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

What factors affect a company's gross profit rate-that is, what can cause the gross profit rate to increase and what can cause it to decrease?

Under a perpetual inventory system, acquisition of merchandise for resale is debited to

A company using a perpetual inventory system that returns goods previously purchased on credit would

When a seller records a return of goods, the account that is credited is

Which of the following is a true statement about inventory systems?

Sampson Company's accounting records show the following at the year ending on December 31, 2014. Purchase Discounts \ ,600 Freight-In 7,800 Purchases 350,010 Beginning Inventory 23,500 Ending Inventory 28,800 Purchase Returns and Allowances 6,400 Using the periodic system, the cost of goods sold is

A company shows the following balances: Sales Revenue \ 800,000 Sales Returns and Allowances 75,000 Sales Discounts 25,000 Cost of Goods Sold 420,000 What is the gross profit rate?

The operating cycle involves the purchase and sale of merchandise inventory as well as the subsequent collection of cash from credit sales.

Which of the following would not be classified as a contra account?

Which of the following is not considered in computing net cost of purchases?

Under the periodic inventory system, acquisitions of merchandise are not recorded in the Inventory account.

Financial information is presented below: Operating expenses \ 45,000 Sales returns and allowances 4,000 Sales discounts 6,000 Sales revenue 160,000 Cost of goods sold 90,000 The gross profit rate would be

The Sales Returns and Allowances account is classified as a(n)

Which of the following is not a true statement about a multiple-step income statement?

The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income.

Gross profit for a merchandising company is net sales minus

Sales Returns and Allowances and Sales Discounts are both ______________ accounts and have normal _______________ balances.

Operating expenses are subtracted from revenue for a service enterprise and from gross profit for a merchandising enterprise.

To encourage bookstores to buy a broader range of book titles many publishers allow bookstores to return unsold books to the publisher. This results in very significant returns each year. To ensure proper recognition of revenues, how should publishing companies account for these returns?

Distinguish between cost of goods sold and operating expenses, describe the nature of these two items and their placement on the income statement.