Skip to main content

Solutions

Multiple Choice Questions - Solutions​

  1. A merchandising business's income statement includes which of the following that a service business does not?

    • Answer: c) Cost of Goods Sold is unique to merchandising businesses.

  2. In a perpetual inventory system, when is cost of goods sold recorded?

    • Answer: b) In perpetual system, COGS is recorded at the time of each sale.

  3. Which PCN account is used for merchandise inventory in a retail store?

    • Answer: d) 321000 is Merchandise (Marchandises) for retail inventory.

  4. Gross profit is calculated as:

    • Answer: b) Gross Profit = Sales Revenue - Cost of Goods Sold.

  5. In Luxembourg, food products for human consumption are subject to which VAT rate?

    • Answer: d) Food products are subject to 3% VAT (super-reduced rate).

  6. Freight-in should be recorded as:

    • Answer: b) Freight-in is part of inventory cost, not a separate expense.

  7. In a periodic inventory system, purchases are recorded in:

    • Answer: b) Periodic system uses Purchases account (602000), not Inventory.

  8. Net Sales equals:

    • Answer: c) Net Sales = Gross Sales - Returns - Allowances - Discounts.

  9. Which VAT rate applies to alcoholic beverages sold as merchandise (not in restaurant)?

    • Answer: c) Alcoholic beverages sold as merchandise have 14% VAT.

  10. A multi-step income statement for a merchandising business shows:

  • Answer: b) Multi-step shows Sales, COGS, Gross Profit, Operating Expenses, and Net Income.

Note: Solutions will be provided in a separate solutions manual. For now, students should work through problems and cases, then compare with instructor-provided solutions or discuss in class.