Question 1

Freight-out appears as an operating expense in the income statement.

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

Which of the following accounts has a normal credit balance?

Accepted Answer

A) Sales Returns and Allowances 
B) Sales Discounts 
C) Sales Revenue 
D) Cost of Goods Sold 
A) Sales Returns and Allowances 
B) Sales Discounts 
C) Sales Revenue 
D) Cost of Goods Sold

Question 4

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 28,000 \
\text { Sales returns and allowances } & 7,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 150,000 \
\text { Cost of goods sold } & 98,000
\end{array}$$ The gross profit rate would be

Accepted Answer

A) $35. 
B) $30. 
C) $70. 
D) $28. 
A) $35. 
B) $30. 
C) $70. 
D) $28.

Question 5

If a company determines cost of goods sold each time a sale occurs, it

Accepted Answer

A) must have a computer accounting system. 
B) uses a combination of the perpetual and periodic inventory systems. 
C) uses a periodic inventory system. 
D) uses a perpetual inventory system. 
A) must have a computer accounting system. 
B) uses a combination of the perpetual and periodic inventory systems. 
C) uses a periodic inventory system. 
D) uses a perpetual inventory system.

Question 6

Gross profit does not appear

Accepted Answer

A) on a merchandising company income statement. 
B) on a service company income statement. 
C) to be relevant in analyzing the operation of a merchandising company. 
D) on the income statement if the periodic inventory system is used because it cannot be calculated. 
A) on a merchandising company income statement. 
B) on a service company income statement. 
C) to be relevant in analyzing the operation of a merchandising company. 
D) on the income statement if the periodic inventory system is used because it cannot be calculated.

Question 7

The periodic inventory system provides an up to date amount of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 8

Fehr Company sells merchandise on account for $7,500 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $1,500 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) $7,350 
B) $7380 
C) $6,000 
D) $5,880 
A) $7,350 
B) $7380 
C) $6,000 
D) $5,880

Question 9

The Income statement is

Accepted Answer

A) required under GAAP but not under IFRS. 
B) required under IFRS in the same format as under GAAP. 
C) required under IFRS but not under GAAP. 
D) required under IFRS with some differences as compared to GAAP. 
A) required under GAAP but not under IFRS. 
B) required under IFRS in the same format as under GAAP. 
C) required under IFRS but not under GAAP. 
D) required under IFRS with some differences as compared to GAAP.

Question 10

A credit sale of $1,400 is made on July 15, terms 2/10, net/30, on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?

Accepted Answer

A) $1,400 
B) $1,274 
C) $1,350 d $1,372 
A) $1,400 
B) $1,274 
C) $1,350 d $1,372

Question 11

If Indiana Ink, Inc. has net sales of $400,000 and cost of goods sold of $320,000, Indiana Ink's gross profit rate is

Accepted Answer

A) 80%. 
B) 25% 
C) 20%. 
D) 100%. 
A) 80%. 
B) 25% 
C) 20%. 
D) 100%.

Question 12

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 13

The entry to record the return of goods from a customer would include a

Accepted Answer

A) debit to Sales Revenue. 
B) credit to Sales Revenue. 
C) debit to Sales Returns and Allowances. 
D) credit to Sales Returns and Allowances. 
A) debit to Sales Revenue. 
B) credit to Sales Revenue. 
C) debit to Sales Returns and Allowances. 
D) credit to Sales Returns and Allowances.

Question 14

Which statement is incorrect?

Accepted Answer

A) The sales revenue account is used to record the sales of goods held for resale to customers. 
B) Sales discounts are recorded as debits to the sales revenue account. 
C) The sales revenue account is a revenue account. 
D) The sales revenue account has a normal credit balance and is closed at the end of the accounting period. 
A) The sales revenue account is used to record the sales of goods held for resale to customers. 
B) Sales discounts are recorded as debits to the sales revenue account. 
C) The sales revenue account is a revenue account. 
D) The sales revenue account has a normal credit balance and is closed at the end of the accounting period.

Question 15

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 42,000 \
\text { Sales returns and allowances } & 12,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 165,000 \
\text { Cost of goods sold } & 96,000
\end{array}$$ The profit margin would be

Accepted Answer

A) $36. 
B) $18. 
C) $06. 
D) $08. 
A) $36. 
B) $18. 
C) $06. 
D) $08.

Question 16

Which of the following is not considered in computing net cost of purchases?

Accepted Answer

A) Purchases returns and allowances 
B) Purchases 
C) Freight paid on purchased goods 
D) Freight paid on goods shipped to customers 
A) Purchases returns and allowances 
B) Purchases 
C) Freight paid on purchased goods 
D) Freight paid on goods shipped to customers

Question 17

Assume Grammar Company uses the periodic inventory system and has a beginning inventory balance of $5,000, purchases of $75,000, and sales of $125,000. Grammar closes its records once a year on December 31. In the accounting records, the inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was

Accepted Answer

A) equal to $5,000. 
B) more than $5,000. 
C) less than $5,000. 
D) indeterminate. 
A) equal to $5,000. 
B) more than $5,000. 
C) less than $5,000. 
D) indeterminate.

Question 18

Sampson Company's accounting records show the following for the year ending on December 31, 2017. $$\begin{array} { l r } 
\text { Purchase Discounts } & \$ 11,200 \
\text { Freight-In } & 15,600 \
\text { Purchases } & 700,020 \
\text { Beginning Inventory } & 47,000 \
\text { Ending Inventory } & 57,600 \
\text { Purchase Returns and Allowances } & 12,800
\end{array}$$ Using the periodic system, the cost of goods purchased is

Accepted Answer

A) $660,420. 
B) $708,420. 
C) $717,220. 
D) $691,620. 
A) $660,420. 
B) $708,420. 
C) $717,220. 
D) $691,620.

Question 19

Turner Corporation returned $150 of goods originally purchased on credit from Morgan Industries. Using the periodic Inventory approach, Turner would record this transaction as:

Accepted Answer

The answer of Turner Corporation returned $150 of goods originally...

Question 20

A company using a perpetual inventory system that returns goods previously purchased on credit would

Accepted Answer

A) debit Accounts Payable and credit Inventory. 
B) debit Sales and credit Accounts Payable. 
C) debit Cash and credit Accounts Payable. 
D) debit Accounts Payable and credit Purchases. 
A) debit Accounts Payable and credit Inventory. 
B) debit Sales and credit Accounts Payable. 
C) debit Cash and credit Accounts Payable. 
D) debit Accounts Payable and credit Purchases.

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

Freight-out appears as an operating expense in the income statement.

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

Which of the following accounts has a normal credit balance?

Financial information is presented below: Operating expenses \ 28,000 Sales returns and allowances 7,000 Sales discounts 3,000 Sales revenue 150,000 Cost of goods sold 98,000 The gross profit rate would be

If a company determines cost of goods sold each time a sale occurs, it

Gross profit does not appear

The periodic inventory system provides an up to date amount of inventory on hand.

Fehr Company sells merchandise on account for $7,500 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $1,500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

The Income statement is

A credit sale of $1,400 is made on July 15, terms 2/10, net/30, on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?

If Indiana Ink, Inc. has net sales of $400,000 and cost of goods sold of $320,000, Indiana Ink's gross profit rate is

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?

The entry to record the return of goods from a customer would include a

Which statement is incorrect?

Financial information is presented below: Operating expenses \ 42,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 165,000 Cost of goods sold 96,000 The profit margin would be

Which of the following is not considered in computing net cost of purchases?

Turner Corporation returned $150 of goods originally purchased on credit from Morgan Industries. Using the periodic Inventory approach, Turner would record this transaction as:

A company using a perpetual inventory system that returns goods previously purchased on credit would

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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