Question 1

Which of the following accounts has a normal credit balance?

Accepted Answer

A)  Sales Returns and Allowances 
B)  Sales Discounts 
C)  Sales Revenue 
D)  Selling Expense 
A)  Sales Returns and Allowances 
B)  Sales Discounts 
C)  Sales Revenue 
D)  Selling Expense

Question 2

The credit terms offered to a customer by a business firm are 3/10 n/30 which means that

Accepted Answer

A)  the customer must pay the bill within 10 days. 
B)  the customer can deduct a 3% discount if the bill is paid between the 10th and 30th day from the invoice date. 
C)  the customer can deduct a 3% discount if the bill is paid within 10 days of the invoice date. 
D)  two sales returns can be made within 10 days of the invoice date and no returns thereafter. 
A)  the customer must pay the bill within 10 days. 
B)  the customer can deduct a 3% discount if the bill is paid between the 10th and 30th day from the invoice date. 
C)  the customer can deduct a 3% discount if the bill is paid within 10 days of the invoice date. 
D)  two sales returns can be made within 10 days of the invoice date and no returns thereafter.

Question 3

Sales revenues are usually considered earned when

Accepted Answer

A)  cash is received from credit sales. 
B)  an order is received. 
C)  goods have been transferred from the seller to the buyer. 
D)  adjusting entries are made. 
A)  cash is received from credit sales. 
B)  an order is received. 
C)  goods have been transferred from the seller to the buyer. 
D)  adjusting entries are made.

Question 4

Chen Company's financial information is presented below. $$\begin{array} { l r l r } 
\text { Sales Revenue } &\$ \text { ???? } & \text { Cost of Goods Sold } & 510,000 \
\text { Sales Returns and Allowances } & 40,000 & \text { Gross Profit } & ? ? ? ? \
\text { Net Sales } & 850,000 & &
\end{array}$$ The missing amounts above are: $\begin{array}{lrr}
  \underline{ \text { Sales Revenue } }&  \underline{\text {  Gross Profit
 } }\
\end{array}$

A)$\begin{array}{ll}
 \$ 890,000 &&&& \$ 340,000 \\end{array}$
B)$\begin{array}{ll} \$ 810,000 &&&& \$ 340,000 \\end{array}$
C)$\begin{array}{ll} \$ 890,000 &&&& \$ 300,000 \\end{array}$
D)$\begin{array}{ll}\$ 810,000 &&&& \$ 380,000
\end{array}$

Accepted Answer

The answer of Chen Company's financial information is presented below....

Question 5

The Sales Returns and Allowances account is classified as a(n)

Accepted Answer

A)  asset account. 
B)  contra asset account. 
C)  expense account. 
D)  contra revenue account. 
A)  asset account. 
B)  contra asset account. 
C)  expense account. 
D)  contra revenue account.

Question 6

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 gross profit for August 2016 is

Accepted Answer

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

Question 7

The Freight-In account

Accepted Answer

A)  increases the cost of merchandise purchased. 
B)  is contra to the Purchases account. 
C)  is a permanent account. 
D)  has a normal credit balance. 
A)  increases the cost of merchandise purchased. 
B)  is contra to the Purchases account. 
C)  is a permanent account. 
D)  has a normal credit balance.

Question 8

Which one of the following transactions is recorded with the same entry in a perpetual and a periodic inventory system?

Accepted Answer

A)  Cash received on account with a discount 
B)  Payment of freight costs on a purchase 
C)  Return of merchandise sold 
D)  Sale of merchandise on credit 
A)  Cash received on account with a discount 
B)  Payment of freight costs on a purchase 
C)  Return of merchandise sold 
D)  Sale of merchandise on credit

Question 9

Which of the following is not a true statement about a multiple-step income statement?

Accepted Answer

A)  Operating expenses are similar for merchandising and service enterprises. 
B)  There may be a section for nonoperating activities. 
C)  There may be a section for operating assets. 
D)  There is a section for cost of goods sold. 
A)  Operating expenses are similar for merchandising and service enterprises. 
B)  There may be a section for nonoperating activities. 
C)  There may be a section for operating assets. 
D)  There is a section for cost of goods sold.

Question 10

Nonoperating activities exclude revenues and expenses that result from secondary or auxiliary operations.

Accepted Answer

A) True 
 B)False

Question 11

Grimm Brothers Supply uses a periodic inventory system. During May the following transactions and events occurred. $\begin{array}{lll}
  \text { May  }&13 &  \text { Purchased 10 motors at a cost of $ \$ 42 $ each from Thompson Company, terms } \
&&  \text { $ 4 / 10, n / 30 $. The motors cost Thompson Company $ \$ 25 $ each. } &\\
 \text {  May} &16&  \text { Returned 1 defective motor to Thompson } \\
 \text { May } &23&  \text { Paid Thompson Company in full. Round to nearest dollar. } \
\end{array}$

Instructions
Journalize the May transactions for Grimm Brothers. You may omit explanations.

Accepted Answer

None

Question 12

The number of years of income statement information to be presented is

Accepted Answer

A)  2 years under both GAAP and IFRS. 
B)  3 years under both GAAP and IFRS. 
C)  2 years under GAAP and 3 years under IFRS. 
D)  3 years under GAAP and 2 years under IFRS. 
A)  2 years under both GAAP and IFRS. 
B)  3 years under both GAAP and IFRS. 
C)  2 years under GAAP and 3 years under IFRS. 
D)  3 years under GAAP and 2 years under IFRS.

Question 13

The multiple-step form of income statement is easier to read than the single-step form.

Accepted Answer

A) True 
 B)False

Question 14

Income from operations will always result if

Accepted Answer

A)  the cost of goods sold exceeds operating expenses. 
B)  revenues exceed cost of goods sold. 
C)  revenues exceed operating expenses. 
D)  gross profit exceeds operating expenses. 
A)  the cost of goods sold exceeds operating expenses. 
B)  revenues exceed cost of goods sold. 
C)  revenues exceed operating expenses. 
D)  gross profit exceeds operating expenses.

Question 15

Sales revenue

Accepted Answer

A)  may be recorded before cash is collected. 
B)  will always equal cash collections in a month. 
C)  only results from credit sales. 
D)  is only recorded after cash is collected. 
A)  may be recorded before cash is collected. 
B)  will always equal cash collections in a month. 
C)  only results from credit sales. 
D)  is only recorded after cash is collected.

Question 16

Garth Company sold goods on account to Kyle Enterprises with terms of 2/10 n/30. The goods had a cost of $600 and a selling price of $1100. Both Garth and Kyle use a perpetual inventory system. Record the sale on the books of Garth and the purchase on the books of Kyle.

Accepted Answer

Journal en

Question 17

For each of the following determine the missing amounts. $\begin{array}{lcccc}
&\text { Sales } & \text { Cost of } & \text { Gross } & \text { Operating } & \text { Net } \
&\text { Revenue } & \text { Goods Sold } & \text { Profit } & \text { Expenses } & \text { Income }\
\hline1.&\$100,000&\underline{\quad\quad}&\underline{\quad\quad}&\$30,000&\$12,000\
2.&\underline{\quad\quad}&\$135,000&\$125,000&\underline{\quad\quad}&\$80,000
\end{array}$

Accepted Answer

1. Gross Profit @#LAT-DLM&
Cos

Question 18

In a single-step income statement all data are classified under two categories: (1) Revenues or (2) Expenses. If the income statement is recast in a multiple-step format what additional information or intermediate components of income would be presented?

Accepted Answer

The items reported in a multiple-step in

Question 19

Sales revenue less cost of goods sold is called

Accepted Answer

A)  gross profit. 
B)  net profit. 
C)  net income. 
D)  marginal income. 
A)  gross profit. 
B)  net profit. 
C)  net income. 
D)  marginal income.

Question 20

Prepare the necessary journal entries to record the following transactions assuming a periodic inventory system:
(a) Purchased $450000 of merchandise on account terms 2/10 n/30.
(b) Returned $30000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.

Accepted Answer

None

Exam 5: Accounting for Merchandising Operations

Which of the following accounts has a normal credit balance?

The credit terms offered to a customer by a business firm are 3/10 n/30 which means that

Sales revenues are usually considered earned when

Chen Company's financial information is presented below. Sales Revenue \ ???? Cost of Goods Sold 510,000 Sales Returns and Allowances 40,000 Gross Profit ???? Net Sales 850,000 The missing amounts above are: A) \ 890,000 \ 340,000 B) \ 810,000 \ 340,000 C) \ 890,000 \ 300,000 D) \ 810,000 \ 380,000

The Sales Returns and Allowances account is classified as a(n)

The Freight-In account

Which one of the following transactions is recorded with the same entry in a perpetual and a periodic inventory system?

Which of the following is not a true statement about a multiple-step income statement?

Nonoperating activities exclude revenues and expenses that result from secondary or auxiliary operations.

The number of years of income statement information to be presented is

The multiple-step form of income statement is easier to read than the single-step form.

Income from operations will always result if

Sales revenue

Garth Company sold goods on account to Kyle Enterprises with terms of 2/10 n/30. The goods had a cost of $600 and a selling price of $1100. Both Garth and Kyle use a perpetual inventory system. Record the sale on the books of Garth and the purchase on the books of Kyle.

For each of the following determine the missing amounts. Sales Cost of Gross Operating Net Revenue Goods Sold Profit Expenses Income 1. \1 00,000 \3 0,000 \1 2,000 2. \1 35,000 \1 25,000 \8 0,000

In a single-step income statement all data are classified under two categories: (1) Revenues or (2) Expenses. If the income statement is recast in a multiple-step format what additional information or intermediate components of income would be presented?

Sales revenue less cost of goods sold is called

Prepare the necessary journal entries to record the following transactions assuming a periodic inventory system: (a) Purchased $450000 of merchandise on account terms 2/10 n/30. (b) Returned $30000 of damaged merchandise for credit. (c) Paid for the merchandise purchased within 10 days.

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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