Question 1

The primary source of revenue for a wholesaler is

Accepted Answer

A)  investment income. 
B)  service revenue. 
C)  the sale of merchandise. 
D)  the sale of plant assets the company owns. 
A)  investment income. 
B)  service revenue. 
C)  the sale of merchandise. 
D)  the sale of plant assets the company owns.

Question 2

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 3

Anderson Inc. sells $900 of merchandise on account to Baltic Company with credit terms of 2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check?

Accepted Answer

A)  $882 
B)  $900 
C)  $810 
D)  $840 
A)  $882 
B)  $900 
C)  $810 
D)  $840

Question 4

Operating expenses include interest expense and income tax expense.

Accepted Answer

A) True 
 B)False

Question 5

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

Accepted Answer

The answer of Cost of goods sold is deducted from...

Question 6

The computer has increased greatly the use of the periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 7

Bolton Company's gross profit rate last year was 32.0% and this year it is 28.4%. Which of the following would not be a possible cause for this decline in the gross profit rate?

Accepted Answer

A)  Bolton must pay higher prices to suppliers without passing these costs on to customers. 
B)  Bolton may have begun selling products with a higher markup. 
C)  Bolton's average margin between selling price and inventory cost is decreasing. 
D)  Bolton may have seen a decline in total gross profit while maintaining net sales. 
A)  Bolton must pay higher prices to suppliers without passing these costs on to customers. 
B)  Bolton may have begun selling products with a higher markup. 
C)  Bolton's average margin between selling price and inventory cost is decreasing. 
D)  Bolton may have seen a decline in total gross profit while maintaining net sales.

Question 8

A periodic inventory system does not require a detailed record of inventory items.

Accepted Answer

A) True 
 B)False

Question 9

Gross profit equals the difference between

Accepted Answer

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

Question 10

Instructions
State the missing items identified by ?.
1. Gross profit - Operating expenses = ?
2. Cost of goods sold + Gross profit = ?
3. Sales revenue - (? + ?) = Net sales
4. Income from operations + ? - ? = Net income
5. Net sales - Cost of goods sold = ?

Accepted Answer

1. Income from operations (or

Question 11

Which of the following expressions is incorrect?

Accepted Answer

A)  Gross profit - Operating expenses = Net income 
B)  Sales revenue - cost of goods sold - Operating expenses = Net income 
C)  Net income + Operating expenses = Gross profit 
D)  Operating expenses - Cost of goods sold = Gross profit 
A)  Gross profit - Operating expenses = Net income 
B)  Sales revenue - cost of goods sold - Operating expenses = Net income 
C)  Net income + Operating expenses = Gross profit 
D)  Operating expenses - Cost of goods sold = Gross profit

Question 12

The freight costs incurred by a seller on outgoing inventory are an ________________ to the seller.

Accepted Answer

The answer of The freight costs incurred by a seller...

Question 13

A merchandising company frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

Accepted Answer

The contra accounts related to the sale

Question 14

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

Accepted Answer

A)  $40,000. 
B)  $43,000. 
C)  $55,000. 
D)  $52,000. 
A)  $40,000. 
B)  $43,000. 
C)  $55,000. 
D)  $52,000.

Question 15

Under the periodic system, the purchases account is used to accumulate all purchases of merchandise for resale.

Accepted Answer

A) True 
 B)False

Question 16

The use of IFRS results in more transactions affecting

Accepted Answer

A)  net income but not other comprehensive income. 
B)  other comprehensive income, but not net income. 
C)  net income and other comprehensive income. 
D)  neither net income nor other comprehensive income. 
A)  net income but not other comprehensive income. 
B)  other comprehensive income, but not net income. 
C)  net income and other comprehensive income. 
D)  neither net income nor other comprehensive income.

Question 17

The following transactions are for Kale Company.
(1) On December 3 Kale Company sold $500,000 of merchandise to Thomson Co., terms 1/10, n/10. The cost of the merchandise sold was $320,000.
(2) On December 8 Thomson Co. was granted an allowance of $20,000 for merchandise purchased on December 3.
(3) On December 13 Kale Company received the balance due from Thomson Co.
Instructions
(a) Prepare the journal entries to record these transactions on the books of Kale Company. Kale uses a perpetual inventory system.
(b) Assume that Kale Company received the balance due from Thomson Co. on January 2 of the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2.

Accepted Answer

The answer of The following transactions are for Kale Company.
(1)...

Question 18

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 36,000 \
\text { Sales revenue } & 150,000 \
\text { Cost of goods sold } & 105,000
\end{array}$$ The profit margin would be

Accepted Answer

A)  .70. 
B)  .06. 
C)  .30. 
D)  .94. 
A)  .70. 
B)  .06. 
C)  .30. 
D)  .94.

Question 19

Sue Cole is a new accountant with Simon Company. Simon purchased merchandise on account for $9,000. The credit terms are 1/10, n/30. Sue has talked with the company's banker and knows that she could earn 6% on any money invested in the company's savings account.
Instructions
(a) Should Sue pay the invoice within the discount period or should she keep the $9,000 in the savings account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would be best.
(b) If Sue forgoes the discount, it may be viewed as paying an interest rate of 1% for the use of $9,000 for 20 days. Calculate the annual rate of interest that this is equivalent to.

Accepted Answer

@#IMG-DLM& (b) The equivalent

Question 20

If Hostell Company has net sales of $500,000 and cost of goods sold of $325,000, Hostell's gross profit rate is

Accepted Answer

A)  50%. 
B)  35%. 
C)  54%. 
D)  100%. 
A)  50%. 
B)  35%. 
C)  54%. 
D)  100%.

The primary source of revenue for a wholesaler is

Gross profit does not appear

Anderson Inc. sells $900 of merchandise on account to Baltic Company with credit terms of 2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check?

Operating expenses include interest expense and income tax expense.

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

The computer has increased greatly the use of the periodic inventory system.

Bolton Company's gross profit rate last year was 32.0% and this year it is 28.4%. Which of the following would not be a possible cause for this decline in the gross profit rate?

A periodic inventory system does not require a detailed record of inventory items.

Gross profit equals the difference between

Instructions State the missing items identified by ?. 1. Gross profit - Operating expenses = ? 2. Cost of goods sold + Gross profit = ? 3. Sales revenue - (? + ?) = Net sales 4. Income from operations + ? - ? = Net income 5. Net sales - Cost of goods sold = ?

Which of the following expressions is incorrect?

The freight costs incurred by a seller on outgoing inventory are an ________________ to the seller.

A merchandising company frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

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 Gross profit would be

Under the periodic system, the purchases account is used to accumulate all purchases of merchandise for resale.

The use of IFRS results in more transactions affecting

Financial information is presented below: Operating expenses \ 36,000 Sales revenue 150,000 Cost of goods sold 105,000 The profit margin would be

If Hostell Company has net sales of $500,000 and cost of goods sold of $325,000, Hostell's gross profit rate is

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

The primary source of revenue for a wholesaler is

Gross profit does not appear

Anderson Inc. sells $900 of merchandise on account to Baltic Company with credit terms of 2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check?

Operating expenses include interest expense and income tax expense.

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

The computer has increased greatly the use of the periodic inventory system.

Bolton Company's gross profit rate last year was 32.0% and this year it is 28.4%. Which of the following would not be a possible cause for this decline in the gross profit rate?

A periodic inventory system does not require a detailed record of inventory items.

Gross profit equals the difference between

Instructions State the missing items identified by ?. 1. Gross profit - Operating expenses = ? 2. Cost of goods sold + Gross profit = ? 3. Sales revenue - (? + ?) = Net sales 4. Income from operations + ? - ? = Net income 5. Net sales - Cost of goods sold = ?

Which of the following expressions is incorrect?

The freight costs incurred by a seller on outgoing inventory are an ________________ to the seller.

A merchandising company frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

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 Gross profit would be

Under the periodic system, the purchases account is used to accumulate all purchases of merchandise for resale.

The use of IFRS results in more transactions affecting

Financial information is presented below: Operating expenses \ 36,000 Sales revenue 150,000 Cost of goods sold 105,000 The profit margin would be

If Hostell Company has net sales of $500,000 and cost of goods sold of $325,000, Hostell's gross profit rate is

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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