Question 1

Which of the following accounts will not be found in the Cost of Goods Sold section on the income statement?

Accepted Answer

A)  Purchases 
B)  Transportation In 
C)  Customer Refunds and Allowances 
D)  Merchandise Inventory 
A)  Purchases 
B)  Transportation In 
C)  Customer Refunds and Allowances 
D)  Merchandise Inventory

Question 2

Net income or loss may appear on the income statement of both a service business and a retail business.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Merchandise subject to the credit terms 2/10, n/30, FOB shipping point, is sold to a customer on account for $20,125.The seller issued a credit memorandum for $4,600 prior to payment.What is the amount of the cash discount allowable if the payment is made within 10 days of the invoice date?

Accepted Answer

A)  $201.25 
B)  $248.75 
C)  $310.50 
D)  $402.50 
A)  $201.25 
B)  $248.75 
C)  $310.50 
D)  $402.50

Question 5

Net sales is calculated by _____.

Accepted Answer

A)  subtracting cost of goods sold from total sales 
B)  subtracting customer refunds from total sales 
C)  adding ending inventory to total sales 
D)  adding cost of goods sold to total sales 
A)  subtracting cost of goods sold from total sales 
B)  subtracting customer refunds from total sales 
C)  adding ending inventory to total sales 
D)  adding cost of goods sold to total sales

Question 6

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.

Accepted Answer

A) True 
 B)False

Question 7

Merchandise with an invoice price of $10,000 is purchased subject to terms of 2/10, n/30, FOB destination.Transportation costs paid by the seller totaled $300.What is the net cost of the merchandise?

Accepted Answer

A)  $10,300 
B)  $10,100 
C)  $9,800 
D)  $9,506 
A)  $10,300 
B)  $10,100 
C)  $9,800 
D)  $9,506

Question 8

On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Investing activities include:

Accepted Answer

A)  collecting cash on loans made. 
B)  obtaining cash from creditors. 
C)  obtaining capital from owners. 
D)  repaying money previously borrowed. 
A)  collecting cash on loans made. 
B)  obtaining cash from creditors. 
C)  obtaining capital from owners. 
D)  repaying money previously borrowed.

Question 11

Which of the following items is subtracted from sales to arrive at net sales?

Accepted Answer

A)  Desired sales 
B)  Sales commission 
C)  Customer refunds and allowances 
D)  Cost of after sales services 
A)  Desired sales 
B)  Sales commission 
C)  Customer refunds and allowances 
D)  Cost of after sales services

Question 12

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount.

Accepted Answer

A) True 
 B)False

Question 13

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are:

Accepted Answer

A)  n/30. 
B)  FOB shipping point. 
C)  FOB destination. 
D)  consigned. 
A)  n/30. 
B)  FOB shipping point. 
C)  FOB destination. 
D)  consigned.

Question 14

By dividing gross profit by cost of merchandise sold we arrive at:

Accepted Answer

A)  gross profit percent. 
B)  average markup percent. 
C)  ratio of sales to assets. 
D)  sales percent. 
A)  gross profit percent. 
B)  average markup percent. 
C)  ratio of sales to assets. 
D)  sales percent.

Question 15

Which of the following is not a subsection in a multiple-step income statement?

Accepted Answer

A)  Purchase discounts 
B)  Gross profit 
C)  Operating income 
D)  Income before taxes 
A)  Purchase discounts 
B)  Gross profit 
C)  Operating income 
D)  Income before taxes

Question 16

Net sales is equal to sales plus cost of merchandise sold.

Accepted Answer

A) True 
 B)False

Question 17

A criticism of a single-step income statement is that net income is not available for analysis.

Accepted Answer

A) True 
 B)False

Question 18

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):

Accepted Answer

A)  decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales. 
B)  increase in Cash, increase in Credit Card Expense, and increase in Sales. 
C)  increase in Cash, decrease in Credit Card Expense, and increase in Sales. 
D)  decrease in Sales, increase in Credit Card Expense, and decrease in Cash. 
A)  decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales. 
B)  increase in Cash, increase in Credit Card Expense, and increase in Sales. 
C)  increase in Cash, decrease in Credit Card Expense, and increase in Sales. 
D)  decrease in Sales, increase in Credit Card Expense, and decrease in Cash.

Question 19

On April 10, 2016, $500 of the merchandise was returned to the seller.

Accepted Answer

A)  $100 
B)  $30 
C)  $43 
D)  $33 
A)  $100 
B)  $30 
C)  $43 
D)  $33

Question 20

Which term indicates that merchandise is free of transportation charges to the buyer?

Accepted Answer

A)  FOB destination 
B)  Transportation out 
C)  FOB shipping point 
D)  Transportation in 
A)  FOB destination 
B)  Transportation out 
C)  FOB shipping point 
D)  Transportation in

Which of the following accounts will not be found in the Cost of Goods Sold section on the income statement?

Net income or loss may appear on the income statement of both a service business and a retail business.

Multiple-step income statements show:

Merchandise subject to the credit terms 2/10, n/30, FOB shipping point, is sold to a customer on account for $20,125.The seller issued a credit memorandum for $4,600 prior to payment.What is the amount of the cash discount allowable if the payment is made within 10 days of the invoice date?

Net sales is calculated by _____.

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.

Merchandise with an invoice price of $10,000 is purchased subject to terms of 2/10, n/30, FOB destination.Transportation costs paid by the seller totaled $300.What is the net cost of the merchandise?

On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.

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

Investing activities include:

Which of the following items is subtracted from sales to arrive at net sales?

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount.

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are:

By dividing gross profit by cost of merchandise sold we arrive at:

Which of the following is not a subsection in a multiple-step income statement?

Net sales is equal to sales plus cost of merchandise sold.

A criticism of a single-step income statement is that net income is not available for analysis.

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):

On April 10, 2016, $500 of the merchandise was returned to the seller.

Which term indicates that merchandise is free of transportation charges to the buyer?

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

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Exam 4: Accounting for Merchandising Businesses

Which of the following accounts will not be found in the Cost of Goods Sold section on the income statement?

Net income or loss may appear on the income statement of both a service business and a retail business.

Multiple-step income statements show:

Merchandise subject to the credit terms 2/10, n/30, FOB shipping point, is sold to a customer on account for $20,125.The seller issued a credit memorandum for $4,600 prior to payment.What is the amount of the cash discount allowable if the payment is made within 10 days of the invoice date?

Net sales is calculated by _____.

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.

Merchandise with an invoice price of $10,000 is purchased subject to terms of 2/10, n/30, FOB destination.Transportation costs paid by the seller totaled $300.What is the net cost of the merchandise?

On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.

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

Investing activities include:

Which of the following items is subtracted from sales to arrive at net sales?

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount.

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are:

By dividing gross profit by cost of merchandise sold we arrive at:

Which of the following is not a subsection in a multiple-step income statement?

Net sales is equal to sales plus cost of merchandise sold.

A criticism of a single-step income statement is that net income is not available for analysis.

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):

On April 10, 2016, $500 of the merchandise was returned to the seller.

Which term indicates that merchandise is free of transportation charges to the buyer?

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters