TRUE OR FALSE

1. If the seller is to shoulder the cost of delivering the goods, the terms are stated
F.O.B. Destination.
2. Freight out is added to the cost of merchandise purchased to compute for the cost of goods
sold.
4. If the buyer is to shoulder the cost of delivering the goods, the terms are F.O.B. Shipping
point.
5. Deductions made from the list price are called sales discount.
6. Beginning merchandise inventory plus net purchases is equal to total cost of goods sold.
7. A discount given to induce prompt payment is called trade discount.
8. Closing entries are prepared at the end of the accounting period to zero out all the accounts
with balances.
9. The physical count of merchandise at the end of the accounting period is needed to compute
for the cost of goods sold if perpetual inventory system is used by the company.
10. There should be a physical count of inventory under the perpetual inventory system in order
to compute the cost of sales.
11. Freight in is classified as selling expense.
12. Under the periodic inventory system, the entry to record the purchase of merchandise on
account is debit Purchases and credit Accounts Payable.
13. In a worksheet, when the total of the credit column of the Income Statement exceeds the
total of the debit column, it signifies a “profit”.
14. Office supplies purchased for office use should be debited to " Purchases".
15. Sales discounts and Sales returns and allowances are contra revenue accounts that should
be added to Sales account.
16. The periodic inventory system requires recording the cost of each sales as it occurs.
17. Failure to prepare an adjusting entry to record accrued income will result to have an
overstated profit.
18. The general principles of accounting applicable to a service type of a firm is not applicable
to merchandising firm.
19. Reversing entries are prepared at the beginning of the new accounting period to reverse
certain types of adjusting entries made at the end of the preceding period.
20. Office supplies purchased to be used in the office of the firm should be debited to
"Purchases" account.
21. Failure to prepare an adjusting entry to record accrued income will result to have overstated
profit.
22. The difference between revenues from sales and cost of sales is gross profit.
23. The terms freight prepaid and freight collect will dictate who pays the transportation costs.
24. The account "Sales" should be credited for merchandise sold on cash basis only.
25. Petty Cash Fund account is credited for every disbursement made out of petty cash fund.
26. The unreplenished petty cash voucher should be adjusted at the end of the accounting
period to avoid overstatement of income and assets.
27. A special journal that contains columns for cash, purchases discounts, and accounts payable
is a Cash Payment Journal.
28. All types of business transactions cannot be recorded or journalized in one type of journal
only.
29. Purchases Returns and Allowances account is credited when the merchandise is returned to
the creditor.
 Matching Type
Chart of Accounts Deferred Revenue Chart of Accounts
Adjusting Entry Deferred Expense Purchases
Accrued Expense Trade Discounts Credit Memorandum
Sales Accrued Revenue Income Summary
Depreciation Income Trial Balance
Debit Memorandum Footing

1. This is used for summarizing the data for the revenue and expense account.
2. An expense that is already incurred but not yet paid.
3. It is a deduction from the price of goods purchased to arrive at the selling price.
4. Major source of revenue of a merchandising business
5. List of account titles classified or arranged according the to statement wherein they
appear
6. This is a temporary account used to accumulate the total cost of merchandise acquired
during an accounting period.
7. An expense that is already paid but not yet incurred.
8. Inflow of future economic benefits that increase equity, other than contribution or
investment by owners.
9. An income that is already earned but not yet received or collected.
10. Advance payment by the customer for products that are not yet delivered and earned by
the business.
11. Shows the equality of the debit and credits
12. A form used by the seller to notify the buyer that his account is being reduced.
13. An entry that splits the nominal and real accounts from mixed account.
14. A form used by the buyer to notify the seller that his account is debited or reduced.
15. List of account titles classified or arranged according the to statement wherein they
appear
Short Problems
1. On March 1, 2020, Morrice Company sold merchandise with a list price of P 250,000.
Terms: 20,10, 2/10,n/30. How much is the amount to be received by the seller within
the discount period?
2. A buyer received an invoice for P15,000 dated Oct. 12, in which P1,000 worth of
merchandise had been returned and P500 freight had been paid by the seller to be
charged to the buyer. If the credit terms are 2/10/30 and the buyer pays the invoice
within the discount period, how much should be received by the seller?
3. On March 1, 2020, Morrice Company sold merchandise with a list price of P 250,000.
Terms: 20,10, 2/10,n/30. How much will be recorded as sales discounts if the amount
due is collected within the discount period.
4. If the merchandise is sold on account to a customer for P50,000, termed FOB shipping
point, 10, 5, 2/10, n/30, and the seller prepays P5,000 in transportation costs, the
amount that would be recorded on the books for purchases would be:
5. On March 1, 2020, Morrice Company sold merchandise with a list price of P250,000.
Terms: 20,10, 2/10,n/30. How much will be recorded as sales?
6. Using the data below, how much is the cost of goods sold using the FIFO periodic
method?
Units Unit Cost Total cost
January 1 Inventory on hand 200 1,500 300,000
April 3 Purchase 300 1,750 525,000
October 1 Purchase 500 2,000 1,000,000

The entity sold 400 units on June 2 and 400 units on December 10.

7. Using the data below, determine the cost of inventory which will be reported at the end
of the period if the company is using FIFO - periodic inventory method
Units Unit Cost Total Cost
January 1 Inventory on hand 50 P100 P5,000.00
Jan 15 Purchase 100 P110 11,000.00
Jan 18 Sales 75
Jan. 30 Purchase 50 P115 5,750.00
 8. On November 1, 2021, A Company established an imprest petty cash fund for P15,000.
On November 20, the fund contained the following:
Currency and coins P8,000
Receipts for office supplies 4,000
Receipts for postage 2,000
Receipts for transportation 1,000
On November 20, the company wrote a check to replenish the fund. The journal entry to
record the replenishment under imprest system will have a credit to ____ of _____.

9. If the merchandise is sold on account to a customer for P5,000, termed FOB shipping
point 1/10, n/30, and the seller prepays P250 in transportation costs, the amount of
discount for early payment would be: