BKAL1013 BUSINESS ACCOUNTING (A162)

Name: ______________________________ Matric no: ________ Group: _____

Tutorial 3: Topics 5 – MERCHANDISING BUSINESS

DUE DATE: 18 April 2017

1. A company that uses the perpetual inventory system sold RM50,000 of goods to a
customer on account. The inventory had been purchased by the company for RM40,000.
Which of the following journal entries correctly records the Cost of Goods Sold?

RM RM
A. Cost of goods sold 40,000
Sales revenue 40,000
B. Inventory 40,000
Cost of goods sold 40,000
C. Cost of goods sold 40,000
Inventory 40,000
D. Accounts receivable 40,000
Sales revenue 40,000

2. Rasaria company keeps track of its inventory using the perpetual inventory system. It
has recently purchased goods for RM55,000 and paid RM1,000 for the freight-in. The
company later, sold the goods to a Lazaria supermarket for RM80,000 on account.
Which of the following entries correctly record the sales revenue?

RM RM
A. Accounts receivable 80,000
Sales revenue 80,000
B. Inventory 80,000
Cost of goods sold 80,000
C. Cost of goods sold 80,000
Sales revenue 80,000
D. Sales revenue 80,000
Inventory 80,000

3. A company makes a purchase of RM15,000 of inventory, subject to credit terms of

2/10, n/30 and returns RM5,000 of inventory prior to payment. What is the amount of
the payment assuming payment is made within the discount period?

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A. RM9,800
B. RM19,600
C. RM14,700
D. RM10,000

4. Which of the following accounts will NOT appear on the cost of goods sold section on
the Income Statement? 
A. Purchases
B. Freight In
C. Sales returns and allowances
D. Merchandise inventory

5. Teja Sdn. Bhd. sold merchandise to Kempas Enterprise on account, RM35,000, terms
2/15, n45. The cost of the merchandise sold is RM24,500.  Teja Sdn. Bhd. issued a credit
memo for RM3,600 for merchandise returned that originally cost RM1,700.  Kempas
Enterprise paid the invoice within the discount period.  What is the amount of gross profit
earned by Teja Sdn. Bhd. on the above transactions? 
A. RM10,500
B. RM30,772
C. RM7,972
D. RM31,400

6. The beginning balance in its inventory account is RM1,500 and the ending balance is
RM1,000. Cost of goods sold is RM6,500. What was the amount of inventory purchased
during the year?
A. RM500
B. RM6,000
C. RM7,000
D. RM7,500

7. Cost of goods sold is equal to

A. the total amount of merchandise purchased during the year
B. the cost of merchandise purchased plus transportation-in costs less ending
inventory
C. the cost of merchandise purchased plus transportation-in costs plus beginning
inventory minus purchase returns and allowances and purchase discounts minus
ending inventory
D. the cost of merchandise purchased plus transportation-in costs plus beginning
inventory minus purchase returns and allowances and purchase discounts

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8. Calculate the net profit for Pekok Enterprise based on the data given below:
Sales RM 764,000
Selling Expenses 5,250
Cost of Merchandise Sold 5,380
Sale Discounts 7,100
Sales Return and Allowances 3,650

A. RM753,250
B. RM700,750
C. RM162,750
D. RM215,250

9. Which of the following is a TRUE statement about inventory systems?

A. Periodic inventory systems require more detailed inventory records
B. Perpetual inventory systems require more detailed inventory records
C. A periodic system requires cost of goods sold be determined after each sale
D. A perpetual system determines cost of goods sold only at the end of the
accounting period

10. A credit memorandum is used as documentation for a journal entry that requires a debit
to:
A. Sales and a credit to cash
B. Sales returns and allowances and a credit to accounts receivable
C. Accounts receivable and a credit to a contra-revenue account
D. Cash and a credit to sales returns and allowances

11. Under a perpetual inventory system, acquisition of merchandise for resale is debited to
the:
A. Merchandise inventory account
B. Purchase account
C. Supplies account
D. Cost of goods sold account

12. Which one of the following transactions is recorded with the same entry in a perpetual
and a periodic inventory system?
A. Cash received on account with a discount
B. Payment of freight costs on a purchase
C. Return of merchandise sold
D. Sale of merchandise on account

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13. If a purchaser using a perpetual system agrees to freight terms of FOB shipping point,
then the:

A. Merchandise inventory account will be increase

B. Merchandise inventory account will not be affected
C. Seller will bear the freight cost
D. Carrier will bear the freight cost

14. Nelo Enterprise sells merchandise for RM1,500 to Fata Enterprise with credit terms of
2/10, n/30, FOB shipping point. Nelo Enterprise paid in advance the transportation costs
of RM100, which were added to the invoice. Fata Enterprise returns RM300 of
merchandise that was damaged, along with a cheque to settle the account within the
discount period. What is the amount of the cheque?
A. RM1,570
B. RM1,470
C. RM1,274
D. RM1,276

15. Syarikat Ratib Couture purchased inventory from Syarikat Wini. The shipping costs were
RM400 and the terms of shipment were FOB shipping point. Syarikat Ratib Couture
would have the following entry regarding the shipping charges:

A. Freight expense 400

Cash 400

B. Freight-out 400
Cash 400

C. Merchandise inventory 400

Cash 400

D. There is no entry on Syarikat Hiasan Arif’s books for this transaction

16. BabaAli Company made a purchase of merchandise on credit from SamyAbu Company
on August 3, for RM6,000, terms 2/10, n/45. On August 10, BabaAli Company makes the
appropriate payment to SamyAbu Company. The entry on August 10 for BabaAli
Company, assuming BabaAli Company uses the perpetual inventory system, is:

A. Accounts payable 6,000

Cash 6,000

B. Accounts payable 5,880

Cash 5,880

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C. Accounts payable 6,000

Purchase returns and allowances 120
Cash 5,880

D. Accounts payable 6,000

Merchandise inventory 120
Cash 5,880

17. NikNor Company sells merchandise on account for RM2,000 to Tan Company with
credit terms of 2/10, n/30. Tan Company returns RM300 of merchandise that was
damaged, along with a cheque to settle the account within the discount period. What
entry does NikNor Company make upon receipt of the cheque assuming the returned
merchandise cannot be considered for resale in future?
A. Cash 1,700
Accounts Receivable 1,700

B. Cash 1,666
Sales returns and allowances 334
Accounts receivable 2,000

C. Cash 1,666
Sales returns and allowances 300
Sales discounts 34
Accounts receivables 2,000

D. Cash 1,960
Sales discounts 40
Sales returns and allowances 300
Accounts Receivables 1,700

Use the following information for questions 18 to 20:

On 30 July 2013, BizzCom Sdn Bhd purchased merchandise on account from KoolCom Sdn
Bhd, RM10,000, terms FOB destination, 3/15, n/30. Transportation cost was RM150. BizzCom
Sdn Bhd uses a perpetual inventory system.

18. What is the entry should be made by BizzCom Sdn Bhd to record the purchase of
merchandise on 30 July 2013?
A. Debit Inventory RM10,150 and credit Account Payable RM10,150
B. Debit Purchase RM10,000 and credit Account Payable RM10,000
C. Debit Inventory RM10,000 and credit Account Payable RM10,000
D. Debit Inventory RM10,150 and credit Cash RM10,150

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19. On 5 August 2013, BizzCom Sdn Bhd returned merchandise purchased on 30 July 2013
from KoolCom Sdn Bhd, RM1,000. The entry to record this transaction is:
A. Debit Cash RM1,000 and credit Inventory RM1,000
B. Debit Account Payable RM1,000 and credit Inventory RM1,000
C. Debit Inventory RM1,000 and credit Account Payable RM1,000
D. Debit Inventory RM1,000 and credit Cash RM1,000

20. On 10 August 2013, BizzCom Sdn Bhd paid KoolCom Sdn Bhd on account for purchase
of 30 July 2013. What is the entry to record this transaction?

A. Debit Account Payable RM10,000, credit Inventory RM300 and credit Cash
RM9,700
B. Debit Account Payable RM9,700 and credit Cash RM9,700
C. Debit Account Payable RM9,000, credit Inventory RM270 and credit Cash
RM8,730
D. Debit Account Payable RM9,000, credit Purchase Discounts RM270 and credit
Cash RM8,730

Use the following information for questions 21 to 22:

Zaim Resources uses the perpetual method for purchase of inventory RM5,000 on
account with terms of 2/10, n/30:

21. Which of the following entries would be made to record the payment if it is made within
10 days?

A. RM4,900 debit to Accounts payable, a RM100 debit to Inventory and a RM5,000

debit to Cash
B. RM5,000 debit to Accounts payable, a RM100 credit to Inventory and a RM4,900
credit to Cash
C. RM100 debit to Inventory, a RM5,000 debit to Accounts payable and a RM5,100
credit to Cash
D. RM5,000 credit to Cash, debit to Accounts payable RM5,000

22. Which of the following entries would be made to record the payment if the company paid
the vendor after 25 days and a defective inventory of RM500 is returned after 5 days of
purchased?

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A. RM4,500 debit to Accounts payable and a RM4,500 credit to Cash

B. RM4,410 debit to Accounts payable, a RM90 debit to Inventory and a RM4,500
credit to Cash
C. RM90 debit to Inventory, a RM4,410 debit to Accounts payable and a RM4,500
credit to Cash
D. RM4,500 debit to Accounts payable, a RM90 credit to Inventory and a RM4,410
credit to Cash

23. A company makes a purchase of RM15,000 of inventory, subject to credit terms of

2/10, n/30 and returns RM5,000 of inventory prior to payment. What is the
amount of the payment assuming payment is made within the discount period?

A. RM9,800
B. RM19,600
C. RM14,700
D. RM10,000

24. MWE Holdings purchased RM8,800 of merchandise on account, terms 3/10, n/30. If
payment was made within the discount period, the entry to record the payment under
the perpetual inventory system would include a credit to:

A. cash of RM8,800
B. inventory of RM8,536
C. accounts payable of RM8,800
D. cash of RM8,536

25. Freight costs incurred by the seller are recorded in the:

A. sales account.
B. cost of merchandise sold account.
C. transportation in account.
D. transportation out account.

26. The sales discount is based on:

A. invoice price plus transportation costs.

B. invoice price less discount.
C. invoice price plus transportation costs less returns and allowances.
D. invoice price less returns and allowances.

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27. Merchandise with an invoice price of RM7,000 is purchased with terms of 2/10, n/30,
FOB shipping point. Transportation costs paid by the buyer were RM125. What is the
cost of the merchandise purchased if payment is made during the discount period?

A. RM6,860.00
B. RM6,982.50
C. RM7,000.00
D. RM6,985.00

28. Cost of merchandise sold would be classified as a (an):

A. asset.
B. expense.
C. liability.
D. revenue.

29. The discount period for credit terms of 1/10, n/30 is:

A. 1 day.
B. 10 days.
C. 20 days.
D. 30 days.

30. In a perpetual inventory system, what accounts are credited when a customer returns
merchandise to the seller?

A. Sales Returns and Allowances and Accounts Receivable

B. Accounts Receivable and Cost of Merchandise Sold
C. Merchandise Inventory and Cost of Merchandise Sold
D. Sales Returns and Allowances and Merchandise Inventory

END OF QUESTIONS