Question 1

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?

Accepted Answer

A) The percentage will not change or it will increase. 
B) The percentage will not change or it will decrease. 
C) The percentage will decrease. 
D) None of the answers are acceptable.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) debited (Dr) 
B) Bedited (Cr) 
C) Ceither (N)

Question 4

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:

Accepted Answer

A) $5,000 will be debited to Purchases Returns and $5,000 will be credited to Accounts Payable. 
B) $5,000 will be debited to Accounts Payable and $5,000 will be credited to Inventory. 
C) $25,000 will be debited to Accounts Payable and $25,000 will be credited to Inventory. 
D) $20,000 will be credited to Inventory and $20,000 will be credited to Purchases.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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?

Accepted Answer

A) Reduced selling prices. 
B) Rising product cost as a percentage of sales. 
C) Increased competition from Pepsi. 
D) All of the answers could have led to the change.

Question 8

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.

Accepted Answer

A) The gross profit percentages on the individual products are 50%,60%,and 70%,respectively. 
B) The third product is the highest margin good. 
C) If the company can persuade some customers to switch to the third product,overall gross profit percentage will increase. 
D) All of the answers are acceptable.

Question 9

Sales discounts are offered to delay payments to suppliers.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Match between columns
                        Premises: Shrinkage
Gross profit
Manufacturing company
Periodic inventory system
Perpetual inventory system
Sales discount
Purchase discount
Merchandising company

Accepted Answer

The Answer of Sales revenue minus total expenses other than is...

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

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:

Accepted Answer

A) $20,500 will be debited to Inventory,$20,000 will be credited to Accounts Payable,and $500 will be credited to Cash. 
B) $20,000 will be debited to Inventory and $20,000 will be credited to Cash. 
C) $20,000 will be credited to Inventory and $20,000 will be credited to Purchases. 
D) $20,500 will be debited to costs of goods sold and $20,500 will be credited to Accounts Payable.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) Theft was an insignificant source of loss compared to today. 
B) Tax laws required physical inventory counts. 
C) New technology,allowing perpetual inventory systems to be installed more easily and inexpensively,was not available thirty years ago. 
D) Before the advent of computers,perpetual systems were less accurate than periodic systems.

Question 19

Contra-revenue accounts:

Accepted Answer

A) are liabilities. 
B) are recorded with a credit. 
C) are recorded with a debit. 
D) are expenses.

Question 20

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?

Accepted Answer

A) $5,733 
B) $6,100 
C) $5,735 
D) $5,730

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 $\bold{not}$ incur operating expenses.

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

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?

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.

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

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?

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