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

For a company using a perpetual inventory system, the journal entry to record the purchase of $3,500 of goods on account, with terms of 4/10, n/30, would include a

Operating expenses are subtracted from revenue for a service company and from gross profit for a merchandising company.

The operating expenses section of a multiple-step income statement for a merchandising company would not include

As an incentive for customers to pay their accounts promptly, a business may offer its customers

The collection of a $2,000 account within the 2 percent discount period will result in a

A merchandising company's profit from operations is determined by subtracting cost of goods sold from net sales.

Prepare entries for sales under a perpetual inventory system.

Inventory is usually the largest current asset for a merchandiser.

Inventory becomes part of the cost of goods sold when a company

A decline in a company's gross profit could be caused by all of the following except

Sales Discounts is a(n)

If merchandise costing $2,500, terms 2/10 n/30, is paid within 10 days, the amount of the purchase discount is $250.

Profit margin is calculated by dividing

A Sales Returns and Allowances account is not debited if a customer

Gross profit does not appear

The operating cycle of a merchandising company is generally shorter than that of a service company.

If net sales are $1,000,000 and cost of goods sold is $800,000, the gross profit margin is 20%.

Net sales less cost of goods sold is called

Gross profit margin is the same as the gross profit amount.

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