Question 1

Tony's Market recorded the following events involving a recent purchase of inventory: Received goods for $80,000, terms 2/10, n/30.
Returned $1,600 of the shipment for credit.
Paid $400 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's inventory

Accepted Answer

A)  increased by $76,832.
B)  increased by $78,800.
C)  increased by $77,224.
D)  increased by $77,232.

Question 2

Which of the following accounts normally have debit balances?

Accepted Answer

A)  Sales Discounts
B)  Sales Returns and Allowances.
C)  Both Sales Discounts and Sales Returns and Allowances have debit balances.
D)  Neither Sales Discounts or Sales Returns and Allowances have debit balances.

Question 3

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

Accepted Answer

A)  Gross profit
B)  Operating expenses
C)  Sales revenue
D)  Cost of goods sold

Question 4

Generally, the revenue account for a merchandising enterprise is called

Accepted Answer

A)  Sales Revenue or Sales.
B)  Investment Income.
C)  Gross Profit.
D)  Net Sales.

Question 5

The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method?

Accepted Answer

A)  Sales Revenue
B)  Cost of Goods Sold
C)  Purchases
D)  Accounts Receivable

Question 6

Detailed records of goods held for resale are not maintained under a

Accepted Answer

A)  perpetual inventory system.
B)  periodic inventory system.
C)  double entry accounting system.
D)  single entry accounting system.

Question 7

Ramos Company receives a payment on account from Martinez Industries.Based on the original sale of $12,000 using the periodic inventory approach, Ramos honors the 3% cash discount and records the payment.Which of the following is the correct entry for Ramos to record?

Accepted Answer

The answer of Ramos Company receives a payment on account...

Question 8

Adams Company is a retailer and uses a perpetual inventory system.Which statement is correct?

Accepted Answer

A)  Returns of merchandise by Adams Company to a manufacturer are credited to Inventory.
B)  Freight paid to get merchandise to Adams Company's store is debited to Freight Expense.
C)  A return of merchandise by one of Adams Company's customers is credited to Inventory.
D)  Discounts taken by Adams Company's customers are credited to Inventory.

Question 9

The Sales Returns and Allowances account does not provide information to management about

Accepted Answer

A)  possible inferior merchandise.
B)  the percentage of credit sales versus cash sales.
C)  inefficiencies in filling orders.
D)  errors in billing customers.

Question 10

As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables.What would be an acceptable explanation?

Accepted Answer

A)  All invoices have credit terms of n/30.
B)  There is not sufficient cash to pay within the discount period.
C)  Discounts are missed because no one knows how to enter them in the new accounting software.
D)  The full amount of the invoice is being paid within the discount period and the treasurer is pocketing the discount amount.

Question 11

Taylor Corporation purchases $1,500 of merchandise on account from Enterprise Company, terms 2/10, n/30.Taylor and Enterprise both use periodic inventory systems.Enterprise's entry record this transaction is:

Accepted Answer

The answer of Taylor Corporation purchases $1,500 of merchandise on...

Question 12

Financial information is presented below:  The gross profit rate would be

Accepted Answer

A)  .64.
B)  .42.
C)  .36.
D)  .37.

Question 13

Which of the following companies would be most likely to use a perpetual inventory system?

Accepted Answer

A)  Grain company
B)  Beauty salon
C)  Clothing store
D)  Fur dealer

Question 14

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.

Accepted Answer

A)  Gross profit
B)  Operating expenses
C)  Sales revenue
D)  Cost of goods sold

Question 15

Under the periodic system, when a customer returns goods, Purchases Returns and Allowances is debited.

Accepted Answer

A) True 
 B)False

Question 16

Inventory becomes part of cost of goods sold when a company

Accepted Answer

A)  pays for the inventory.
B)  purchases the inventory.
C)  sells the inventory.
D)  receives payment from the customer.

Question 17

Net sales minus cost of goods sold is called gross profit.

Accepted Answer

A) True 
 B)False

Question 18

Financial information is presented below:  Gross profit would be

Accepted Answer

A)  $49,000.
B)  $42,000.
C)  $45,000.
D)  $52,000.

Question 19

A company shows the following balances:  What is the company's gross profit rate?

Accepted Answer

A)  60%
B)  75%
C)  40%
D)  25%

Question 20

What is an advantage of using the multiple-step income statement?

Accepted Answer

A)  It highlights the components of net income.
B)  Gross profit is not a separate item.
C)  It is easier to prepare than the single-step income statement.
D)  Net income will be higher than net income computed using the single-step income statement.

Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

Correct Answer
verified

Which of the following accounts normally have debit balances?

Correct Answer
verified

What is an advantage of using the multiple-step income statement?

Correct Answer
verified

Financial information is presented below: The gross profit rate would be

Correct Answer
verified

Financial information is presented below: Gross profit would be

Correct Answer
verified

Inventory becomes part of cost of goods sold when a company

Correct Answer
verified

Net sales minus cost of goods sold is called gross profit.

Correct Answer
verified

Generally, the revenue account for a merchandising enterprise is called

Correct Answer
verified

Ramos Company receives a payment on account from Martinez Industries.Based on the original sale of $12,000 using the periodic inventory approach, Ramos honors the 3% cash discount and records the payment.Which of the following is the correct entry for Ramos to record?

Correct Answer
verified

Under the periodic system, when a customer returns goods, Purchases Returns and Allowances is debited.

Correct Answer
verified

Which of the following companies would be most likely to use a perpetual inventory system?

Correct Answer
verified

A company shows the following balances: What is the company's gross profit rate?

Correct Answer
verified

Taylor Corporation purchases $1,500 of merchandise on account from Enterprise Company, terms 2/10, n/30.Taylor and Enterprise both use periodic inventory systems.Enterprise's entry record this transaction is:

Correct Answer
verified

Adams Company is a retailer and uses a perpetual inventory system.Which statement is correct?

Correct Answer
verified

Detailed records of goods held for resale are not maintained under a

Correct Answer
verified

As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables.What would be an acceptable explanation?

Correct Answer
verified

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.

Correct Answer
verified

Correct Answer
verified

The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method?

Correct Answer
verified

The Sales Returns and Allowances account does not provide information to management about

Correct Answer
verified

Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

Correct AnswerverifiedShow Answer

Which of the following accounts normally have debit balances?

Correct AnswerverifiedShow Answer

What is an advantage of using the multiple-step income statement?

Correct AnswerverifiedShow Answer

Financial information is presented below: The gross profit rate would be

Correct AnswerverifiedShow Answer

Financial information is presented below: Gross profit would be

Correct AnswerverifiedShow Answer

Inventory becomes part of cost of goods sold when a company

Correct AnswerverifiedShow Answer

Net sales minus cost of goods sold is called gross profit.

Correct AnswerverifiedShow Answer

Generally, the revenue account for a merchandising enterprise is called

Correct AnswerverifiedShow Answer

Ramos Company receives a payment on account from Martinez Industries.Based on the original sale of $12,000 using the periodic inventory approach, Ramos honors the 3% cash discount and records the payment.Which of the following is the correct entry for Ramos to record?

Correct AnswerverifiedShow Answer

Under the periodic system, when a customer returns goods, Purchases Returns and Allowances is debited.

Correct AnswerverifiedShow Answer

Which of the following companies would be most likely to use a perpetual inventory system?

Correct AnswerverifiedShow Answer

A company shows the following balances: What is the company's gross profit rate?

Correct AnswerverifiedShow Answer

Taylor Corporation purchases $1,500 of merchandise on account from Enterprise Company, terms 2/10, n/30.Taylor and Enterprise both use periodic inventory systems.Enterprise's entry record this transaction is:

Correct AnswerverifiedShow Answer

Adams Company is a retailer and uses a perpetual inventory system.Which statement is correct?

Correct AnswerverifiedShow Answer

Detailed records of goods held for resale are not maintained under a

Correct AnswerverifiedShow Answer

As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables.What would be an acceptable explanation?

Correct AnswerverifiedShow Answer

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method?

Correct AnswerverifiedShow Answer

The Sales Returns and Allowances account does not provide information to management about

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified