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FAR SET2 - A basic reviewer for Financial Accounting and

Reporting 1
Accountancy (Far Eastern University)

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SET 2

NAME:
SECTION:

Instructions:
Write the letter of the correct answer before each number
Use Ballpen, no Erasure
Use Calculator, no Cellphone
No CR break during the quiz

PART I – THEORY (1 pt. each)

1. The expression 3/20, n/60 means

a. The invoice must be paid in 3 to 20 days, otherwise interest for 60 days will be charge.
b. A 30% discount is available if the invoice is paid in 20 to 60 days; otherwise the total invoice price is due.
c. A 3% discount is available if the invoice is paid within 20 days, otherwise, the total invoice price is due in 60
days.
d. A 15% (3/4 of 20) is available if the invoice is paid within 60 days.

2. These are expenses incurred in storing, promoting, packaging and delivering the merchandise such as Freight Out,
Sales Salaries, Advertising and Sales Commission.
a. Distribution expenses/Selling expenses c. Financing Charges
b. Administrative expenses d. Cost of Sales

3. The normal balance of sales discount is on ______ side of T-account.

a. Debit
b. Credit
c. Either debit or credit depending on circumstances.
d. No normal balance.

4. For a merchandise entity, the purchases accounts includes _________.

a. All items acquired for both short term and long term use.
b. Acquisition of item for resale.
c. Acquisition of short term asset.
d. Acquisition of supplies.

5. What does FOB destination mean:

a. Title passes at shipping point; seller pays transportation cost.
b. Title passes at shipping point; buyer pay transportation cost.
c. Title does not pass at shipping point, however, seller is responsible for the transportation cost.
d. Title does not pass at shipping point and seller is not responsible for the transportation cost.

6. Which of the following has no account of its own and requires no special accounting entry?
a. Freight out c. Trade discount
b. Purchase discount d. Freight - in

7. When comparing the statement of financial position of a service type of business to a merchandising one, the main
difference is on the recognition of ___________ in the latter.
a. Inventory account c. Accounts Receivable
b. Cash d. Accounts Payable

8. This method of inventory system records continuously the movement of the merchandise and shows the inventory
balance at any point of time.
a. Periodic inventory system c. Inventory count system
b. Weighted average inventory system d. Perpetual inventory system

9. Which of the following is not a contra account?

a. Sales discount c. Purchase returns and allowances
b. Purchase discounts d. Freight - in

10. A purchase discount results from ___________.

a. Returning goods to seller.
b. Receiving a purchase allowance from seller.
c. Buying large enough quantity of merchandise to get the discount.
d. Paying within the discount period.

11. In a merchandising operation, the sales account should include _______.

a. Only credit of merchandise.

Joshua 1: 9 “Have I not commanded you? Be strong and courageous. Do not be afraid; do not be discouraged, for
the LORD your God will be with you wherever you go.”

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SET 2

b. Only cash sales of merchandise.

c. Both cash and credit sales of merchandise.
d. Sales of both merchandise and other receivables of the business.

12. Which of the following statement is false?

a. The difference between list price and invoice price is equal to the amount of trade discount.
b. Trade discounts are convenient means of reducing list price to the invoice price.
c. Trade discounts are not entered in the accounting records.
d. Trade discounts are identical to cash discounts.

13. The major revenue for a merchandising business comes from selling goods or merchandise and is called
_____________.
a. Sales Revenue c. Merchandise inventory
b. Other revenues d. Cost of Sales

14. In the eyes of the seller under the terms FOB shipping point - Collect for the merchandise purchased, who paid the
freight at the point of shipment?
a. Buyer c. Freight company
b. Seller d. No one paid for the freight

15. In the eyes of the buyer under the terms FOB shipping point - Collect for the merchandise purchase, who must pay
for the freight at the point of shipment?
a. Buyer c. Freight company
b. Seller d. No one must pay for the freight

16. When a seller of merchandise allowed a customer a reduction from the original price for defective goods, the seller
will issue to a customer a

a. Debit memorandum c. Sales invoice

b. Credit memorandum d. Official receipt

17. 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 c. Transportation-in

b. Sales d. Accounts payable

18. The account that appears in the chart of account for a merchandising entity but not for a service activity is

a. Accounts receivable c. Sales returns and allowances

b. Advertising expense d. Accounts payable

19. The excess of net sales over the cost of goods sold is called

a. Gross profit c. Net income

b. Operating profit d. Merchandising income

20. The amount of cost of goods sold available for sale during the year depends on the amounts of

a. Beginning merchandise inventory and cost of goods sold

b. Beginning merchandise inventory, net purchases, and ending merchandise inventory
c. Beginning merchandise inventory, cost of goods sold, and ending merchandise inventory
d. Beginning merchandise inventory and net purchase

PART II – PROBLEMS (1.5 point each)

Joshua 1: 9 “Have I not commanded you? Be strong and courageous. Do not be afraid; do not be discouraged, for
the LORD your God will be with you wherever you go.”

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SET 2

21. An item for P50,000 subject to a trade discount of 15% is paid within the discount period on terms 5/10, n/30. What
is the amount of payment?
a. P40,375 c. P42,500
b. P 57,500 d. P50,000

22. Big Company had the following data for the period ended. Cash sales P200,000; credit sales of P140,000; sales
discounts P12,500; sales return P10,000; freight in P7,500 and freight out P8,000. The company would report Gross
Sales Revenue on its income statement of _________.
a. P340,000 c. P317,500
b. P326,500 d. P310,000

23. BA Company recorded the sale of P6,000. If the sale was subjected to a 20% trade discount, how much is the
invoice price?
a. P4,500 c. P7,500
b. P4,800 d. P6,000

24. Smile Company reported a net income of P40,000. If the net sales was P150,000 and a gross profit of 80,000,
operating expenses amounted to ______.
a. P70,000 c. P110,000
b. P40,000 d. P80,000

25. Happy Company paid an account with a list price of P15,625 which was purchased 8 days ago. Term of the purchase
are 4% trade discount, 3/10, n/30, FOB destination. The amount paid by Happy is _______.
a. P15,250 c. P15,000
b. P14,550 d. P14,500

26. During the year, Shy Store purchased goods worth P150,000. There were P40,000 unsold goods at the end of the
year but the old stock brought forward from last year’s purchases was P10,000. Cost of goods available for sale was
_____________.
a. P160,000 c. P110,000
b. P120,000 d. P190,000

27. During the year, Sad Store purchased goods worth P150,000. There were P40,000 unsold goods at the end of the
year but the old stock brought forward from last year’s purchases was P10,000. Cost of sale was _____________.
a. P160,000 c. P110,000
b. P120,000 d. P190,000

28. On October 1, Ace Company purchased P6,000 worth of goods on terms 2/15,n/30. Freight of P500 was prepaid by
the seller under the term FOB Shipping Point, goods worth P1,000 were returned and the account was paid on
October 3. How much cash was paid to the seller?
a. P5,400 c. P5,380
b. P5,390 d. P5,500

29. Net Sales amounted to P50,000 with cost of sales representing 75%. If operating expenses is 10% of sales, net
income will be ___________.
a. P5,000 c. P17,500
b. P12,500 d. P7,500

For items 30 to 33, use the following information:

Tamaraw Company reported the following information for the month ended October 2018:

30. How much is the Cost of Goods Available for Sale?

a. P26,034 c. P20,114
b. P28,034 d. P 20,144

31. How much is the operating expenses?

a. P28,000 c. P56,000

Joshua 1: 9 “Have I not commanded you? Be strong and courageous. Do not be afraid; do not be discouraged, for
the LORD your God will be with you wherever you go.”

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 lOMoARcPSD|7971880

SET 2

b. P30,000 d. P58,000

32. How much is the gross sales?

a. P200,000 c. P189,741
b. P171,650 d. P161, 391

33. How much is the gross profit?

a. P202,675 c. P141,247
b. P161,391 d. P144,685

34. An item retailing for P50,000 subject to a trade discount of 15% is paid for within the discount period on terms 5/10,
n/30. What is the amount of payment?
a. P 40,375 c. P 42,500
b. P 57,500 d. P 50,000

35. Blue Company had the following data for the period ended. Cash sales P200,000; credit sales of P140,000, sales
discounts P12,500; sales return P10,000; freight in P7,500 and freight out P8,000. The company would report net
sales revenue on its income statement for the amount of?
a. P 340,000 c. P 317,500
b. P 326,500 d. P 310,000

ANSWER KEY:
1. C
2. A

Joshua 1: 9 “Have I not commanded you? Be strong and courageous. Do not be afraid; do not be discouraged, for
the LORD your God will be with you wherever you go.”

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 lOMoARcPSD|7971880

SET 2

3. A
4. B
5. C
6. C
7. A
8. D
9. D
10. D
11. C
12. D
13. A
14. A
15. A
16. B
17. C
18. C
19. A
20. D
21. A
22. A
23. D
24. B
25. B
26. A
27. B
28. A
29. D
30. B
31. D
32. A
33. C
34. A
35. C

Joshua 1: 9 “Have I not commanded you? Be strong and courageous. Do not be afraid; do not be discouraged, for
the LORD your God will be with you wherever you go.”

Downloaded by Nico Bela (islanicole01@gmail.com)