Bookkeeping Certification — Practice Exam
Merchandising and discounts: practice questions
Our Bookkeeping bank has 9 questions on this topic. Here are 4 of them with answers; the full mock exam draws from every topic, like the real one.
Question 1
Who pays the freight when terms are 'FOB destination'?
- The seller
- The buyer
- The bank
- The carrier
Show the answer
A. The seller — Ownership passes when goods reach the buyer.
Question 2
What is 'Sales Returns and Allowances'?
- A contra-revenue account for goods returned or price reductions given
- A liability
- An asset
- An expense account
Show the answer
A. A contra-revenue account for goods returned or price reductions given — It reduces gross sales to net sales.
Question 3
Net sales are $80,000 and COGS is $50,000. What is the gross profit margin?
- 30%
- 160%
- 37.5%
- 62.5%
Show the answer
C. 37.5% — $30,000 ÷ $80,000 = 37.5%.
Question 4
What does the purchases discount account (periodic system) represent?
- Freight charges
- Discounts given to customers
- Sales revenue
- Discounts taken for early payment, reducing the cost of purchases
Show the answer
D. Discounts taken for early payment, reducing the cost of purchases — In a perpetual system, inventory is credited instead.