1. LO 6.1 Which of the following is an example of a contra revenue account?

A. sales

B. merchandise inventory

C. sales discounts

D. accounts payable

Solution

2. LO 6.1 What accounts are used to recognize a retailer’s purchase from a manufacturer on credit?

A. accounts receivable, merchandise inventory

B. accounts payable, merchandise inventory

C. accounts payable, cash

D. sales, accounts receivable

Solution

3. LO 6.1 Which of the following numbers represents the discount percentage applied if a customer pays
within a discount window and credit terms are 3/15, n/60?

A. 3

B. 15

C. 60

D. 3 and 15

Solution

4. LO 6.1 If a customer purchases merchandise on credit and returns the defective merchandise before
payment, what accounts would recognize this transaction?

A. sales discount, cash

B. sales returns and allowances, cash

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 C. accounts receivable, sales discount

D. accounts receivable, sales returns and allowances

Solution

5. LO 6.2 Which of the following is a disadvantage of the perpetual inventory system?

A. Inventory information is in real-time.

B. Inventory is automatically updated.

C. It allows managers to make current decisions about purchases, stock, and sales.

D. It is cost-prohibitive.

Solution

6. LO 6.2 Which of the following is an advantage of the periodic inventory system?

A. frequent physical inventory counts

B. cost prohibitive

C. time consuming

D. real-time information for managers

Solution

7. LO 6.2 Which of the following is not a reason for the physical inventory count to differ from what is
recognized on the company’s books?

A. mismanagement

B. shrinkage

C. damage

D. sale of services to customers

Solution

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 8. LO 6.2 Which of the following is not included when computing Net Purchases?

A. purchase discounts

B. beginning inventory

C. purchase returns

D. purchase allowances

Solution

9. LO 6.3 Which of the following accounts are used when recording a purchase?

A. cash, merchandise inventory

B. accounts payable, merchandise inventory

C. A or B

D. cash, accounts payable

Solution

10. LO 6.3 A retailer pays on credit for $650 worth of inventory, terms 3/10, n/40. If the merchandiser
pays within the discount window, how much will the retailer remit in cash to the manufacturer?

A. $19.50

B. $630.50

C. $650

D. $195

Solution

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