ACCT 201 Exam 2 Practice Questions
with Accurate Answers 2025.
Operating cycles - Answer the cycle of a merchandising company ordinarily is longer than that
of a service company
Flow of costs - Answer beginning inventory + cost of goods purchased = cost of goods available
for sale = ending inventory + cost of goods sold
Perpetual inventory system - Answer companies keep detailed records of the cost of each
inventory purchase and sale. records are continuously updated
- determine cost of goods sold each time a sale occurs
Periodic inventory system - Answer companies determine cost of goods sold only at the end of
the accounting period
Recording purchases - Answer companies
- purchase inventory using cash or credit (on account)
- record purchases when they receive the goods from the seller
- each cash purchase should be supported by a canceled check or a cash register receipt
- increase inventory, decrease cash
- a purchase invoice should support each credit purchase
- buyer uses sales invoice from seller as purchase invoice
- increase inventory, decrease accounts payable
Freight costs - Answer the sales agreement should indicate who - the seller or the buyer - is to
pay for transporting the goods to the buyer's place of business
FOB shipping point - Answer buyer pays freight
- these costs are considered part of the cost of purchasing inventory: debit inventory, credit cash
, Purchase returns and allowances - Answer return: purchaser returns to seller for store credit
or cash
allowance: seller will grant a deduction from price for purchaser to keep merchandise
- debit accounts payable, credit inventory
Purchase discounts - Answer the credit terms of a purchase on account may permit the buyer
to claim a cash discount for prompt payment
credit terms:
- 2/10, n/30: 2% cash discount if payment is made within 10 days of invoice date. otherwise,
due in 30 days
- 1/10 EOM: 1% discount if invoice is paid within the first 10 days of the next month
- debit accounts payable by amount of gross invoice, credit inventory by discount, credit cash by
net amount owed
Recording sales - Answer companies record sales revenue when the performance obligation is
satisfied - when the goods transfer from the seller to buyer
- a business document should support every transaction
- cash register documents provide evidence of cash sales
- a sales invoice provides support for a credit sale
two entries for each sale
1. record the sale: debit cash (or A/R), credit sales revenue [at selling price]
2. record the the cost of merchandise sold: debit (increase) cost of goods sold, credit inventory
[at cost]
Sales returns and allowances - Answer contra revenue account to sales revenue: means it is
offset against a revenue account on income statement.
normal balance is debit.
return:
with Accurate Answers 2025.
Operating cycles - Answer the cycle of a merchandising company ordinarily is longer than that
of a service company
Flow of costs - Answer beginning inventory + cost of goods purchased = cost of goods available
for sale = ending inventory + cost of goods sold
Perpetual inventory system - Answer companies keep detailed records of the cost of each
inventory purchase and sale. records are continuously updated
- determine cost of goods sold each time a sale occurs
Periodic inventory system - Answer companies determine cost of goods sold only at the end of
the accounting period
Recording purchases - Answer companies
- purchase inventory using cash or credit (on account)
- record purchases when they receive the goods from the seller
- each cash purchase should be supported by a canceled check or a cash register receipt
- increase inventory, decrease cash
- a purchase invoice should support each credit purchase
- buyer uses sales invoice from seller as purchase invoice
- increase inventory, decrease accounts payable
Freight costs - Answer the sales agreement should indicate who - the seller or the buyer - is to
pay for transporting the goods to the buyer's place of business
FOB shipping point - Answer buyer pays freight
- these costs are considered part of the cost of purchasing inventory: debit inventory, credit cash
, Purchase returns and allowances - Answer return: purchaser returns to seller for store credit
or cash
allowance: seller will grant a deduction from price for purchaser to keep merchandise
- debit accounts payable, credit inventory
Purchase discounts - Answer the credit terms of a purchase on account may permit the buyer
to claim a cash discount for prompt payment
credit terms:
- 2/10, n/30: 2% cash discount if payment is made within 10 days of invoice date. otherwise,
due in 30 days
- 1/10 EOM: 1% discount if invoice is paid within the first 10 days of the next month
- debit accounts payable by amount of gross invoice, credit inventory by discount, credit cash by
net amount owed
Recording sales - Answer companies record sales revenue when the performance obligation is
satisfied - when the goods transfer from the seller to buyer
- a business document should support every transaction
- cash register documents provide evidence of cash sales
- a sales invoice provides support for a credit sale
two entries for each sale
1. record the sale: debit cash (or A/R), credit sales revenue [at selling price]
2. record the the cost of merchandise sold: debit (increase) cost of goods sold, credit inventory
[at cost]
Sales returns and allowances - Answer contra revenue account to sales revenue: means it is
offset against a revenue account on income statement.
normal balance is debit.
return:
