Weekly quiz

1. Quiz Week 6 MBA Professionals Section A Financial Accounting I
Lahore School Of Economics Page 1
1. When merchandise inventory is purchased with credit terms of 2/10, n/60, the credit
period is 60 days from date of the invoice.
True / False
2. Merchandise purchased on June 8 with credit terms of 2/10, n/30, must be paid sooner
than with credit terms of n/10 EOM.
True / False
3. under the periodic inventory system, inventory shrinkage, theft, and spoilage are
accounted for in a special account.
True / False
4. An inventory system in which the business has up-to-date data as to the quantity of goods
on hand is called a periodic inventory system.
True / False
5. A deduction allowed from the invoice price of goods if payment is made within a specified
period of time is called a trade discount.
True / False
6. Merchandise with a list price of $100, subject to a trade discount of 40 percent and sold
with credit terms of 2/10, n/60, would cost the buyer $58.80 if payment is made within the
discount period.
True / False
7. When goods are shipped under freight terms of FOB shipping point (FOB factory), the
buyer of the goods pays the freight charges.
True / False
8. When a return of merchandise requires the buyer to notify the seller of the reduction in the
invoice due to the return, the memorandum sent by the buyer is called a debit memorandum.
True / False
9. The cost of goods sold is determined by adding the cost of purchases to the beginning
merchandise inventory and subtracting the ending merchandise inventory.
True / False
10. An income statement in which the details of the cost of goods sold are shown is called a
single-step income statement.
True / False

2. Quiz Week 6 MBA Professionals Section A Financial Accounting I
Lahore School Of Economics Page 2
11. In a periodic inventory system, transportation charges for merchandise are added to net
purchases to determine the cost of goods purchased.
True / False
12. In a perpetual inventory system, transportation charges are recorded with a debit to the
merchandise inventory account.
True / False
13. Transportation-In, Freight-In, and Delivery Expense are all the same account.
True / False
14. Under a periodic system with inventory included in the closing entry procedure, the
Credit column of the Income Statement columns of the work sheet will likely contain more
than revenue account balances.
True / False
15. The purpose of including the Merchandise Inventory account (a real account) in the
closing procedure is to close the beginning balance to the Income Summary account and
enter the unsold balance in the Merchandise Inventory account (periodic system).
True / False
16. The steps in the accounting cycle are different for a merchandising business than they
are for a service business.
True / False
17. If net sales for the business totals $150,000, gross profit is $65,000, and net income is
$40,000, then the cost of goods sold will total $25,000.
True / False
18. If net sales for the business total $50,000, gross margin is $24,000, and net income is
$4,000, then the operating expenses for this company will total $20,000.
True / False
19. The income statement for the period shows a net loss for the year of $4,500. When the
closing entries are prepared, this net loss will be closed into the Capital account of a
proprietorship business with a debit to the Income Summary account and a credit to the
Retained Earnings account.
True / False

3. Quiz Week 6 MBA Professionals Section A Financial Accounting I
Lahore School Of Economics Page 3
20. Operating expenses include general expenses, administrative expenses, and cost of
goods sold.
True / False
21. Merchandise with a list price of $2,000 is sold with a trade discount of 30% and cash
terms of 2/10, n/30. If the merchandise is paid for within the discount period, the total cost
will be $1,372.
True / False
22. Merchandise is purchased FOB shipping point. The seller will pay the freight charges.
True / False