Question 1

Positive operating income will result if gross profit exceeds

Accepted Answer

A) costs of goods sold. 
B) salaries and wages expense. 
C) cost of goods sold plus operating expenses. 
D) operating expenses. 
A) costs of goods sold. 
B) salaries and wages expense. 
C) cost of goods sold plus operating expenses. 
D) operating expenses.

Question 2

Which of the following would not be considered a merchandising operation?

Accepted Answer

A) Retailer 
B) Wholesaler 
C) Service firm 
D) Merchandising company 
A) Retailer 
B) Wholesaler 
C) Service firm 
D) Merchandising company

Question 3

A very small business most likely would have to use the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 4

Haverty Industries increased its gross profit rate from 18.4% in 2016 to 23.7% in 2017. Which of the following would be a possible explanation for this change?

Accepted Answer

A) Haverty's global sourcing efforts at the beginning of 2017 resulted in a lower cost of merchandise sold. 
B) Haverty's new profit lines with lower margins in 2017 became a larger component of their sales. 
C) Haverty increased its product markdowns in 2017. 
D) Haverty's average margin between the selling price and the inventory cost decreased over this two-year period. 
A) Haverty's global sourcing efforts at the beginning of 2017 resulted in a lower cost of merchandise sold. 
B) Haverty's new profit lines with lower margins in 2017 became a larger component of their sales. 
C) Haverty increased its product markdowns in 2017. 
D) Haverty's average margin between the selling price and the inventory cost decreased over this two-year period.

Question 5

Aber Company sells merchandise on account for $3,000 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Accepted Answer

A) $2,440 
B) $2,460 
C) $2,450 
D) $2,250 
A) $2,440 
B) $2,460 
C) $2,450 
D) $2,250

Question 6

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. 
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.

Question 7

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 45,000 \
\text { Sales returns and allowances } & 3,000 \
\text { Sales discounts } & 7,000 \
\text { Sales revenue } & 160,000 \
\text { Cost of goods sold } & 96,000
\end{array}$$ The amount of net sales on the income statement would be

Accepted Answer

A) $153,000. 
B) $150,000. 
C) $160,000. 
D) $157,000. 
A) $153,000. 
B) $150,000. 
C) $160,000. 
D) $157,000.

Question 8

Discounts taken by the buyer for early payment of an invoice are called sales discounts by the buyer.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following activities is not a component of the operating cycle?

Accepted Answer

A) Sale of merchandise 
B) Payment of employees' salaries 
C) Collection of cash from merchandise sales 
D) Purchase of merchandise 
A) Sale of merchandise 
B) Payment of employees' salaries 
C) Collection of cash from merchandise sales 
D) Purchase of merchandise

Question 10

The entry to record a sale of $900 with terms of 2/10, n/30 will include a

Accepted Answer

A) credit to Sales Discounts for $18. 
B) debit to Cash for $882. 
C) credit to Accounts Receivable for $900. 
D) credit to Sales Revenue for $900. 
A) credit to Sales Discounts for $18. 
B) debit to Cash for $882. 
C) credit to Accounts Receivable for $900. 
D) credit to Sales Revenue for $900.

Question 11

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

Accepted Answer

A) credit, credit, credit. 
B) debit, credit, debit. 
C) credit, debit, debit. 
D) credit, debit, credit. 
A) credit, credit, credit. 
B) debit, credit, debit. 
C) credit, debit, debit. 
D) credit, debit, credit.

Question 12

Operating expenses include interest expense and income tax expense.

Accepted Answer

A) True 
 B)False

Question 13

Sales revenues are usually considered earned when

Accepted Answer

A) cash is received from credit sales. 
B) an order is received. 
C) goods have been transferred from the seller to the buyer. 
D) adjusting entries are made. 
A) cash is received from credit sales. 
B) an order is received. 
C) goods have been transferred from the seller to the buyer. 
D) adjusting entries are made.

Question 14

The collection of an $800 account beyond the 2 percent discount period will result in a

Accepted Answer

A) debit to Cash for $784. 
B) credit to Accounts Receivable for $800. 
C) credit to Cash for $800. 
D) debit to Sales Discounts for $16. 
A) debit to Cash for $784. 
B) credit to Accounts Receivable for $800. 
C) credit to Cash for $800. 
D) debit to Sales Discounts for $16.

Question 15

If merchandise costing $5,000, with terms 2/10, n/30, is paid within 10 days, the amount of the purchase discount is $100.

Accepted Answer

A) True 
 B)False

Question 16

After gross profit is calculated, operating expenses are deducted to determine

Accepted Answer

A) gross margin. 
B) net income. 
C) gross profit on sales. 
D) net margin. 
A) gross margin. 
B) net income. 
C) gross profit on sales. 
D) net margin.

Question 17

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

Question 18

A company shows the following balances: $$\begin{array} { l r } 
\text { Sales Revenue } & \$ 800,000 \
\text { Sales Returns and Allowances } & 75,000 \
\text { Sales Discounts } & 25,000 \
\text { Cost of Goods Sold } & 490,000
\end{array}$$ What is the gross profit rate?

Accepted Answer

A) 61% 
B) 70% 
C) 30% 
D) 39% 
A) 61% 
B) 70% 
C) 30% 
D) 39%

Question 19

Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.

Accepted Answer

A) True 
 B)False

Question 20

When using the periodic system the physical inventory count is used to determine

Accepted Answer

A) only the sales value of goods in the ending inventory. 
B) both the cost of the goods in ending inventory and the sales value of goods sold during the period. 
C) both the cost of the goods sold and the cost of ending inventory. 
D) only the cost of merchandise sold during the period. 
A) only the sales value of goods in the ending inventory. 
B) both the cost of the goods in ending inventory and the sales value of goods sold during the period. 
C) both the cost of the goods sold and the cost of ending inventory. 
D) only the cost of merchandise sold during the period.

Exam 4: Merchandising Operations and the Multiple-Step Income Statement

Positive operating income will result if gross profit exceeds

Which of the following would not be considered a merchandising operation?

A very small business most likely would have to use the perpetual inventory system.

Haverty Industries increased its gross profit rate from 18.4% in 2016 to 23.7% in 2017. Which of the following would be a possible explanation for this change?

Aber Company sells merchandise on account for $3,000 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

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

Financial information is presented below: Operating expenses \ 45,000 Sales returns and allowances 3,000 Sales discounts 7,000 Sales revenue 160,000 Cost of goods sold 96,000 The amount of net sales on the income statement would be

Discounts taken by the buyer for early payment of an invoice are called sales discounts by the buyer.

Which of the following activities is not a component of the operating cycle?

The entry to record a sale of $900 with terms of 2/10, n/30 will include a

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

Operating expenses include interest expense and income tax expense.

Sales revenues are usually considered earned when

The collection of an $800 account beyond the 2 percent discount period will result in a

If merchandise costing $5,000, with terms 2/10, n/30, is paid within 10 days, the amount of the purchase discount is $100.

After gross profit is calculated, operating expenses are deducted to determine

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

A company shows the following balances: Sales Revenue \ 800,000 Sales Returns and Allowances 75,000 Sales Discounts 25,000 Cost of Goods Sold 490,000 What is the gross profit rate?

Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.

When using the periodic system the physical inventory count is used to determine

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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