ACG 2021 Lecture Notes - Lecture 5: Perpetual Inventory, Association To Advance Collegiate Schools Of Business, General Ledger

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Published on 28 Nov 2019
School
Department
Course
Professor
1
Horngren's Financial & Managerial Accounting, 4e (Nobles)
Chapter 5 Merchandising Operations
Learning Objective 5-1
1) A wholesaler is a merchandiser who buys merchandise from a manufacturer and sells the same to a
retailer.
Answer: TRUE
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
2) G-mart, a small-scale grocer, wants to introduce an inventory system to track its inventory. G-mart
does not currently use optical scanning registers and computer systems. The perpetual inventory system
is most suitable for its operations.
Answer: FALSE
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
3) When a company uses a perpetual inventory system, all merchandise transactions are updated as and
when they occur. As a result, the inventory account will show the current balance at all times.
Answer: TRUE
Diff: 2
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
4) Even in a perpetual inventory system that updates the inventory account as and when transactions
occur, the business must count its inventory at least once in a year.
Answer: TRUE
Diff: 2
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
5) A retailer purchases goods from a manufacturer and sells them to customers.
Answer: TRUE
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
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2
6) In a periodic inventory system, the Cost of Goods Sold account is continuously updated as and when
sales occur.
Answer: FALSE
Diff: 2
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
7) The perpetual inventory system keeps a running record of inventory and cost of goods sold.
Answer: TRUE
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
8) Which of the following line items will appear on the income statement of a merchandiser but not of a
service company?
A) Salaries Expense
B) Depreciation Expense
C) Cost of Goods Sold
D) Supplies Inventory
Answer: C
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
9) A wholesaler or a retailer needs to maintain stock to carry out its day-to-day operations. This stock is
known as ________.
A) accounts receivable
B) prepaid insurance
C) merchandise inventory
D) common stock
Answer: C
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
10) The term "inventory," for a merchandiser, refers to ________.
A) raw materials that are used for production
B) equipment that are used in production process
C) the cost of goods sold
D) goods held for sale to customers
Answer: D
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
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11) An entity that buys goods and sells them to customers at a markup is a ________.
A) merchandiser
B) service provider
C) manufacturer
D) producer
Answer: A
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
12) Gross profit is calculated as the difference between net sales revenue and ________.
A) purchases
B) cost of goods sold
C) cost of merchandise inventory
D) selling and administrative expenses
Answer: B
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
13) Best Value Inc. started its operations on January 1, 2015. It engages in buying and selling different
types of electronic gadgets. The first step in its operating cycle would be to ________.
A) collect cash from customers
B) sell goods to customers
C) purchase inventory from vendors
D) record the sales in accounts
Answer: C
Diff: 2
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
14) The main expense of a merchandiser is ________.
A) cost of goods sold
B) current assets
C) selling and administrative cost
D) production overheads
Answer: A
Diff: 1
LO: 5-1
AACSB: Concept
AICPA Functional: Measurement
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