Question 1

Each of the following companies is a merchandising company except a

Accepted Answer

A) wholesale parts company. 
B) candy store. 
C) moving company. 
D) furniture store. 
A) wholesale parts company. 
B) candy store. 
C) moving company. 
D) furniture store.

Question 2

Which of the following "formulas" is incorrect?

Accepted Answer

A) Gross profit - operating expenses = profit before income tax. 
B) Net sales - cost of goods sold = gross profit. 
C) Net sales - gross profit = cost of goods sold. 
D) Operating expenses - cost of goods sold = gross profit. 
A) Gross profit - operating expenses = profit before income tax. 
B) Net sales - cost of goods sold = gross profit. 
C) Net sales - gross profit = cost of goods sold. 
D) Operating expenses - cost of goods sold = gross profit.

Question 3

Gross sales less cost of goods sold is called gross profit.

Accepted Answer

A) True 
 B)False

Question 4

When returned merchandise is defective, the seller's sales account is debited.

Accepted Answer

A) True 
 B)False

Question 5

The operating cycle of a merchandising company is

Accepted Answer

A) always one year in length. 
B) generally longer than that of a service company. 
C) about the same as that of a service company. 
D) generally shorter than that of a service company. 
A) always one year in length. 
B) generally longer than that of a service company. 
C) about the same as that of a service company. 
D) generally shorter than that of a service company.

Question 6

Under a perpetual inventory system

Accepted Answer

A) there is no need for a year-end physical count. 
B) increases in inventory resulting from purchases are debited to Purchases. 
C) accounting records continuously disclose the amount of inventory. 
D) the account Purchase Returns and Allowances is credited when goods are returned to vendors. 
A) there is no need for a year-end physical count. 
B) increases in inventory resulting from purchases are debited to Purchases. 
C) accounting records continuously disclose the amount of inventory. 
D) the account Purchase Returns and Allowances is credited when goods are returned to vendors.

Question 7

Under a perpetual inventory system, purchase of inventory is recorded as a debit to the

Accepted Answer

A) Supplies account. 
B) Purchases account. 
C) Merchandise Inventory account. 
D) Cost of Goods Sold account. 
A) Supplies account. 
B) Purchases account. 
C) Merchandise Inventory account. 
D) Cost of Goods Sold account.

Question 8

When goods from a cash sale are returned, the effect on the seller's accounts will be

Accepted Answer

A) an increase in net sales. 
B) a decrease in gross sales. 
C) an increase in gross sales. 
D) a decrease in net sales. 
A) an increase in net sales. 
B) a decrease in gross sales. 
C) an increase in gross sales. 
D) a decrease in net sales.

Question 9

Under the perpetual inventory system, a discount taken for early payment is credited to the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Question 10

The primary source of revenue for a wholesaler is generated by

Accepted Answer

A) investments. 
B) providing services. 
C) the sale of merchandise. 
D) the sale of property, plant, and equipment the company owns. 
A) investments. 
B) providing services. 
C) the sale of merchandise. 
D) the sale of property, plant, and equipment the company owns.

Question 11

Companies following ASPE may classify their expenses by nature, but not by function.

Accepted Answer

A) True 
 B)False

Question 12

The primary difference between a periodic and a perpetual inventory system is that a periodic system

Accepted Answer

A) keeps a detailed record showing the inventory on hand at all times. 
B) provides better control over inventories. 
C) records the cost of goods sold on the date the sale is made. 
D) determines the cost of goods sold at the end of the accounting period. 
A) keeps a detailed record showing the inventory on hand at all times. 
B) provides better control over inventories. 
C) records the cost of goods sold on the date the sale is made. 
D) determines the cost of goods sold at the end of the accounting period.

Question 13

If a customer agrees to keep defective merchandise because the seller is willing to reduce the selling price, this transaction is known as a sales

Accepted Answer

A) discount. 
B) return. 
C) contra asset. 
D) allowance. 
A) discount. 
B) return. 
C) contra asset. 
D) allowance.

Question 14

Gross profit is expressed as a percentage of gross sales.

Accepted Answer

A) True 
 B)False

Question 15

If a company has net sales of $500,000 and cost of goods sold of $350,000, the gross profit margin is

Accepted Answer

A) 15%. 
B) 30%. 
C) 70%. 
D) 100%. 
A) 15%. 
B) 30%. 
C) 70%. 
D) 100%.

Question 16

Under the perpetual inventory system, which of the following accounts would not be used?

Accepted Answer

A) Sales 
B) Purchases 
C) Cost of Goods Sold 
D) Merchandise Inventory 
A) Sales 
B) Purchases 
C) Cost of Goods Sold 
D) Merchandise Inventory

Question 17

Gross profit is a measure of the overall profit of a company.

Accepted Answer

A) True 
 B)False

Question 18

Which statement is not correct about expenses on the income statement?

Accepted Answer

A) Classifying expenses by function means that expenses are reported according to the activity for which they are incurred. 
B) Examples of expenses classified by nature are salaries and depreciation. 
C) Companies following ASPE do not have to list their expenses in any particular order. 
D) Expenses must be classified in decreasing order of magnitude. 
A) Classifying expenses by function means that expenses are reported according to the activity for which they are incurred. 
B) Examples of expenses classified by nature are salaries and depreciation. 
C) Companies following ASPE do not have to list their expenses in any particular order. 
D) Expenses must be classified in decreasing order of magnitude.

Question 19

Company A sells $500 of merchandise on account to Company B with credit terms of 2/10, n/30.If Company B pays within the discount period, how much cash will Company A receive?

Accepted Answer

A) $400 
B) $410 
C) $490 
D) $500 
A) $400 
B) $410 
C) $490 
D) $500

Question 20

Sales revenues are recorded by the seller when an order is placed by a buyer.

Accepted Answer

A) True 
 B)False

Each of the following companies is a merchandising company except a

Which of the following "formulas" is incorrect?

Gross sales less cost of goods sold is called gross profit.

When returned merchandise is defective, the seller's sales account is debited.

The operating cycle of a merchandising company is

Under a perpetual inventory system

Under a perpetual inventory system, purchase of inventory is recorded as a debit to the

When goods from a cash sale are returned, the effect on the seller's accounts will be

Under the perpetual inventory system, a discount taken for early payment is credited to the Merchandise Inventory account.

The primary source of revenue for a wholesaler is generated by

Companies following ASPE may classify their expenses by nature, but not by function.

The primary difference between a periodic and a perpetual inventory system is that a periodic system

If a customer agrees to keep defective merchandise because the seller is willing to reduce the selling price, this transaction is known as a sales

Gross profit is expressed as a percentage of gross sales.

If a company has net sales of $500,000 and cost of goods sold of $350,000, the gross profit margin is

Under the perpetual inventory system, which of the following accounts would not be used?

Gross profit is a measure of the overall profit of a company.

Which statement is not correct about expenses on the income statement?

Company A sells $500 of merchandise on account to Company B with credit terms of 2/10, n/30.If Company B pays within the discount period, how much cash will Company A receive?

Sales revenues are recorded by the seller when an order is placed by a buyer.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters

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

Each of the following companies is a merchandising company except a

Which of the following "formulas" is incorrect?

Gross sales less cost of goods sold is called gross profit.

When returned merchandise is defective, the seller's sales account is debited.

The operating cycle of a merchandising company is

Under a perpetual inventory system

Under a perpetual inventory system, purchase of inventory is recorded as a debit to the

When goods from a cash sale are returned, the effect on the seller's accounts will be

Under the perpetual inventory system, a discount taken for early payment is credited to the Merchandise Inventory account.

The primary source of revenue for a wholesaler is generated by

Companies following ASPE may classify their expenses by nature, but not by function.

The primary difference between a periodic and a perpetual inventory system is that a periodic system

If a customer agrees to keep defective merchandise because the seller is willing to reduce the selling price, this transaction is known as a sales

Gross profit is expressed as a percentage of gross sales.

If a company has net sales of $500,000 and cost of goods sold of $350,000, the gross profit margin is

Under the perpetual inventory system, which of the following accounts would not be used?

Gross profit is a measure of the overall profit of a company.

Which statement is not correct about expenses on the income statement?

Company A sells $500 of merchandise on account to Company B with credit terms of 2/10, n/30.If Company B pays within the discount period, how much cash will Company A receive?

Sales revenues are recorded by the seller when an order is placed by a buyer.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters