Question 1

Under GAAP, companies generally classify income statement items by

Accepted Answer

A)  function. 
B)  nature. 
C)  nature or function 
D)  date incurred. 
A)  function. 
B)  nature. 
C)  nature or function 
D)  date incurred.

Question 2

The quality of earnings ratio is calculated as net income divided by net cash provided by operating activities.

Accepted Answer

A) True 
 B)False

Question 3

Match between columns
                        Premises: Provides support for a credit sale.
Requires a physical count of goods on hand to compute cost of goods sold.
An account that is offset against a revenue account on the income statement.
Specifies the amount of cash discount and time period during which it is offered.
Sales less sales returns and allowances and sales discounts.
A cash discount claimed by a buyer for prompt payment of a balance due.
Net sales less cost of goods sold.
A reduction given by the seller for prompt payment of a credit sale.
Gross profit divided by net sales.
Freight cost to deliver goods to customers reported as an operating expense.

Accepted Answer

The Answer of Contra revenue and Purchase discount and Sales is...

Question 4

The journal entry to record a credit sale ignoring cost of goods sold is

Accepted Answer

A)  Cash Sales Revenue 
B)  Cash Service Revenue 
C)  Accounts Receivable Sales Returns and Allowances 
D)  Accounts Receivable Sales Revenue 
A)  Cash Sales Revenue 
B)  Cash Service Revenue 
C)  Accounts Receivable Sales Returns and Allowances 
D)  Accounts Receivable Sales Revenue

Question 5

Which sales accounts normally have a debit balance?

Accepted Answer

A)  Sales Discounts 
B)  Sales Returns and Allowances. 
C)  Both Sales Discounts and Sales Returns and Allowances have debit balances. 
D)  Neither Sales Discounts or Sales Returns and Allowances have debit balances. 
A)  Sales Discounts 
B)  Sales Returns and Allowances. 
C)  Both Sales Discounts and Sales Returns and Allowances have debit balances. 
D)  Neither Sales Discounts or Sales Returns and Allowances have debit balances.

Question 6

A very small business most likely would have to use the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 7

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Accepted Answer

You have made a very good observation bu

Question 8

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Accepted Answer

A) True 
 B)False

Question 9

Davies Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

Accepted Answer

A)  $9,000 
B)  $8,856 
C)  $8,820 d $7,200 
A)  $9,000 
B)  $8,856 
C)  $8,820 d $7,200

Question 10

Aber Company sells merchandise on account for $1,800 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Accepted Answer

A)  $1,464 
B)  $1,476 
C)  $1,470 
D)  $1,350 
A)  $1,464 
B)  $1,476 
C)  $1,470 
D)  $1,350

Question 11

Rains Company is a furniture retailer. On January 14, 2014, Rains purchased merchandise inventory at a cost of $48,000. Credit terms were 2/10, n/30. The inventory was sold on account for $80,000 on January 21, 2014. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2014 and the accounts receivables were settled on January 30, 2014. Which statement is correct?

Accepted Answer

A)  Cash flows were affected on January 14 and January 21. 
B)  Gross profit percentage is 60%. 
C)  On January 30, 2014, customers should remit cash in the amount of $79,200. 
D)  There is not enough information available to answer this question. 
A)  Cash flows were affected on January 14 and January 21. 
B)  Gross profit percentage is 60%. 
C)  On January 30, 2014, customers should remit cash in the amount of $79,200. 
D)  There is not enough information available to answer this question.

Question 12

If a customer agrees to retain merchandise that is defective 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 13

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.

Accepted Answer

A)  Gross profit 
B)  Operating expenses 
C)  Sales revenue 
D)  Cost of goods sold 
A)  Gross profit 
B)  Operating expenses 
C)  Sales revenue 
D)  Cost of goods sold

Question 14

June 4 Black Company purchased $9,000 worth of merchandise, terms n/30 from Hayes Company. The cost of the merchandise was $6,300.
12 Black returned $500 worth of goods to Hayes for full credit. The goods had a cost of $350 to Hayes.
12 Black paid the account in full.
Instructions
Prepare the journal entries to record these transactions in (a) Black's records and (b) Hayes' records. Assume use of the perpetual inventory system for both companies.

Accepted Answer

The answer of June 4 Black Company purchased $9,000 worth...

Question 15

The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period.

Accepted Answer

A) True 
 B)False

Question 16

If Indiana Ink, Inc. has net sales of $400,000 and cost of goods sold of $300,000, Indiana Ink's gross profit rate is

Accepted Answer

A)  75%. 
B)  33% 
C)  25%. 
D)  100%. 
A)  75%. 
B)  33% 
C)  25%. 
D)  100%.

Question 17

During the year, Megan's Pet Shop's merchandise inventory decreased by $60,000. If the company's cost of goods sold for the year was $900,000, purchases would have been

Accepted Answer

A)  $960,000. 
B)  $840,000. 
C)  $780,000. 
D)  Unable to determine. 
A)  $960,000. 
B)  $840,000. 
C)  $780,000. 
D)  Unable to determine.

Question 18

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

Accepted Answer

A)  selling products with a lower markup. 
B)  clearance of discontinued inventory. 
C)  paying lower prices to its suppliers. 
D)  increasing competition resulting in a lower selling price. 
A)  selling products with a lower markup. 
B)  clearance of discontinued inventory. 
C)  paying lower prices to its suppliers. 
D)  increasing competition resulting in a lower selling price.

Question 19

Which of the following statements is true regarding profit margin?

Accepted Answer

A)  Profit margin can be improved by decreasing the gross profit rate and/or controlling operating expenses and other costs 
B)  Profit margin does not vary across industries. 
C)  Discount stores with high merchandise turnover generally have higher profit margins. 
D)  If the profit margin has a higher value, this suggests favorable return on each dollar of sales. 
A)  Profit margin can be improved by decreasing the gross profit rate and/or controlling operating expenses and other costs 
B)  Profit margin does not vary across industries. 
C)  Discount stores with high merchandise turnover generally have higher profit margins. 
D)  If the profit margin has a higher value, this suggests favorable return on each dollar of sales.

Question 20

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 28,000 \
\text { Sales returns and allowances } & 7,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 150,000 \
\text { Cost of goods sold } & 91,000
\end{array}$$ Gross profit would be

Accepted Answer

A)  $56,000. 
B)  $49,000. 
C)  $52,000. 
D)  $59,000. 
A)  $56,000. 
B)  $49,000. 
C)  $52,000. 
D)  $59,000.

Under GAAP, companies generally classify income statement items by

The quality of earnings ratio is calculated as net income divided by net cash provided by operating activities.

The journal entry to record a credit sale ignoring cost of goods sold is

Which sales accounts normally have a debit balance?

A very small business most likely would have to use the perpetual inventory system.

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Davies Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

Aber Company sells merchandise on account for $1,800 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

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

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.

The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period.

If Indiana Ink, Inc. has net sales of $400,000 and cost of goods sold of $300,000, Indiana Ink's gross profit rate is

During the year, Megan's Pet Shop's merchandise inventory decreased by $60,000. If the company's cost of goods sold for the year was $900,000, purchases would have been

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

Which of the following statements is true regarding profit margin?

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 Gross profit would be

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

Under GAAP, companies generally classify income statement items by

The quality of earnings ratio is calculated as net income divided by net cash provided by operating activities.

The journal entry to record a credit sale ignoring cost of goods sold is

Which sales accounts normally have a debit balance?

A very small business most likely would have to use the perpetual inventory system.

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Davies Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

Aber Company sells merchandise on account for $1,800 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

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

Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.

The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period.

If Indiana Ink, Inc. has net sales of $400,000 and cost of goods sold of $300,000, Indiana Ink's gross profit rate is

During the year, Megan's Pet Shop's merchandise inventory decreased by $60,000. If the company's cost of goods sold for the year was $900,000, purchases would have been

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

Which of the following statements is true regarding profit margin?

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 Gross profit would be

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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