FABM CHAPTER 14

Question 1

buys goods (i.e. inventories) and sells them to
customers for a profit.

Answer 1

merchandising business

Question 2

The goods bought by the merchandising business from its suppliers are called what?

Answer 2

Purchases.

Question 3

The merchandiser add-up a value (i.e. markup or gross profit) to the______________ of goods and charges the total amount to the customer.

Answer 3

purchase prices

Question 4

The merchandiser ___________ to the
purchase prices of goods and charges the total amount to the customer.

Answer 4

add-up a value (i.e. markup or gross profit)

Question 5

The total amount charged to customers is called what?

Answer 5

Sales

Question 6

Seller’s perspective of Agreed selling price of the goods

Answer 6

Sales

Question 7

Buyer’ s perspective of Agreed selling price of the goods

Answer 7

Purchases

Question 8

Seller’s perspective of Return by the buyer of defective or
non-conforming goods to the seller

Answer 8

Sales return

Question 9

Buyer’s perspective of Return by the buyer of defective or
non-conforming goods to the seller

Answer 9

Purchase returns

Question 10

Seller’s perspective of Agreed reduction in selling price

Answer 10

Sales discount

Question 11

Buyer’ s perspective of Agreed reduction in selling price

Answer 11

Purchase discount

Question 12

Seller’s perspective of Agreed reduction in selling price for
poor quality goods which the buyer
agreed to retake at reduced price

Answer 12

Sales allowances

Question 13

Buyer’ s perspective of Agreed reduction in selling price for
poor quality goods which the buyer
agreed to retake at reduced price

Answer 13

Purchases allowances

Question 14

Seller’s perspective of Transportation cost of bringing the
goods to buyer’s place of business

Answer 14

Freight-out

Question 15

Buyer’ s perspective of Transportation cost of bringing the
goods to buyer’s place of business

Answer 15

Freight-in

Question 16

This is an established price determined by reference
to a catalog or general price list before deducting any discounts.

Answer 16

List price

Question 17

This list price less any trade discounts.

Answer 17

Invoice price

Question 18

This is the
gross billable amount by the seller to the buyer.

Answer 18

Invoice price

Question 19

This is the
amount that is indicated in the billing statement of the seller.

Answer 19

Invoice price

Question 20

Pertains to a direct deduction to the invoice price on account of
volume purchases made by a buyer.

Answer 20

Trade discount

Question 21

Trade discount is also called what?

Answer 21

volume discount or quantity discount

Question 22

This discount is usually given when the
buyer is a fellow merchandiser in order to allow him to profit for the resale
of the goods to his customers.

Answer 22

Trade discount

Question 23

this is an additional
discount to the invoice price aside from the trade discount which is given to
the buyer for early payment.

Answer 23

Cash discount

Question 24

Cash discount is also called what?

Answer 24

Settlement discount,

Question 25

RECORDING OF MERCHANDISING TRANSACTIONS?

Answer 25

Purchasing and disbursement activities and Sales and collections activities

Question 26

An account used to record the cost of goods or merchandise bought for resale during the current reporting period.

Answer 26

Purchases

Question 27

An account used to record the transport cost of the goods purchased.

Answer 27

Freight-in

Question 28

This is an adjunct account (addition) to the purchases account

Answer 28

Freight-in

Question 29

An account used for the agreed reduction in the price of goods.

Answer 29

Purchase discount

Question 30

This is normally given by the supplier on account of early payment.

Answer 30

Purchase discount

Question 31

Is a contra-account to the purchase account.

Answer 31

Purchase discount

Question 32

An account used to record the cost of merchandise returned to the supplier and including price reductions to the purchase which is granted by a supplier on account of unsatisfactory goods delivered.

Answer 32

Purchase returns and allowances

Question 33

An account used to record advance payments made to a supplier for goods to be purchased in the future.

Answer 33

Advances to supplier

Question 34

Purchases normal balance?

Answer 34

Debit

Question 35

Freight-in normal balance?

Answer 35

debit

Question 36

Purchase discount normal balance?

Answer 36

credit

Question 37

Purchase returns and allowances normal balance?

Answer 37

credit

Question 38

Advances to supplier normal balance?

Answer 38

Asset Account and debit

Question 39

Involves selling of goods and collecting customers' accounts.

Answer 39

sale and collection function

Question 40

An account used to record the selling price of goods to a customer.

Answer 40

Sales

Question 41

An account used to record the transport cost of the goods sold to customers.

Answer 41

Freight-out-

Question 42

If goods are purchased from the business warehouse, customers normally what?

Answer 42

shoulder the freight of their goods.

Question 43

Freight-out may alternatively called what?

Answer 43

delivery expense.

Question 44

An account used to record the agreed reduction in the price of goods sold to customers.

Answer 44

Sales discount

Question 45

This is the equivalent a of purchase discount from the buyer's perspective.

Answer 45

Sales discount

Question 46

Sales discountis the equivalent a of a _________ from the buyer's perspective.

Answer 46

purchase discount

Question 47

An account used under a periodic inventory system to record the amount of sales returned by customers including reductions in selling prices granted to customers because the merchandise was not satisfactory to a buyer.

Answer 47

Sales returns and allowances

Question 48

An account representing advance payment made by a customer for goods to be delivered in the future.

Answer 48

Advances from customer

Question 49

Sales has a normal balance of?

Answer 49

credit

Question 50

Freight-out- has a normal balance of?

Answer 50

of an expense account or debit

Question 51

Sales discount has a normal balance of?

Answer 51

debit

Question 52

Sales returns and allowances has a normal balance of?

Answer 52

debit

Question 53

Advances from customer has a normal balance of?

Answer 53

credit

Question 54

Ownership to the goods transfer to the buyer from the moment the goods leave the warehouse of the seller which is normally the shipping date or invoice date.

Answer 54

FOB shipping point

Question 55

Ownership to the goods transfer to the buyer from the moment the goods arrive at the warehouse of the buyer which is normally the delivery receipt date.

Answer 55

FOB Destination

Question 56

the freight shall be paid by the seller to the freight or cargo forwarder upon release of the goods in his premises

Answer 56

Freight prepaid

Question 57

The freight shall be paid by the buyer to the freight or cargo forwarder upon arrival of the delivery in his premises

Answer 57

Freight collect

Question 58

Date of recognition of purchases for FOB destination

Answer 58

When the buyer receives the goods

Question 59

Date of recognition of sales for FOB Destination

Answer 59

When the buyer receives the goods

Question 60

Date of recognition of purchases for FOB shipping point

Answer 60

At the point of shipment

Question 61

Date of recognition of sales for FOB shipping point

Answer 61

At the point of shipment