SECTION A - 20 Marks 1. Sales Returns and Allowances: a) Is a contra revenue account. b) Has a normal debit balance. c) Appears on the income statement. d) All of the above. 2. Recording a sale requires a: a) Credit to a revenue account and a debit to an asset account. b) Debit to Cash and a credit to Owner's Capital. c) Debit to a revenue account and credit to an asset account. d) Credit to Sales and a debit to Sales Returns and Allowances. 3. Which of the following is a non-operating expense? a) Interest expense b) Rent expense c) Delivery expense d) Office expense 4. Whlch of the following statements is false? a) Freight costs pald by the seller are debited to Delivery Expense. b) Freight charges for goods shipped FOB destination are paid by the seller. c) Freight charges for goods shipped FOB shipping point are paid by the purchaser. d) Freight costs paid by the purchaser are debited to Delivery Expense. 5. When a company uses the perpetual inventory system, the: a) Merchandise Inventory account balance does not change until the end of the year. b) Merchandise Inventory account is debited when inventory is purchased. c) Sale of inventory requires a credit to Cost of Goods Sold. d) Acquisition of merchandise requires a debit to Purchases. 6. If the ending inventory is overstated: a) Profit will be understated. b) Profit will be overstated, c) Profit will be correct. d) Gross profit will be understated. 7. If the ending Inventory is understated: a) Profit this year will be overstated. b) Profit next year will be understated. c) The beginning inventory the next year will be understated. d) The beginning inventory the next year will be overstated.