Chapter 6—Accounting for Merchandising Businesses [Multiple Choice]

1. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer
for $18,000. The seller paid transportation costs of $1,000 and issued a credit memorandum for
$5,000 prior to payment. What is the amount of the cash discount allowable?
a. $190
b. $180
c. $170
d. $130
ANS: D DIF: 3 OBJ: 02c

2. If the seller is to pay the transportation costs of delivering merchandise, the delivery
terms are stated as:
a. FOB shipping point
b. FOB destination
c. FOB n/30
d. FOB seller
ANS: B DIF: 1 OBJ: 02c

3. If title to merchandise purchases passes to the buyer when the goods are shipped from the
seller, the terms are:
a. n/30
b. FOB shipping point
c. FOB destination
d. consigned
ANS: B DIF: 1 OBJ: 02c

4. If title to merchandise purchases passes to the buyer when the goods are delivered to the
buyer, the terms are:
a. consigned
b. n/30
c. FOB shipping point
d. FOB destination
ANS: D DIF: 1 OBJ: 02c

5. Merchandise with an invoice price of $5,000 is purchased subject to terms of 2/10, n/30, FOB
shipping point. Transportation costs paid by the seller totaled $150. What is the cost of
the merchandise purchased?
a. $5,150
b. $4,900
c. $5,025
d. $5,050
ANS: D DIF: 3 OBJ: 02c

6. Merchandise with an invoice price of $5,000 is purchased subject to terms of 2/10, n/30, FOB
destination. Transportation costs paid by the seller totaled $125. What is the cost of the
merchandise?
a. $5,150
b. $5,050
c. $5,000
d. $4,900
 ANS: D DIF: 3 OBJ: 02c
7. When goods are shipped FOB destination and the seller pays the transportation charges, the
buyer
a. journalizes a reduction for the cost of the merchandise.
b. journalizes a reimbursement to the seller.
c. does not take a discount.
d. makes no journal entry for the transportation.
ANS: D DIF: 2 OBJ: 02d

8. X sold Y merchandise on account FOB shipping point, 2/10, net 30, for $10,000. X prepaid the
$200 shipping charge. Which of the following entries does X make to record t his sale?
a. Accounts Receivable-Y, debit $10,000; Sales, credit $10,000
b. Accounts Receivable-Y, debit $10,000; Sales, credit $10,000, and
Accounts Receivable-Y, debit $200; Cash, credit $200
c. Accounts Receivable-Y, debit $10,400; Sales, credit $10,400
d. Accounts Receivable-Y, debit $10,000; Sales, credit $10,000, and Transportation Out,
debit $200; Cash, credit $200
ANS: B DIF: 3 OBJ: 02d

9. X sold Y merchandise on account FOB shipping point, 2/10, net 30, for $10,000. X prepaid the
$200 shipping charge. Which of the following entries will Y make if Y pays within the discount
period?
a. Accounts Payable-X, debit $10,000; Transportation In, credit $200; Cash, credit $9,800
b. Accounts Payable-X, debit $10,200; Merchandise Inventory, credit $200; Cash, credit
$10,000
c. Accounts Payable-X, debit $10,000; Transportation In, debit $200; Cash, credit $10,200
d. Accounts Payable-X, debit $10,200; Merchandise Inventory, debit $200; Cash, credit
$10,400
ANS: B DIF: 3 OBJ: 02d

10. A chart of accounts for a merchandising business usually:

a. is the same as the chart of accounts for a service business
b. requires more accounts than does the chart of accounts for a service business
c. is standardized by the FASB for all merchandising businesses
d. does not have a Cost of Goods Sold account if a perpetual inventory system is used
ANS: B DIF: 3 OBJ: 03