credit Depreciation Expense $6,500. B. Credit Accumulated Depreciation $3,250.
C. Debit Depreciation Expense $4,000. D. Credit Accumulated Depreciation $6,500.

Part Two: Matching

A B
1. Straight line A. Most accelerated depreciation
2. Units of productivity B. Measured solely by the passage of time
3. Double Declining Balance C. Depreciation cost per unit
4. Sum of The years digit D. Common denominator
5. Sales minus cost of goods sold E. Accumulated Depreciation
F. Annual depreciation expense
G. Net income
H. Gross Profit

Part Three: Work out

1. The following transactions were completed by Montrose Company during May of the
current year. Montrose Company uses a perpetual inventory system.
May 3. Purchased merchandise on account from Floyd Co.,$4,000,terms FOB
shipping point,2/10, n/30,with prepaid freight of $120added to the invoice.
May 5. Purchased merchandise on account from Kramer Co., $8,500, terms FOB
destination, 1/10, n/30.
 6. Sold merchandise on account to C.F. Howell Co. with price of $4,000 terms 2/10,n/30.The
cost of the merchandise sold was $1,125.
8. Purchased office supplies for cash, $150.
10. Returned merchandise purchased on May 5 from Kramer Co., $1,300.
13. Paid Floyd Co. on account for purchase of May 3, less discount.
14. Purchased merchandise for cash, $10,500.
15. Paid Kramer Co. on account for purchase of May 5, less return of May 10 and discount.
16. Received cash on account from sale of May 6 to C. F. Howell Co., less discount.
19. Sold merchandise on MasterCard credit cards, $2,450. The cost of the merchandise sold was
$980.
22. Sold merchandise on account to Comer Co., $3,480, terms 2/10, n/30. The cost of the
merchandise sold was $1,400.
24. Sold merchandise for cash, $4,350. The cost of the merchandise sold was $1,750.
25. Received merchandise returned by Comer Co. from sale on May 22, $1,480. The cost of the
returned merchandise was $600.
31. Paid a service processing fee of $140 for MasterCard sales.
Instructions
1. Journalize each transaction in a two-column journal.

2. Based on the following data, determine the cost of merchandise sold for May.
Merchandise inventory, May 1 . . . . . . . . . . . . . . . . $121,200
Merchandise inventory, May 31 . . . . . . . . . . . . . . . 142,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985,000
Purchases returns and allowances . . . . . . . . . . . . . 23,500
Purchases discounts . . . . . . . . . . . . . . . . . . . . . . . . 21,000
Freight in….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,300