Question 1

Two categories of expenses for merchandising companies are

Accepted Answer

A) cost of goods sold and financing expenses. 
B) operating expenses and financing expenses. 
C) cost of goods sold and operating expenses. 
D) sales and cost of goods sold. 
A) cost of goods sold and financing expenses. 
B) operating expenses and financing expenses. 
C) cost of goods sold and operating expenses. 
D) sales and cost of goods sold.

Question 2

The major difference between the balance sheets of a service company and a merchandising company is inventory.

Accepted Answer

A) True 
 B)False

Question 3

The gross profit rate is computed by dividing gross profit by

Accepted Answer

A) cost of goods sold. 
B) net income. 
C) net sales. 
D) sales revenue. 
A) cost of goods sold. 
B) net income. 
C) net sales. 
D) sales revenue.

Question 4

Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement.

Accepted Answer

A) True 
 B)False

Question 5

At the beginning of September 2022, Stella Company reported Inventory of $8,000.During the month, the company made purchases of $35,600.At September 30, 2022, a physical count of inventory reported $8,400 on hand.Cost of goods sold for the month is

Accepted Answer

A) $35,200. 
B) $35,600. 
C) $36,000. 
D) $43,600. 
A) $35,200. 
B) $35,600. 
C) $36,000. 
D) $43,600.

Question 6

Jake's Market recorded the following events involving a recent purchase of merchandise: Received goods for $60,000, terms 2/10, n/30.
Returned $1,200 of the shipment for credit.
Paid $300 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's inventory increased by

Accepted Answer

A) $57,624. 
B) $57,918. 
C) $57,924. 
D) $59,100. 
A) $57,624. 
B) $57,918. 
C) $57,924. 
D) $59,100.

Question 7

When goods are returned that relate to a prior cash sale,

Accepted Answer

A) the Sales Returns and Allowances account should not be used. 
B) the Cash account will be credited. 
C) Sales Returns and Allowances will be credited. 
D) Accounts Receivable will be credited. 
A) the Sales Returns and Allowances account should not be used. 
B) the Cash account will be credited. 
C) Sales Returns and Allowances will be credited. 
D) Accounts Receivable will be credited.

Question 8

Sales minus operating expenses equals gross profit.

Accepted Answer

A) True 
 B)False

Question 9

A sales invoice is a source document that

Accepted Answer

A) provides support for goods purchased for resale. 
B) provides evidence of incurred operating expenses. 
C) provides evidence of credit sales. 
D) serves only as a customer receipt. 
A) provides support for goods purchased for resale. 
B) provides evidence of incurred operating expenses. 
C) provides evidence of credit sales. 
D) serves only as a customer receipt.

Question 10

A merchandising company using a perpetual system may record an adjusting entry by

Accepted Answer

A) debiting Income Summary. 
B) crediting Income Summary. 
C) debiting Cost of Goods Sold. 
D) debiting Sales Revenue. 
A) debiting Income Summary. 
B) crediting Income Summary. 
C) debiting Cost of Goods Sold. 
D) debiting Sales Revenue.

Question 11

Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement.

Accepted Answer

A) True 
 B)False

Question 12

The Inventory account balance appearing in a perpetual inventory worksheet represents the

Accepted Answer

A) ending inventory. 
B) beginning inventory. 
C) cost of merchandise purchased. 
D) cost of merchandise sold. 
A) ending inventory. 
B) beginning inventory. 
C) cost of merchandise purchased. 
D) cost of merchandise sold.

Question 13

Sales revenues are recognized during the period cash is collected from the buyer.

Accepted Answer

A) True 
 B)False

Question 14

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point.The freight costs will be paid by the

Accepted Answer

A) seller. 
B) buyer. 
C) transportation company. 
D) buyer and the seller. 
A) seller. 
B) buyer. 
C) transportation company. 
D) buyer and the seller.

Question 15

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.

Accepted Answer

A) True 
 B)False

Question 16

The basic accounting entries for merchandising are

Accepted Answer

A) the same under GAAP and under IFRS. 
B) required under GAAP but not under IFRS. 
C) required under IFRS but not under GAAP. 
D) required under IFRS with some differences as compared to GAAP.
IFRS. 
A) the same under GAAP and under IFRS. 
B) required under GAAP but not under IFRS. 
C) required under IFRS but not under GAAP. 
D) required under IFRS with some differences as compared to GAAP.
IFRS.

Question 17

Income from operations appears on

Accepted Answer

A) both a multiple-step and a single-step income statement. 
B) neither a multiple-step nor a single-step income statement. 
C) a single-step income statement. 
D) a multiple-step income statement. 
A) both a multiple-step and a single-step income statement. 
B) neither a multiple-step nor a single-step income statement. 
C) a single-step income statement. 
D) a multiple-step income statement.

Question 18

The operating cycle of a merchandiser is

Accepted Answer

A) always one year in length. 
B) generally longer than it is for a service company. 
C) about the same as for a service company. 
D) generally shorter than it is for a service company. 
A) always one year in length. 
B) generally longer than it is for a service company. 
C) about the same as for a service company. 
D) generally shorter than it is for a service company.

Question 19

The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts.

Accepted Answer

A) True 
 B)False

Question 20

All of the following items would be reported as other expenses and losses except

Accepted Answer

A) freight-out. 
B) casualty losses. 
C) interest expense. 
D) loss from employees' strikes. 
A) freight-out. 
B) casualty losses. 
C) interest expense. 
D) loss from employees' strikes.

Two categories of expenses for merchandising companies are

The major difference between the balance sheets of a service company and a merchandising company is inventory.

The gross profit rate is computed by dividing gross profit by

Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement.

At the beginning of September 2022, Stella Company reported Inventory of $8,000.During the month, the company made purchases of $35,600.At September 30, 2022, a physical count of inventory reported $8,400 on hand.Cost of goods sold for the month is

When goods are returned that relate to a prior cash sale,

Sales minus operating expenses equals gross profit.

A sales invoice is a source document that

A merchandising company using a perpetual system may record an adjusting entry by

Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement.

The Inventory account balance appearing in a perpetual inventory worksheet represents the

Sales revenues are recognized during the period cash is collected from the buyer.

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point.The freight costs will be paid by the

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.

The basic accounting entries for merchandising are

Income from operations appears on

The operating cycle of a merchandiser is

The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts.

All of the following items would be reported as other expenses and losses except

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Inventories

Fraud, Internal Control and Cash

Accounting for Receivables

Plant Assets, Natural Resources and Intangible Assets

Liabilities

Corporations: Organisations, Stock Transactions and Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Time Value of Money

Payroll Accounting

Other Significant Liabilities

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Exam 5: Accounting for Merchandising Operations

Two categories of expenses for merchandising companies are

The major difference between the balance sheets of a service company and a merchandising company is inventory.

The gross profit rate is computed by dividing gross profit by

Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement.

At the beginning of September 2022, Stella Company reported Inventory of $8,000.During the month, the company made purchases of $35,600.At September 30, 2022, a physical count of inventory reported $8,400 on hand.Cost of goods sold for the month is

When goods are returned that relate to a prior cash sale,

Sales minus operating expenses equals gross profit.

A sales invoice is a source document that

A merchandising company using a perpetual system may record an adjusting entry by

Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement.

The Inventory account balance appearing in a perpetual inventory worksheet represents the

Sales revenues are recognized during the period cash is collected from the buyer.

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point.The freight costs will be paid by the

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.

The basic accounting entries for merchandising are

Income from operations appears on

The operating cycle of a merchandiser is

The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts.

All of the following items would be reported as other expenses and losses except

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Inventories

Fraud, Internal Control and Cash

Accounting for Receivables

Plant Assets, Natural Resources and Intangible Assets

Liabilities

Corporations: Organisations, Stock Transactions and Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Time Value of Money

Payroll Accounting

Other Significant Liabilities

Filters