Exam 6: Merchandising Operations and the Multi-Step Income Statement

When sales discounts in the current year exceed sales discounts in the prior year,assuming all else remains unchanged,what is the effect on the gross profit percentage?

(Multiple Choice)

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Question 41

Transportation costs associated with acquiring inventory should be included in the inventory account if a perpetual inventory system is used.

(True/False)

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Question 42

The company receives a purchase discount for prompt payment to a supplier.

(Multiple Choice)

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Question 43

An electronics retailer purchases $25,000 of computers on account for resale.The retailer returns $5,000 of computers to the supplier and receives a credit on their account.Under a perpetual inventory system the journal entry to record the returned goods will include:

(Multiple Choice)

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Question 44

One of the advantages to using gross profit for analysis is that the resulting values should be similar across industries and therefore,provide a means of comparison

(True/False)

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Question 45

Reductions in the selling price of merchandise that occur before a sale is made is recorded by debiting sales discounts and crediting accounts receivable.

(True/False)

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Question 46

Over a two-year period,Coca-Cola's gross profit percentage went from 70.4% to 69.7%.Which of the following was the cause of this change?

(Multiple Choice)

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Question 47

A company sells three different products.The first costs $8 and sells for $16,the second costs $18 and sells for $45,while the third costs $36 and sells for $120.

(Multiple Choice)

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Question 48

Sales discounts are offered to delay payments to suppliers.

(True/False)

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Question 49

Merchandise inventory for sale is recorded in the same account as supplies for internal use.

(True/False)

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Question 50

The Sales Returns and Allowances account balance should be deducted from the Sales account balance when computing net sales.

(True/False)

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Question 51

Unlike manufacturers and merchandisers,service companies do $\bold{not}$ incur operating expenses.

(True/False)

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Question 52

Match the term and the definition.Not all definitions will be used.

Shrinkage

Sales revenue minus total expenses other than income taxes.

Gross profit

When a company receives a discount for early payment on goods it buys.

Manufacturing company

When a company authorizes the transfer of funds electronically to another bank.

Correct Answer:

Verified

Shrinkage

Gross profit

Manufacturing company

Periodic inventory system

Perpetual inventory system

Sales discount

Purchase discount

Merchandising company

(Matching)

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Question 53

A buyer bought inventory for $3000 and pays $500 for shipping.The terms of the purchase is 2/10 n/30.If the buyer pays for the purchase within the discount period,the amount of the discount is $70.

(True/False)

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Question 54

An electronics retailer purchases $20,000 of computers for resale.The retailer spends $500 in cash for transportation cost.Under a perpetual inventory system the journal entry to record the purchase will include:

(Multiple Choice)

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Question 55

A company must solely be a service company,a merchandising company,or a manufacturer.

(True/False)

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Question 56

Customers are the biggest source of shrinkage in the retail industry.

(True/False)

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Question 57

Thirty years ago,most companies relied mainly upon periodic inventory systems.Why?

(Multiple Choice)

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Question 58

Contra-revenue accounts:

(Multiple Choice)

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Question 59

A company purchased $6,000 of merchandise.Transportation costs were an additional $100.The company later returned $250 of the merchandise and paid the invoice within the 2% discount period.What is the total amount of cash paid?

(Multiple Choice)

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Question 60

When sales discounts in the current year exceed sales discounts in the prior year,assuming all else remains unchanged,what is the effect on the gross profit percentage?

Transportation costs associated with acquiring inventory should be included in the inventory account if a perpetual inventory system is used.

The company receives a purchase discount for prompt payment to a supplier.

An electronics retailer purchases $25,000 of computers on account for resale.The retailer returns $5,000 of computers to the supplier and receives a credit on their account.Under a perpetual inventory system the journal entry to record the returned goods will include:

One of the advantages to using gross profit for analysis is that the resulting values should be similar across industries and therefore,provide a means of comparison

Reductions in the selling price of merchandise that occur before a sale is made is recorded by debiting sales discounts and crediting accounts receivable.

Over a two-year period,Coca-Cola's gross profit percentage went from 70.4% to 69.7%.Which of the following was the cause of this change?

A company sells three different products.The first costs $8 and sells for $16,the second costs $18 and sells for $45,while the third costs $36 and sells for $120.

Sales discounts are offered to delay payments to suppliers.

Merchandise inventory for sale is recorded in the same account as supplies for internal use.

The Sales Returns and Allowances account balance should be deducted from the Sales account balance when computing net sales.

Unlike manufacturers and merchandisers,service companies do $\bold{not}$ incur operating expenses.

A buyer bought inventory for $3000 and pays $500 for shipping.The terms of the purchase is 2/10 n/30.If the buyer pays for the purchase within the discount period,the amount of the discount is $70.

An electronics retailer purchases $20,000 of computers for resale.The retailer spends $500 in cash for transportation cost.Under a perpetual inventory system the journal entry to record the purchase will include:

A company must solely be a service company,a merchandising company,or a manufacturer.

Customers are the biggest source of shrinkage in the retail industry.

Thirty years ago,most companies relied mainly upon periodic inventory systems.Why?

Contra-revenue accounts:

A company purchased $6,000 of merchandise.Transportation costs were an additional $100.The company later returned $250 of the merchandise and paid the invoice within the 2% discount period.What is the total amount of cash paid?

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, financial Statements, and Financial Results

Fraud, internal Control, and Cash

Inventory and Cost of Goods Sold

Receivables, bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Shareholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 6: Merchandising Operations and the Multi-Step Income Statement

When sales discounts in the current year exceed sales discounts in the prior year,assuming all else remains unchanged,what is the effect on the gross profit percentage?

Transportation costs associated with acquiring inventory should be included in the inventory account if a perpetual inventory system is used.

The company receives a purchase discount for prompt payment to a supplier.

An electronics retailer purchases $25,000 of computers on account for resale.The retailer returns $5,000 of computers to the supplier and receives a credit on their account.Under a perpetual inventory system the journal entry to record the returned goods will include:

One of the advantages to using gross profit for analysis is that the resulting values should be similar across industries and therefore,provide a means of comparison

Reductions in the selling price of merchandise that occur before a sale is made is recorded by debiting sales discounts and crediting accounts receivable.

Over a two-year period,Coca-Cola's gross profit percentage went from 70.4% to 69.7%.Which of the following was the cause of this change?

A company sells three different products.The first costs $8 and sells for $16,the second costs $18 and sells for $45,while the third costs $36 and sells for $120.

Sales discounts are offered to delay payments to suppliers.

Merchandise inventory for sale is recorded in the same account as supplies for internal use.

The Sales Returns and Allowances account balance should be deducted from the Sales account balance when computing net sales.

Unlike manufacturers and merchandisers,service companies do not\bold{not}not incur operating expenses.

A buyer bought inventory for $3000 and pays $500 for shipping.The terms of the purchase is 2/10 n/30.If the buyer pays for the purchase within the discount period,the amount of the discount is $70.

An electronics retailer purchases $20,000 of computers for resale.The retailer spends $500 in cash for transportation cost.Under a perpetual inventory system the journal entry to record the purchase will include:

A company must solely be a service company,a merchandising company,or a manufacturer.

Customers are the biggest source of shrinkage in the retail industry.

Thirty years ago,most companies relied mainly upon periodic inventory systems.Why?

Contra-revenue accounts:

A company purchased $6,000 of merchandise.Transportation costs were an additional $100.The company later returned $250 of the merchandise and paid the invoice within the 2% discount period.What is the total amount of cash paid?

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, financial Statements, and Financial Results

Fraud, internal Control, and Cash

Inventory and Cost of Goods Sold

Receivables, bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Shareholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Unlike manufacturers and merchandisers,service companies do $\bold{not}$ incur operating expenses.