MOCK QUIZ

FAR

TEST I. Multiple choice (30% - 1.5 points each). Select the best answer. Write your answers in
the answer sheet provided to you. Write your answers in capital letters.
1. In merchandising operations, the Sales account will be recorded if the seller sells
a. assets that the company owns.
b. goods or merchandise only.
c. goods or merchandise on cash basis.
d. goods or merchandise with discount.
2. Which of the following discounts has no account of its own and requires no special accounting
entry?
a. cash discount
b. trade discount
c. sales discount
d. purchase discount
3. Which of the following would not be included in merchandise inventory for a purchasing
company?
a. Goods in transit shipped FOB shipping point.
b. Goods in transit shipped FOB destination.
c. Goods on hand in the showroom.
d. Goods ordered and received from the supplier.
4. A sale on May 21 with terms of 2/10; n/30 is due to be collected by
a. May 23
b. May 31
c. June 20
d. June 1
5. 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
b. Transportation in
c. Accounts payable
d. Sales
6. Under the perpetual inventory system, the entry to record a sales return would include a debit to
a. Accounts receivable
b. Sales discount
c. Cost of goods sold
d. Merchandise inventory
7. Which of the following is not considered in computing net cost of purchases?
a. Transportation cost paid on purchased goods
b. Transportation cost paid on goods shipped to customers
c. Purchase returns and allowances
d. Purchases
8. FOB shipping point means
a. title passes at shipping point; seller pays transportation cost
b. title passes at shipping point; buyer pays transportation cost
c. title does not pass at shipping point; however, buyer is responsible for the transportation cost
d. none of the above
9. Which of the following statement is false?
a. Cash discounts are a convenient means of reducing prices to invoice prices.
b. Cash discounts are used to encourage customers to make prompt discount payments.
c. Cash discounts may be offered in conjunction with trade discounts.
d. From the seller’s point of view, the terms “cash discount” and “sales discount” are the same.
10. If a customer returns goods to a merchandiser, what effect will the return have on the books of
the merchandiser?
a. a increase in sales account
b. a decrease in the accounts payable and allowance accounts
c. an increase in the purchase return and allowance account
d. an increase in the sales returns and allowance account
11. Sales return and allowances is classified in the financial statements as:
a. an expense account
b. a revenue account
c. a contra revenue account
d. a cost of goods sold account
12. Which of the following statement is false?
a. The difference between list price and invoice price is equal to the amount of the trade
discount.
b. Trade discounts are a convenient way of reducing list price to invoice price.

c. Trade discounts are not entered in the accounting records.

d. Trade discounts are identical to cash discounts.
13. A physical inventory count is usually taken
a. in the middle of the accounting period
b. at the end of the accounting period
 c. at the start of the accounting period
d. at the peak of the busy season
14. A purchase discount results from
a. buying a large enough quantity of merchandise to get the discount
b. returning goods to the seller
c. receiving a purchase allowance from the seller
d. paying within the discount
15. Revenue is normally entered in the accounting records when:
a. goods are received
b. goods are sold
c. a customer pays for the goods
d. a customer orders goods
16. It is the largest single expense of the merchandising business. It is the cost of inventory that the
entity has sold to customers.
a. ending inventory
b. total goods available for sale
c. purchases and beginning inventory
d. cost of goods sold
17. I. The chart of accounts for a merchandising entity differs from that of a service entity.
II. Discounts offered to the buyer to encourage early payment are trade discounts.
III. If the seller is to shoulder the cost of delivery, the term is stated as FOB destination.
IV. The ending inventory of one period is the beginning of the next period.
a. Only one statement is true.
b. Only two statements are true.
c. Only three statement s are true.
d. All statements are true.
18. When a seller allowed a reduction from the original price for defective goods, the seller will issue
to the customer a
a. debit memorandum
b. sales invoice
c. credit memorandum
d. official receipt
19. Theoretically, cash discounts permitted on purchased inventory should be
a. Added to other income, whether taken or not.
b. Added to other income, only if the discount is taken.
c. Deducted from inventory, whether taken or not.
d. Deducted from inventory, only if the discount is taken.
20. When partial payment was made by the buyer for merchandise purchased on account with terms
2/10; n/30, what will happen when full payment will be made after the discount period?
a. Partial discount will be given to the buyer in proportion to the amount paid within the
discount period.
b. A 2% discount will be given for the whole amount purchased.
c. No discount will be given at all.
d. A 2% discount will be given as long as it was paid within 30 days upon purchase.

Test II. Problem solving. (70% - 2.8 points each number).

PROBLEM A.
The accounts below were taken from the adjusted trial balance of JPIA Company at December
31, 2013:
Cash P240,000 CA
Notes receivable 125,000 CA
Accounts receivable 235,000 CA
Allowance for doubtful accounts 45,000 -CA
Notes payable 250,000 CL 100,000
Accounts payable 75,000 CL
Merchandise inventory, January 1 100,000
Office supplies 35,000 CA
Machinery, net 350,000
Land 890,000
Income tax payable 87,000 CL
SSS payable 24,000 CL
Prepaid insurance 12,000 CA
Freight-out 15,000
Accrued expenses 33,000 CL

Merchandise inventory per physical count at the end of the year amounts to P125,000 and the
notes payable is payable starting December 31, 2014 at P100,000 per year. It is a non-interest bearing
note. At the end of the year:
1. How much is the amount of current assets? 727,000
2. How much is the amount of current liabilities? 319,000

PROBLEM B
Angelo Corp. reports operating expenses in two categories: (1) selling and (2) general and
administrative. The adjusted trial balance at December 31, 2013, included the following expense
accounts:

Accounting and legal fees P120,000 GAE

Advertising expense 150,000 SE
Transportation-out 75,000 SE
Sales discount 60,000
Bad debts 30,000 GAE
Officer’s salaries 180,000 GAE
Rent for office space 160,000 80/80
Sales salaries and commissions 110,000 SE
Store supplies expense 12,500 SE
Depreciation – Office building 125,000 GAE
One-half of the rented premises were occupied by the sales department.
3. How much of the expenses listed above should be included in Angelo’s selling expenses for
2013? 427,500
4. How much of the expenses listed above should be included in Angelo’s general and
administrative expenses for 2013? 535,000

PROBLEM C
ADRIAN Co. uses the periodic inventory system and begins with P35,000 inventory. During the year,
ADRIAN purchases P480,000 of additional inventory and cost of goods sold amounts to P450,000; gross
profit, P145,000.

5. What is the balance of the inventory account to be presented in the Statement of Financial
position of Adrian Company as at the end of the year? 65,000

BEGINNING INVENTORY 35,000

PURCHASES 480,000
TGAS 515,000
Less: COGS 450,000
Ending inventory 65,000

PROBLEM D
Beginning inventory of Faye Co. is P420,000; However, management wants to limit inventory on hand at
year end at P240,000. If Net Sales for the year are projected to be P1,350,000 and Gross Profit
amounted to 40% of cost;

6. How much is the amount of gross profit? 385,714.29

7. How much is the amount of merchandise purchased by Faye Co.? 784,285.71

Net sales 1,350,000.00

Cost of goods sold (1,350,000/1.4) 964,285.71
Gross profit 385,714.29

Cost of goods sold (1,350,000/1.4) 964,285.71

Add: Ending inventory 240,000.00
TGAS 1,204,285.71
Less: Beginning inventory 420,000.00
Purchases 784,285.71

PROBLEM E
Compute the amount received by MIKE Co.
Sales Inv. Date List Price Trade Terms Freight Date Paid
Discount Cost
8. Oct. 16 P200,000 30%;20% 2/10 n/30 P4,000 Oct. 20
FOB Dest;
109,760 Prepaid
9. Sept. 7 P140,000 30%10% 2/10 n/30 P5,000 Sept. 15
FOB
91,436 ship.pt
Prepaid
10. Apr. 16 P100,000 30%;10%;5% 1/10 FOB P6,000 Apr. 27
ship.pt
59,850 collect

Invoice price (200,000 x 0.7 x 0.8) 112,000

Less: 2% discount 2,240
Cash received 109,760

Invoice price (140,000 x 0.7 x 0.9) 88,200

Less: 2% discount 1,764
Total 86,436
Add: Freight 5,000
Cash received 91,436

Invoice price (100,000 x 0.7 x 0.9 x 0.95) 59,850

PROBLEM F
On January 1, 2013, SLURPEE Co. bought merchandise worth P132,000, terms 3/15;n/60. On January 8,
the firm received a credit memo for P32,000 of defective merchandise returned. On Jan. 18, SLURPEE
paid the full amount.
11. How much will SLURPEE pay to settle its account? 100,000
12. How much is the balance of the sales discount account after the January 18 transaction? -0-

Purchases 132,000
Less: Purchase returns 32,000
Cash paid 100,000

No discount since it is paid beyond the discount period -0-

PROBLEM G
ALFRED Co. purchased merchandise from VIVIAN Co. for P30,600 list price subject to a trade discount
of 25%. The goods were purchased on terms of 2/10; n/30 fob destination - freight prepaid; P1,000.
ALFRED returned P4,000 of the merchandise to VIVIAN and later paid the amount due within the
discount period.
13. How much is the amount paid by ALFRED Co.? 18,571

List price 30,600

Less: Trade discount 7,650
Invoice price 22,950
Less: Purchase returns 4,000
Balance 18,950
Less: Purchase discount (18,950 x 2%) 379
Cash paid 18,571

PROBLEM H
Camille Co. purchased an item of merchandise quoted and listed at P280,000 under the following terms:
trade discount 10%; 20%; 30% fob destination; freight-collect ,freight cost is P15,000;
14. At what amount should the merchandise be recorded in the books, assuming Camille Co. uses
the Perpetual inventory system? 141,120
15. How much will be the amount of the Freight-in account in the books of Camille Company
assuming the company uses the Periodic inventory system? -0-

List price 280,000

Invoice price (280,000 x 0.9 x 0.8 x 0.7) 141,120

Since the term is FOB destination freight should be shouldered by the SELLER -0-

PROBLEM I
Given:
Sales P430,000; Purchases P218,000; Ending inventory P110,000; Purchase returns P20,000;
Sales returns P40,000; Freight in P22,000; Freight out P10,000; Operating expenses P102,000; Gross
Profit is 40% of net sales.
From the data given:
16. How much is the beginning inventory? 124,000
17. How much is the increase or decrease in Merchandise inventory? DECREASE BY 14,000

Sales 430,000
Less: Sales returns 40,000
Net sales 390,000
Less: COGS
Beginning inventory 124,000
Add: Purchases 218,000
Freight-in 22,000
Purchase returns (20,000) 220,000
TGAS 344,000
Less: Ending inventory 110,000 234,000
Gross profit (40% of net sales) (390,000 x 40%) 156,000
PROBLEM J

Cathy Company maintains a gross profit of 40% based on sales. The company’s selling and
administrative expenses average 30% of sales. For 2015, sales amounted to P2,400,000 while inventory
beginning and ending amounts to P264,000 and P188,000, respectively.
18. Based on the given information, how much is Cathy Company’s Net Income for the year?
240,000

Sales 2,400,000

GP (2,400,000 x 40%) 960,000

Less: SAExp (2,400,000 x 30%) 720,000
NET INCOME 240,000

PROBLEM K

On January 1, 2015, Duterte Co. sold merchandise with an invoice price of P1,500,000 (Disregard VAT)
to Robredo Co. Credit terms 3/10, n/30. On January 3 , Robredo Co. returned damaged goods and was
issued a credit memo for P126,000. Robredo Co. paid half of the account on January 10 and on January
31 paid the whole amount.
19. How much was collected from Robredo Co. on January 31? 687,000
20. How much is the balance of net sales to be presented in the Statement of Comprehensive
Income? 1,374,000

Sales 1,500,000
Less: Sales returns 126,000
Net sales 1,374,000
X 50% X 50%
Balance 687,000

PROBLEM L
Arriba Amor Co. had the following data for 2015:
Gross Profit P540,000 Net Income P50,000
Purchases P320,000 Decrease in Inventory P15,000
21. What is the amount of sales for 2015? 875,000

Gross profit 540,000

Purchases 320,000
Decrease in inventory 15,000
Cost of goods sold 335,000
SALES 875,000

PROBLEM M
Use the following information to answer questions 22 to 25:
Debit Credit
Sales P750,000
Sales Returns and Allowances P15,000
Sales Discounts P10,000
Purchases P170,000
Purchase Returns and Allowances P20,000
Transportation – in P30,000
Selling Expenses P75,000
General and Administrative Exp. P275,000

In addition, the beginning merchandise inventory was P55,000 and ending merchandise Inventory was
P35,000.
22. Net Sales for the period were ______________. 725,000
23. Net Purchases for the period were ______________. 180,000
24. Cost of sales for the period was ______________. 200,000
25. Net income for the period was _______________. 175,000

Sales 750,000
Less: Sales returns and allowances 15,000
Sales discounts 10,000 25,000
Net sales 725,000
Less: Cost of goods sold
BI 55,000
Add: Purchases 170,000
Freight-in 30,000
PRA (20,000) 180,000
 TGAS 235,000
Less: EI 35,000 200,000
GP 525,000
Less: SE 75,000
GAE 275,000 350,000
NET INCOME 175,000

END OF EXAMINATION!!!
THINK! No matter how it hurts.

Be honest.
Even if others are not…….
Even if others will not……..
Even if others cannot………!!!

Fundamentals of Accounting 1
BSA 101
2nd Semester, Academic Year 2015-2016
QUIZ 5 – Merchandising Operations

ANSWER SHEET

NAME: _____________________________ SCORE: ________

YEAR & SECTION: _____________________

NAME:

SECTION: SCORE:

Test I. 30 points TEST II. 70 points (2.5 points/item)

1. B 1. 727,000

2. B 2. 319,000

3. B 3. 427,500

4. C 4. 535,000

5. A 5. 65,000

6. D 6. 385,714.29

7. B 7. 784,285.71

8. B 8. 109,760

9. A 9. 91,436

10. D 10. 59,850

11. C 11. 100,000

12. D 12. -0-

13. B 13. 18,571

14. D 14. 141,120

15. B 15. -0-

16. D 16. 124,000

17. C 17. Dec by 14,000

18. C 18. 240,000

19. D 19. 687,000

20. C 20. 1,374,000

21. 875,000
22. 725,000

23. 180,000

24. 200,000

25. 160,000