Question 1

Comprehensive income under IFRS

Accepted Answer

A)  includes unrealized gains and losses included in net income, in contrast to GAAP. 
B)  includes unrealized gains and losses included in net income, similar to GAAP. 
C)  excludes unrealized gains and losses included in net income, in contrast to GAAP. 
D)  excludes unrealized gains and losses included in net income, similar to GAAP. 
A)  includes unrealized gains and losses included in net income, in contrast to GAAP. 
B)  includes unrealized gains and losses included in net income, similar to GAAP. 
C)  excludes unrealized gains and losses included in net income, in contrast to GAAP. 
D)  excludes unrealized gains and losses included in net income, similar to GAAP.

Question 2

The revenue recognition principle applies to merchandising companies by recognizing sales revenues when the performance obligation is satisfied.

Accepted Answer

A) True 
 B)False

Question 3

A buyer borrows money at 6% interest to pay a $6,000 invoice with terms 1/10, n/30 on the 10th day of the discount period. The loan is repaid on the 30th day of the invoice. What is the buyer's net savings for this total event?

Accepted Answer

A)  $0 
B)  $40.00 
C)  $40.80 
D)  $80.00 
A)  $0 
B)  $40.00 
C)  $40.80 
D)  $80.00

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 35,000 \
\text { Sales returns and allowances } & 12,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 140,000 \
\text { Cost of goods sold } & 85,000
\end{array}$$ The amount of net sales on the income statement would be

Accepted Answer

A)  $128,000. 
B)  $125,000. 
C)  $140,000. 
D)  $137,000. 
A)  $128,000. 
B)  $125,000. 
C)  $140,000. 
D)  $137,000.

Question 6

Under IFRS, income statement items classified by nature are generally described as

Accepted Answer

A)  administration, distribution, manufacturing, etc. 
B)  salaries, depreciation, utilities, etc. 
C)  administration, depreciation, manufacturing, etc. 
D)  salaries, distribution, utilities, etc. 
A)  administration, distribution, manufacturing, etc. 
B)  salaries, depreciation, utilities, etc. 
C)  administration, depreciation, manufacturing, etc. 
D)  salaries, distribution, utilities, etc.

Question 7

Cash register tapes provide evidence of credit sales.

Accepted Answer

A) True 
 B)False

Question 8

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 45,000 \
\text { Sales returns and allowances } & 14,000 \
\text { Sales discounts } & 6,000 \
\text { Sales revenue } & 160,000 \
\text { Cost of goods sold } & 90,000
\end{array}$$ Gross profit would be

Accepted Answer

A)  $90,000. 
B)  $70,000. 
C)  $60,000. 
D)  $66,000. 
A)  $90,000. 
B)  $70,000. 
C)  $60,000. 
D)  $66,000.

Question 9

The gross profit amount is generally considered to be more informative than the gross profit rate.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Andrea's Fashions sold merchandise for $95,000 cash during the month of July. Returns that month totaled $2,000. If the company's gross profit rate is 40%, Andrea's will report monthly net sales revenue and cost of goods sold of

Accepted Answer

A)  $95,000 and $57,000. 
B)  $93,000 and $37,200. 
C)  $93,000 and $55,800. 
D)  $95,000 and $55,800. 
A)  $95,000 and $57,000. 
B)  $93,000 and $37,200. 
C)  $93,000 and $55,800. 
D)  $95,000 and $55,800.

Question 12

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 13

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 14

Cost of Goods Sold is considered an expense of a merchandising firm.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Gross profit equals the difference between net sales and

Accepted Answer

A)  operating expenses. 
B)  cost of goods sold. 
C)  net income. 
D)  cost of goods sold plus operating expenses. 
A)  operating expenses. 
B)  cost of goods sold. 
C)  net income. 
D)  cost of goods sold plus operating expenses.

Question 17

A sales invoice is used as documentation for a journal entry that requires a debit to

Accepted Answer

A)  Cash and a credit to Sales Revenue. 
B)  Sales Returns and Allowances and a credit to Accounts Receivable. 
C)  Accounts Receivable and a credit to Sales Revenue. 
D)  Cash and a credit to Sales Returns and Allowances. 
A)  Cash and a credit to Sales Revenue. 
B)  Sales Returns and Allowances and a credit to Accounts Receivable. 
C)  Accounts Receivable and a credit to Sales Revenue. 
D)  Cash and a credit to Sales Returns and Allowances.

Question 18

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 35,000 \
\text { Sales returns and allowances } & 12,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 140,000 \
\text { Cost of goods sold } & 85,000
\end{array}$$ The profit margin would be

Accepted Answer

A)  .32. 
B)  .16. 
C)  .03. 
D)  .04. 
A)  .32. 
B)  .16. 
C)  .03. 
D)  .04.

Question 19

Alice Gray believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.

Accepted Answer

Agree. In accordance with the revenue re

Question 20

The collection of an $900 account within the 2 percent discount period will result in a

Accepted Answer

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

Comprehensive income under IFRS

The revenue recognition principle applies to merchandising companies by recognizing sales revenues when the performance obligation is satisfied.

A buyer borrows money at 6% interest to pay a $6,000 invoice with terms 1/10, n/30 on the 10th day of the discount period. The loan is repaid on the 30th day of the invoice. What is the buyer's net savings for this total event?

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

Financial information is presented below: Operating expenses \ 35,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 140,000 Cost of goods sold 85,000 The amount of net sales on the income statement would be

Under IFRS, income statement items classified by nature are generally described as

Cash register tapes provide evidence of credit sales.

Financial information is presented below: Operating expenses \ 45,000 Sales returns and allowances 14,000 Sales discounts 6,000 Sales revenue 160,000 Cost of goods sold 90,000 Gross profit would be

The gross profit amount is generally considered to be more informative than the gross profit rate.

Which of the following accounts has a normal credit balance?

Andrea's Fashions sold merchandise for $95,000 cash during the month of July. Returns that month totaled $2,000. If the company's gross profit rate is 40%, Andrea's will report monthly net sales revenue and cost of goods sold of

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

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

Cost of Goods Sold is considered an expense of a merchandising firm.

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

Gross profit equals the difference between net sales and

A sales invoice is used as documentation for a journal entry that requires a debit to

Financial information is presented below: Operating expenses \ 35,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 140,000 Cost of goods sold 85,000 The profit margin would be

Alice Gray believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.

The collection of an $900 account within the 2 percent discount period will result in a

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 Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

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

Comprehensive income under IFRS

The revenue recognition principle applies to merchandising companies by recognizing sales revenues when the performance obligation is satisfied.

A buyer borrows money at 6% interest to pay a $6,000 invoice with terms 1/10, n/30 on the 10th day of the discount period. The loan is repaid on the 30th day of the invoice. What is the buyer's net savings for this total event?

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

Financial information is presented below: Operating expenses \ 35,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 140,000 Cost of goods sold 85,000 The amount of net sales on the income statement would be

Under IFRS, income statement items classified by nature are generally described as

Cash register tapes provide evidence of credit sales.

Financial information is presented below: Operating expenses \ 45,000 Sales returns and allowances 14,000 Sales discounts 6,000 Sales revenue 160,000 Cost of goods sold 90,000 Gross profit would be

The gross profit amount is generally considered to be more informative than the gross profit rate.

Which of the following accounts has a normal credit balance?

Andrea's Fashions sold merchandise for $95,000 cash during the month of July. Returns that month totaled $2,000. If the company's gross profit rate is 40%, Andrea's will report monthly net sales revenue and cost of goods sold of

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

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

Cost of Goods Sold is considered an expense of a merchandising firm.

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

Gross profit equals the difference between net sales and

A sales invoice is used as documentation for a journal entry that requires a debit to

Financial information is presented below: Operating expenses \ 35,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 140,000 Cost of goods sold 85,000 The profit margin would be

Alice Gray believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.

The collection of an $900 account within the 2 percent discount period will result in a

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 Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

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