Name

Financial Accounting Instructor

Kimmel, Weygandt, & Kieso Section # Date

|Part |I |II |III |IV |V |Total |

|Points |45 |25 |12 |10 |8 |100 |

|Score | | | | | | |

PART I — MULTIPLE CHOICE (45 points)

Instructions

Designate the best answer for each of the following questions.

____ 1. When a customer returns goods for credit, the seller should

a. credit Accounts Payable.

b. credit Accounts Payable.

c. debit Accounts Receivable.

d. credit Merchandise Inventory

____ 2. Credit terms of 3/10, n/30 mean that a(n)

a. 10% cash discount may be taken if payment is made immediately; a 3% discount if paid within 30 days.

b. 3% cash discount may be taken if payment is made within 10 days of the invoice date; otherwise the full amount is due within 30 days.

c. 3% cash discount may be taken if payment is made within 10 days of the invoice date; otherwise the full amount is due at the end of the month.

d. additional amount equal to 3% of the invoice price must be paid if payment is not received within 10 days; the account is overdue after 30 days.

____ 3. A periodic inventory system

a. allows for the determination of cost of goods sold after each sale.

b. requires a physical inventory count to determine the cost of goods on hand.

c. requires that detailed inventory records be kept.

d. requires the use of a cost of goods sold account.

____ 4. In accordance with the revenue recognition principle, sales revenues are recorded when

a. earned, which typically occurs when the goods are transferred from the seller to the buyer.

b. cash is received from the customer for items