Question 1

Gross profit rate is computed by dividing cost of goods sold by net sales.

Accepted Answer

A) True 
 B)False

Question 2

Cost of goods available for sale is computed by adding

Accepted Answer

A)  beginning inventory to net purchases. 
B)  beginning inventory to the cost of goods purchased. 
C)  net purchases and freight-in. 
D)  purchases to beginning inventory. 
A)  beginning inventory to net purchases. 
B)  beginning inventory to the cost of goods purchased. 
C)  net purchases and freight-in. 
D)  purchases to beginning inventory.

Question 3

Prepare the necessary journal entries on the books of Magic Carpet Company to record the following transactions assuming a perpetual inventory system (you may omit explanations):
(a) Magic purchased $49000 of merchandise on account terms 2/10 n/30.
(b) Returned $4000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.

Accepted Answer

None

Question 4

Comprehensive income under IFRS

Accepted Answer

A)  includes unrealized gains and losses included in net income in contrast to GAAP. 
B)  includes unrealized gains and losses included in net income similar to GAAP. 
C)  excludes unrealized gains and losses included in net income in contrast to GAAP. 
D)  excludes unrealized gains and losses included in net income similar to GAAP. 
A)  includes unrealized gains and losses included in net income in contrast to GAAP. 
B)  includes unrealized gains and losses included in net income similar to GAAP. 
C)  excludes unrealized gains and losses included in net income in contrast to GAAP. 
D)  excludes unrealized gains and losses included in net income similar to GAAP.

Question 5

In the Murphy Company sales were $750000 sales returns and allowances were $30000 and cost of goods sold was $475200. The gross profit rate was

Accepted Answer

A)  36.6%. 
B)  34%. 
C)  66%. 
D)  63.4%. 
A)  36.6%. 
B)  34%. 
C)  66%. 
D)  63.4%.

Question 6

Company M sells $900 of merchandise on account to Company N with credit terms of 1/15 n/30. If Company N remits a check taking advantage of the discount offered what is the amount of Company N's check?

Accepted Answer

A)  $774 
B)  $765 
C)  $810 
D)  $891 
A)  $774 
B)  $765 
C)  $810 
D)  $891

Question 7

Martin Company reported the following balances at June 30 2016: $$\begin{array} { l r } 
\text { Sales Revenue } & \$ 16,500 \
\text { Sales Returns and Allowances } & 800 \
\text { Sales Discounts } & 200 \
\text { Cost of Goods Sold } & 7,100
\end{array}$$ Net sales for the month is

Accepted Answer

A)  $7300 
B)  $15500. 
C)  $15700. 
D)  $16500. 
A)  $7300 
B)  $15500. 
C)  $15700. 
D)  $16500.

Question 8

The revenue recognition principle applies to merchandisers by recognizing sales revenues when the performance obligation is satisfied.

Accepted Answer

A) True 
 B)False

Question 9

When a seller grants credit for returned goods the account that is credited is

Accepted Answer

A)  Sales Revenue. 
B)  Sales Returns and Allowances. 
C)  Inventory. 
D)  Accounts Receivable. 
A)  Sales Revenue. 
B)  Sales Returns and Allowances. 
C)  Inventory. 
D)  Accounts Receivable.

Question 10

Dawn Company uses a perpetual inventory system made a purchase of merchandise on credit from Wagne Corporation on August 3 for $7000 terms 2/10 n/45. On August 10 Dawn makes the appropriate payment to Wagne. The entry on August 10 for Dawn Company is a.
$\begin{array}{lrr}
  \text {Accounts Payable  } &7,000\
 \text { Cash } &&7,000\
\end{array}$

b.
$\begin{array}{lrr}
  \text { Accounts Payable } &6,860\
 \text { Cash } &&6,860
\end{array}$

c.
$\begin{array}{lrr}
  \text {Accounts Payable  } &7,000\
 \text { Purchase Returns and Allowances } &&140\
 \text {Cash  } &&6,860
\end{array}$

d. 
$\begin{array}{lrr}
  \text {  Accounts Payable} &7,000\
 \text { Inventory } &&140\
 \text {  Cash} &&6,860
\end{array}$

Accepted Answer

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

Question 11

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.

Accepted Answer

A) True 
 B)False

Question 12

During August 2016 Shelby's Supply Store generated revenues of $65000. The company's expenses were as follows: cost of goods sold of $33000 and operating expenses of $7000. The company also had rent revenue of $2000 and a loss on the sale of a delivery truck of $3000. Shelby's net income for August 2016 is

Accepted Answer

A)  $25000. 
B)  $27000. 
C)  $24000. 
D)  $32000. 
A)  $25000. 
B)  $27000. 
C)  $24000. 
D)  $32000.

Question 13

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

Accepted Answer

A)  Accounts Payable. 
B)  Purchase Returns and Allowances. 
C)  Sales Revenue. 
D)  Inventory. 
A)  Accounts Payable. 
B)  Purchase Returns and Allowances. 
C)  Sales Revenue. 
D)  Inventory.

Question 14

Armando Martinez believes revenues from credit sales may be recognized before they are collected in cash. Do you agree? Explain.

Accepted Answer

Agree. In accordance with the revenue re

Question 15

Under IFRS companies must classify income statement items by

Accepted Answer

A)  function. 
B)  nature. 
C)  nature or function 
D)  date incurred. 
A)  function. 
B)  nature. 
C)  nature or function 
D)  date incurred.

Question 16

Instructions
State the missing items identified by ?.
1. Gross profit - Operating expenses = ?
2. Cost of goods sold + Gross profit on sales = ?
3. Sales Revenue - (? + ?) = Net sales
4. Income from operations + ? - ? = Net income
5. Net sales - Cost of goods sold = ?

Accepted Answer

1. Income from operations (or

Question 17

When the physical count of Barr Company inventory had a cost of $4380 at year end and the unadjusted balance in Inventory was $4600 Barr will have to make the following entry: a. 
$\begin{array}{lrr}
  \text { Cost of Goods Sold } &220\
 \text {Inventory  } &&220\
\end{array}$

b. 
$\begin{array}{lrr}
  \text {Inventory  } &220\
 \text { Cost of Goods Sold } &&220\
\end{array}$

c. 
$\begin{array}{lrr}
  \text { Income Summary }&220\
 \text { Inventory } &&220\
\end{array}$

d. 
$\begin{array}{lrr}
  \text {Cost of Goods Sold  } &4,600\
 \text { Inventory } &&4,600 \
\end{array}$

Accepted Answer

The answer of When the physical count of Barr Company...

Question 18

Bradshaw Shoe Store has a beginning inventory of $48000. During the period purchases were $180000; purchase returns $15000; and freight-in $6000. A physical count of inventory at the end of the period revealed that $30000 was still on hand. The cost of goods available for sale was

Accepted Answer

A)  $165000. 
B)  $171000. 
C)  $189000. 
D)  $219000. 
A)  $165000. 
B)  $171000. 
C)  $189000. 
D)  $219000.

Question 19

An enterprise which sells goods to customers is known as a

Accepted Answer

A)  proprietorship. 
B)  corporation. 
C)  retailer. 
D)  service firm. 
A)  proprietorship. 
B)  corporation. 
C)  retailer. 
D)  service firm.

Question 20

A Sales Returns and Allowances account is not debited if a customer

Accepted Answer

A)  returns defective merchandise. 
B)  receives a credit for merchandise of inferior quality. 
C)  utilizes a prompt payment incentive. 
D)  returns goods that are not in accordance with specifications. 
A)  returns defective merchandise. 
B)  receives a credit for merchandise of inferior quality. 
C)  utilizes a prompt payment incentive. 
D)  returns goods that are not in accordance with specifications.

Exam 5: Accounting for Merchandising Operations

Gross profit rate is computed by dividing cost of goods sold by net sales.

Cost of goods available for sale is computed by adding

Comprehensive income under IFRS

In the Murphy Company sales were $750000 sales returns and allowances were $30000 and cost of goods sold was $475200. The gross profit rate was

Company M sells $900 of merchandise on account to Company N with credit terms of 1/15 n/30. If Company N remits a check taking advantage of the discount offered what is the amount of Company N's check?

Martin Company reported the following balances at June 30 2016: Sales Revenue \ 16,500 Sales Returns and Allowances 800 Sales Discounts 200 Cost of Goods Sold 7,100 Net sales for the month is

The revenue recognition principle applies to merchandisers by recognizing sales revenues when the performance obligation is satisfied.

When a seller grants credit for returned goods the account that is credited is

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

Armando Martinez believes revenues from credit sales may be recognized before they are collected in cash. Do you agree? Explain.

Under IFRS companies must classify income statement items by

Instructions State the missing items identified by ?. 1. Gross profit - Operating expenses = ? 2. Cost of goods sold + Gross profit on sales = ? 3. Sales Revenue - (? + ?) = Net sales 4. Income from operations + ? - ? = Net income 5. Net sales - Cost of goods sold = ?

Bradshaw Shoe Store has a beginning inventory of $48000. During the period purchases were $180000; purchase returns $15000; and freight-in $6000. A physical count of inventory at the end of the period revealed that $30000 was still on hand. The cost of goods available for sale was

An enterprise which sells goods to customers is known as a

A Sales Returns and Allowances account is not debited if a customer

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

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