Question 1

Multiple-step income statements show

Accepted Answer

A)  gross profit but not income from operations 
B)  neither gross profit nor income from operations 
C)  both gross profit and income from operations 
D)  income from operations but not gross profit 
A)  gross profit but not income from operations 
B)  neither gross profit nor income from operations 
C)  both gross profit and income from operations 
D)  income from operations but not gross profit

Question 2

When comparing a retail business to a service business, the financial statement that changes the least is the

Accepted Answer

A)  balance sheet 
B)  income statement 
C)  retained earnings statement 
D)  statement of cash flows 
A)  balance sheet 
B)  income statement 
C)  retained earnings statement 
D)  statement of cash flows

Question 3

Inventory shrinkage is recorded when

Accepted Answer

A)  merchandise is returned by a buyer 
B)  merchandise purchased from a seller is incomplete or short 
C)  merchandise is returned to a seller 
D)  there is a difference between a physical count of inventory and inventory records 
A)  merchandise is returned by a buyer 
B)  merchandise purchased from a seller is incomplete or short 
C)  merchandise is returned to a seller 
D)  there is a difference between a physical count of inventory and inventory records

Question 4

The abbreviation FOB stands for "free on board."

Accepted Answer

A) True 
 B)False

Question 5

Using the following information, what is the amount of income from operations?

Accepted Answer

A)  $32,870 
B)  $31,910 
C)  $30,710 
D)  $29,800 
A)  $32,870 
B)  $31,910 
C)  $30,710 
D)  $29,800

Question 6

Merchandise Inventory normally has a debit balance.

Accepted Answer

A) True 
 B)False

Question 7

Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Madison Company for the year ended October 31.

Accepted Answer

The answer of Madison Company's perpetual inventory records indicate that...

Question 8

Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period?

Accepted Answer

A)  Accounts Payable-Emma Co., debit $15,000; Cash, credit $15,000 
B)  Accounts Payable-Emma Co., debit $15,450; Cash, credit $15,450 
C)  Accounts Payable-Emma Co., debit $15,000; Freight-In, debit $750; Cash, credit $15,750 
D)  Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, debit $300; Cash, credit $16,050 
A)  Accounts Payable-Emma Co., debit $15,000; Cash, credit $15,000 
B)  Accounts Payable-Emma Co., debit $15,450; Cash, credit $15,450 
C)  Accounts Payable-Emma Co., debit $15,000; Freight-In, debit $750; Cash, credit $15,750 
D)  Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, debit $300; Cash, credit $16,050

Question 9

What type of company would normally offer trade discounts to its customers?

Accepted Answer

A)  service companies 
B)  retailers 
C)  wholesalers 
D)  online retailers 
A)  service companies 
B)  retailers 
C)  wholesalers 
D)  online retailers

Question 10

Journalize the following transactions assuming the perpetual inventory system:
July 3 Sold merchandise on account for $3,750 including terms. The cost of the merchandise sold was $2,000.
5 Issued credit memo for $1,050 for merchandise returned from sale on July 3. The cost of the merchandise returned was $610.
12 Received check for the amount due for sale on July 3 less return on July 5.
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Accepted Answer

The answer of Journalize the following transactions assuming the perpetual...

Question 11

Calculate income from operations for Jonas Company based on the following data: $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 764,000 \
\hline \text { Operating Expenses } & 52,500 \
\hline \text { Cost of Merchandise Sold } & 538,000 \
\hline
\end{array}$$

Accepted Answer

A)  $485,500 
B)  $711,500 
C)  $173,500 
D)  $226,000 
A)  $485,500 
B)  $711,500 
C)  $173,500 
D)  $226,000

Question 12

Which account will be included in the closing entries for both service and merchandising companies?

Accepted Answer

A)  Sales 
B)  Cost of Merchandise Sold 
C)  Purchase Discounts 
D)  Purchase Returns and Allowances 
A)  Sales 
B)  Cost of Merchandise Sold 
C)  Purchase Discounts 
D)  Purchase Returns and Allowances

Question 13

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.

Accepted Answer

A) True 
 B)False

Question 14

Under the perpetual inventory system, all purchases of merchandise are debited to the account

Accepted Answer

A)  Merchandise Inventory 
B)  Cost of Merchandise Sold 
C)  Cost of Merchandise Available for Sale 
D)  Purchases 
A)  Merchandise Inventory 
B)  Cost of Merchandise Sold 
C)  Cost of Merchandise Available for Sale 
D)  Purchases

Question 15

Who is responsible for the freight costs when the terms are FOB shipping point?

Accepted Answer

A)  the ultimate customer 
B)  the buyer 
C)  the seller 
D)  either the seller or the buyer 
A)  the ultimate customer 
B)  the buyer 
C)  the seller 
D)  either the seller or the buyer

Question 16

The cost of merchandise inventory is limited to the purchase price less any purchase discounts.

Accepted Answer

A) True 
 B)False

Question 17

Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid freight costs of $150. The sales amount recorded is $3,528.

Accepted Answer

A) True 
 B)False

Question 18

Generally, the revenue account for a merchandising business is entitled

Accepted Answer

A)  Sales 
B)  Fees Earned 
C)  Gross Sales 
D)  Gross Profit 
A)  Sales 
B)  Fees Earned 
C)  Gross Sales 
D)  Gross Profit

Question 19

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

Accepted Answer

A)  only the list price 
B)  only the sales tax 
C)  the list price plus the sales tax 
D)  the list price less the sales tax 
A)  only the list price 
B)  only the sales tax 
C)  the list price plus the sales tax 
D)  the list price less the sales tax

Question 20

A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an account receivable of $750.

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Businesses

Multiple-step income statements show

When comparing a retail business to a service business, the financial statement that changes the least is the

Inventory shrinkage is recorded when

The abbreviation FOB stands for "free on board."

Using the following information, what is the amount of income from operations?

Merchandise Inventory normally has a debit balance.

Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Madison Company for the year ended October 31.

What type of company would normally offer trade discounts to its customers?

Calculate income from operations for Jonas Company based on the following data: Sales \ 764,000 Operating Expenses 52,500 Cost of Merchandise Sold 538,000

Which account will be included in the closing entries for both service and merchandising companies?

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.

Under the perpetual inventory system, all purchases of merchandise are debited to the account

Who is responsible for the freight costs when the terms are FOB shipping point?

The cost of merchandise inventory is limited to the purchase price less any purchase discounts.

Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid freight costs of $150. The sales amount recorded is $3,528.

Generally, the revenue account for a merchandising business is entitled

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an account receivable of $750.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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