Question 1

Under IFRS income statement items are generally described as

Accepted Answer

A)  administration distribution manufacturing etc. 
B)  salaries depreciation utilities etc. 
C)  administration depreciation manufacturing etc. 
D)  salaries distribution utilities etc. 
A)  administration distribution manufacturing etc. 
B)  salaries depreciation utilities etc. 
C)  administration depreciation manufacturing etc. 
D)  salaries distribution utilities etc. B

Question 2

Net purchases plus freight-in determines

Accepted Answer

A)  cost of goods sold. 
B)  cost of goods available for sale. 
C)  cost of goods purchased. 
D)  total goods available for sale. 
A)  cost of goods sold. 
B)  cost of goods available for sale. 
C)  cost of goods purchased. 
D)  total goods available for sale. C

Question 3

On a classified balance sheet inventory is classified as

Accepted Answer

A)  an intangible asset. 
B)  property plant and equipment. 
C)  a current asset. 
D)  a long-term investment. 
A)  an intangible asset. 
B)  property plant and equipment. 
C)  a current asset. 
D)  a long-term investment. C

Question 4

Karns Company purchased merchandise on account from Bailey Office Suppliers for $174000 with terms of 2/10 n/30. During the discount period Karns returned some merchandise and paid $156800 as payment in full. Karns uses a perpetual inventory system. Prepare the journal entries that Karns Company made to record:
(1) the purchase of merchandise.
(2) the return of merchandise.
(3) the payment on account.
(b) Hinds Company sold merchandise to Peter Company on account for $146000 with credit terms of ?/10 n/30. The cost of the merchandise sold was $86140. During the discount period Peter Company returned $6000 of merchandise and paid its account in full (minus the discount) by remitting $137200 in cash. Both companies use a perpetual inventory system. Prepare the journal entries that Hinds Company made to record:
(1) the sale of merchandise.
(2) the return of merchandise.
(3) the collection on account.

Accepted Answer

(a) To compute the amount due after retu

Question 5

The following information is available for Hopkins Company: $$\begin{array} { l r } 
\text { Beginning inventory } & \$ 45,000 \
\text { Ending inventory } & 70,000 \
\text { Freight-in } & 10,000 \
\text { Purchases } & 290,000 \
\text { Purchase returns and allowances } & 8,000
\end{array}$$ Instructions
Compute each of the following:
(a) Net purchases
(b) Cost of goods purchased
(c) Cost of goods sold

Accepted Answer

(a) Net purchases = $282000 ($

Question 6

Which of the following accounts has a normal credit balance?

Accepted Answer

A)  Purchases 
B)  Sales Returns and Allowances 
C)  Freight-In 
D)  Purchase Discounts 
A)  Purchases 
B)  Sales Returns and Allowances 
C)  Freight-In 
D)  Purchase Discounts

Question 7

A merchandising company using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count.

Accepted Answer

A) True 
 B)False

Question 8

The following information is available for Sheldon Leonard Company: $$\begin{array}{l}
\begin{array} { l r } 
\text { Operating expenses } & \$ 85,000 \
\text { Cost of goods sold } & 200,000 \
\text { Sales revenue } & 325,000
\end{array}\
\text { Sales returns and allowances } 16,000
\end{array}$$ Instructions
Compute each of the following:
(a) Net sales
(b) Gross profit
(c) Income from operations

Accepted Answer

(a) Net sales = $309000 ($3250

Question 9

Net sales appears on both the multiple-step and single-step forms of an income statement.

Accepted Answer

A) True 
 B)False

Question 10

Financial information is presented below: Operating Expenses $\quad \$ 65,000$
Sales Revenue $\quad\quad \quad  220,000$
Cost of Goods Sold $\quad 138,000$ Gross profit would be

Accepted Answer

A)  $17000. 
B)  $82000. 
C)  $155000. 
D)  $220000. 
A)  $17000. 
B)  $82000. 
C)  $155000. 
D)  $220000.

Question 11

Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.

Accepted Answer

A) True 
 B)False

Question 12

The income statement for Pierre Paul Company for the year ended December 31 2016 is as follows: $\begin{array}{c}
 \text {PIERRE PAUL COMPANY}\
 \text {Income Statement}\
 \text {For the Year Ended December 31, 2016}\
\begin{array}{lrr}
  \text {Revenues  } &\
 \text { Sales revenue } &\$53,000\
 \text { Interest revenue } &4,000\
 \text { Total revenues } &\$57,000\
\
 \text { Expenses } &\
 \text {  Cost of goods sold} &30,000\
 \text { Salaries and wages expense } &18,000\
 \text {Interest expense  } &1,500\
 \text { Total expenses } &&49,500\
\
 \text { Net income. } &&\$7,500\
\end{array}\end{array}$
 Prepare the entries to close the revenue and expense accounts at December 31 2016. You may omit explanations for the transactions.

Accepted Answer

None

Question 13

In a worksheet for a merchandising company Inventory would appear in the

Accepted Answer

A)  trial balance and adjusted trial balance columns only. 
B)  trial balance and balance sheet columns only. 
C)  trial balance adjusted trial balance and balance sheet columns. 
D)  trial balance adjusted trial balance and income statement columns. 
A)  trial balance and adjusted trial balance columns only. 
B)  trial balance and balance sheet columns only. 
C)  trial balance adjusted trial balance and balance sheet columns. 
D)  trial balance adjusted trial balance and income statement columns.

Question 14

Under the perpetual system cash freight costs incurred by the buyer for the transporting of goods is recorded in

Accepted Answer

A)  Freight Expense. 
B)  Freight - In. 
C)  Inventory. d Freight - Out. 
A)  Freight Expense. 
B)  Freight - In. 
C)  Inventory. d Freight - Out.

Question 15

Gross profit represents the merchandising profit of a company.

Accepted Answer

A) True 
 B)False

Question 16

Prepare the necessary journal entries to record the following transactions assuming Dakin Company uses a perpetual inventory system.
(a) Purchased $35000 of merchandise on account terms 2/10 n/30.
(b) Returned $700 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.

Accepted Answer

None

Question 17

In preparing closing entries for a merchandising company the Income Summary account will be credited for the balance of

Accepted Answer

A)  sales revenue. 
B)  inventory. 
C)  sales discounts. 
D)  freight-out. 
A)  sales revenue. 
B)  inventory. 
C)  sales discounts. 
D)  freight-out.

Question 18

Blake Company uses a perpetual inventory system purchased inventory from Snow Company. The shipping costs were $650 and the terms of the shipment were FOB shipping point. Blake would have the following entry regarding the shipping charges: 
a. There is no entry on Blake's books for this transaction.
b. 
$\begin{array}{lrr}
  \text {Freight Expense.  } &650\
 \text {  Cash} &&650\
\end{array}$

c. 
$\begin{array}{lrr}
  \text {Freight-Out  } &650\
 \text {Cash  } &&650\
\end{array}$

d. 
$\begin{array}{lrr}
  \text { Inventory. } &650\
 \text {Cash  } &&650\
\end{array}$

Accepted Answer

The answer of Blake Company uses a perpetual inventory system...

Question 19

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price this transaction is known as a sales

Accepted Answer

A)  discount. 
B)  return. 
C)  contra asset. 
D)  allowance. 
A)  discount. 
B)  return. 
C)  contra asset. 
D)  allowance.

Question 20

Gross profit is obtained by subtracting ________________ from ________________.

Accepted Answer

cost of go

Exam 5: Accounting for Merchandising Operations

Under IFRS income statement items are generally described as

Net purchases plus freight-in determines

On a classified balance sheet inventory is classified as

The following information is available for Hopkins Company: Beginning inventory \ 45,000 Ending inventory 70,000 Freight-in 10,000 Purchases 290,000 Purchase returns and allowances 8,000 Instructions Compute each of the following: (a) Net purchases (b) Cost of goods purchased (c) Cost of goods sold

Which of the following accounts has a normal credit balance?

A merchandising company using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count.

The following information is available for Sheldon Leonard Company: Operating expenses \ 85,000 Cost of goods sold 200,000 Sales revenue 325,000 Sales returns and allowances 16,000 Instructions Compute each of the following: (a) Net sales (b) Gross profit (c) Income from operations

Net sales appears on both the multiple-step and single-step forms of an income statement.

Financial information is presented below: Operating Expenses $65,000\quad \$ 65,000$65,000 Sales Revenue 220,000\quad\quad \quad 220,000220,000 Cost of Goods Sold 138,000\quad 138,000138,000 Gross profit would be

Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.

In a worksheet for a merchandising company Inventory would appear in the

Under the perpetual system cash freight costs incurred by the buyer for the transporting of goods is recorded in

Gross profit represents the merchandising profit of a company.

In preparing closing entries for a merchandising company the Income Summary account will be credited for the balance of

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price this transaction is known as a sales

Gross profit is obtained by subtracting ________________ from ________________.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

Financial information is presented below: Operating Expenses $\quad \$ 65,000$ Sales Revenue $\quad\quad \quad 220,000$ Cost of Goods Sold $\quad 138,000$ Gross profit would be

Gross profit is obtained by subtracting from .