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

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 20 days after the invoice date to take advantage of the cash discount.

Sales allowances and Sales discounts are both designed to encourage customers to pay their accounts promptly.

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

Each of the following companies is a merchandising company except a

The income statement for a merchandising company presents five amounts not shown on a service company's income statement. Identify and briefly explain the five unique amounts.

Under GAAP, companies can choose which inventory system? Perpetual Periodic

A sales invoice is prepared when goods

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 91,000 The profit margin would be

Hiller Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others are content to receive payment within six months of receipt of the goods. Because of this situation, Hiller never closes its books until at least ten days after month end. In this way, it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not. Donna Gordon, a new accountant, was asked to record about $50,000 in inventory as having been received before month end. She argued that the shipping documents clearly showed that the goods were actually received on the 8th of the current month. Her boss, busy with month-end reports, curtly tells Donna to check the shipping terms. She did so, and found the notation "FOB (free on board) shipper's dock" on the document. She hadn't seen that particular notation before, but she reasoned that if the selling company considered it shipped when it reached their dock, Hiller should consider it received when it reached Hiller's dock. She did not record the sale until after month end. Required: 1. Why are accountants concerned with the timing in the recording of purchases? 2. Was there a violation of ethical standards here? Explain.

During the year, Sarah's Pet Shop's merchandise inventory decreased by $40,000. If the company's cost of goods sold for the year was $600,000, purchases would have been

The Income statement is

Freight costs incurred by a seller on merchandise sold to customers will cause an increase

A quality of earnings ratio significantly less than 1 suggests that a company may be using more aggressive accounting techniques in order to accelerate income recognition.

The following are the gross profit percentages for Naylor Company: List four possible explanations for the low gross profit percentage in 2015.

Horner Corporation reported net sales of $150,000, cost of goods sold of $96,000, operating expenses of $35,000, other expenses of $10,000, net income of $9,000. Calculate the following values. 1. Profit margin. 2. Gross profit rate.

The collection of a $600 account beyond the 2 percent discount period will result in a

Gross profit appears on both the single-step and multiple-step forms of an income statement.

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

When using the periodic inventory system, which of the following is not a step in determining cost of goods purchased?

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