Question 1

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers.

Accepted Answer

A) True 
 B)False

Question 2

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A) Because gross profit percentages are so consistent from period to period they are not very useful for analyzing one company over time. 
B) Because gross profit percentages are so variable across industries they are most useful in comparing companies from different industries. 
C) Because gross profit percentages are so variable across industries they are more useful in analyzing one company over time. 
D) Because gross profit percentages are so consistent across industries they are most useful in comparing companies from different industries.

Question 4

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Accepted Answer

A) Selling goods to consumers. 
B) Receiving cash. 
C) Selling goods to other firms. 
D) Buying raw materials.

Question 5

The company gives a sales discount for prompt payment to customers.

Accepted Answer

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

Question 6

It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales.

Accepted Answer

A) True 
 B)False

Question 7

The following merchandise transactions occurred during December for two different companies: Rippen and Burnen.Both companies use a perpetual inventory system.
On December 3,Rippen Corporation sold merchandise on account to Burnen Corp.for $480,000,terms 2/10,n/30.This merchandise originally cost Rippen $320,000.
On December 8,Burnen Corp.returned merchandise to Rippen Corporation for a credit of $30,000.Rippen returned this merchandise to inventory at its original cost of $20,000.
December 12,Burnen Corp.paid Rippen Corporation for the amount owed.
Required:
a.Prepare the journal entries to record these transactions on the books of Rippen Corporation.
b.Prepare the journal entries to record these transactions on the books of Burnen Corp.

Accepted Answer

The answer of The following merchandise transactions occurred during December...

Question 8

A perpetual inventory system updates inventory records every time an item is

Accepted Answer

A) bought or sold. 
B) bought or returned. 
C) sold or returned. 
D) All of the choices are correct.

Question 9

The company sells $4600 of goods to consumers.

Accepted Answer

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

Question 10

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

Accepted Answer

A) Producing product. 
B) Incurring operating expenses. 
C) Buying goods or raw materials. 
D) Selling goods or physical product.

Question 11

The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.

Accepted Answer

A) True 
 B)False

Question 12

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Accepted Answer

A) BC Company will report a higher net income than AB Company. 
B) AB Company must have a greater sales volume than BC Company. 
C) BC Company must be more efficient at controlling selling,general,and administrative expenses than AB Company. 
D) None of the answers are acceptable.

Question 13

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Accepted Answer

A) Debit Inventory for $500 and credit Accounts Payable for $500. 
B) Debit Cash for $49,500,credit Accounts receivable for $50,000,and debit sales discounts for $500. 
C) Debit Accounts receivable for $50,000,credit Cash for $49,500,and credit sales discounts for $500. 
D) Debit Accounts Payable for $500 and credit Inventory for $500.

Question 14

Most companies report their sales revenue and contra-revenue accounts as well as net sales on their externally reported income statements.

Accepted Answer

A) True 
 B)False

Question 15

Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion.Its gross profit percentage was:

Accepted Answer

A) 30.3%. 
B) 69.7%. 
C) 43.5%. 
D) None of the answers are acceptable.

Question 16

Which is the best form of inventory control for inventory?

Accepted Answer

A) Establish responsibility. 
B) Use a periodic inventory system. 
C) Use a perpetual inventory system. 
D) Document procedures.

Question 17

Purrfect Pets announces that its gross profit rose 5% and its net income fell.Which of the following statements is true?

Accepted Answer

A) This is not possible given that net income is determined by gross profit. 
B) This must mean that other expenses have risen more than 5%. 
C) This must mean that other expenses fell. 
D) This must mean that sales revenue fell.

Question 18

BetterBuy sells a computer from inventory for $599 on credit.BetterBuy originally bought the computer from IBM for $395.What are the journal entries Betterbuy would record?

Accepted Answer

A) Debit Cash for $599,credit Sales for $599; debit Inventory for $395 and credit Cost of Goods Sold for $395. 
B) Debit Accounts Receivable for $599,credit Inventory for $395,and credit Retained Earnings for $204. 
C) Debit Accounts Receivable for $599,credit Sales for $599; debit Cost of Goods Sold for $395 and credit Inventory for $395. 
D) Debit Inventory for $395,debit Cost of Goods Sold for $204,and credit Accounts Receivable for $599.

Question 19

Companies using a perpetual inventory system:

Accepted Answer

A) never physically count their inventory. 
B) must physically count their inventory at least once a week. 
C) still need to count the physical inventory occasionally. 
D) always know the actual amount in inventory from their accounting records.

Question 20

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Accepted Answer

A) wholesale merchandising company. 
B) service company. 
C) retail merchandising company. 
D) secondary service company.

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

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers.

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.

Which of the following statements is true?

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

The company gives a sales discount for prompt payment to customers.

It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales.

A perpetual inventory system updates inventory records every time an item is

The company sells $4600 of goods to consumers.

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Most companies report their sales revenue and contra-revenue accounts as well as net sales on their externally reported income statements.

Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion.Its gross profit percentage was:

Which is the best form of inventory control for inventory?

Purrfect Pets announces that its gross profit rose 5% and its net income fell.Which of the following statements is true?

BetterBuy sells a computer from inventory for $599 on credit.BetterBuy originally bought the computer from IBM for $395.What are the journal entries Betterbuy would record?

Companies using a perpetual inventory system:

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a: