Question 1

The collection of a $6000 account within the 3 percent discount period will result in a

Accepted Answer

A)  debit to Sales Discounts for $180. 
B)  debit to Accounts Receivable for $5820. 
C)  credit to Cash for $5820. 
D)  credit to Accounts Receivable for $5820. 
A)  debit to Sales Discounts for $180. 
B)  debit to Accounts Receivable for $5820. 
C)  credit to Cash for $5820. 
D)  credit to Accounts Receivable for $5820.

Question 2

Hoyt Company provides this information for the month of November 2014: sales on credit $170000; cash sales $70000; sales discounts $2000; and sales returns and allowances $9000. Prepare the sales revenues section of the income statement based on this information.

Accepted Answer

None

Question 3

Sales minus operating expenses equals gross profit.

Accepted Answer

A) True 
 B)False

Question 4

Gross profit is a measure of the overall profitability of a company.

Accepted Answer

A) True 
 B)False

Question 5

A company shows the following balances: $$\begin{array} { l r } 
\text { Sales Revenue } & \$ 2,500,000 \
\text { Sales Returns and Allowances } & 400,000 \
\text { Sales Discounts } & 50,000 \
\text { Cost of Goods Sold } & 1,353,000
\end{array}$$ What is the gross profit rate?

Accepted Answer

A)  34% 
B)  46% 
C)  66% 
D)  54% 
A)  34% 
B)  46% 
C)  66% 
D)  54%

Question 6

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Accepted Answer

You have made a very good observation, b

Question 7

Sales revenues are earned during the period cash is collected from the buyer.

Accepted Answer

A) True 
 B)False

Question 8

A merchandising company that sells directly to consumers is a

Accepted Answer

A)  retailer. 
B)  wholesaler. 
C)  broker. 
D)  service company. 
A)  retailer. 
B)  wholesaler. 
C)  broker. 
D)  service company.

Question 9

The major difference between the balance sheets of a service company and a merchandising company is inventory.

Accepted Answer

A) True 
 B)False

Question 10

The Inventory account is used in each of the following except the entry to record

Accepted Answer

A)  goods purchased on account. 
B)  the return of goods purchased. 
C)  payment of freight on goods sold. 
D)  payment within the discount period. 
A)  goods purchased on account. 
B)  the return of goods purchased. 
C)  payment of freight on goods sold. 
D)  payment within the discount period.

Question 11

The entry to record the receipt of payment within the discount period on a sale of $2500 with terms of 2/10 n/30 will include a credit to

Accepted Answer

A)  Sales Discounts for $50. 
B)  Cash for $2450. 
C)  Accounts Receivable for $2500. 
D)  Sales Revenue for $2500. 
A)  Sales Discounts for $50. 
B)  Cash for $2450. 
C)  Accounts Receivable for $2500. 
D)  Sales Revenue for $2500.

Question 12

Net income is gross profit less

Accepted Answer

A)  financing expenses. 
B)  operating expenses. 
C)  other expenses and losses. 
D)  other expenses. 
A)  financing expenses. 
B)  operating expenses. 
C)  other expenses and losses. 
D)  other expenses.

Question 13

The adjusted trial balance of J. W. Hatch Company appears below. $\begin{array}{c}
\text { J. W. HATCH}\
\text { Adjusted Trial Balance}\
\text { December 31, 2016}\\\begin{array}{lrr}
& \text {Debit}& \text {Credit}\
\text { Cash } & 12,000 \
\text { Accounts Receivable } & 25,000 & \
\text { Inventory } & 35,000 & \
\text { Buildings } & 140,000 & \
\text { Accumulated Depreciation- } & & \
\quad \text { Buildings } & & 20,000 \
\text { Accounts Payable } & & 12,000 \
\text { Owner's Capital } & & 144,000 \
\text { Owner's Drawings } &30,000  & \
\text { Sales Revenue } &  &310,000 \ 
\text { Sales Discounts } &6,000\
\text { Sales Returns \& Allowances } & 8,000 & \
\text { Cost of Goods Sold } & 188,000 & \
\text { Operating Expenses } & 42,000 & \
& 486,000 & 486,000 
\end{array}\end{array}$ Instructions
Using the information given prepare the year-end closing entries.

Accepted Answer

@#IMG-DLM& (To close accounts with debit balances)

Question 14

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the

Accepted Answer

A)  seller. 
B)  buyer. 
C)  transportation company. 
D)  buyer and the seller. 
A)  seller. 
B)  buyer. 
C)  transportation company. 
D)  buyer and the seller.

Question 15

Which of the following expressions is incorrect?

Accepted Answer

A)  Gross profit - operating expenses = net income 
B)  Sales revenue - cost of goods sold - operating expenses = net income 
C)  Net income + operating expenses = gross profit 
D)  Operating expenses - cost of goods sold = gross profit 
A)  Gross profit - operating expenses = net income 
B)  Sales revenue - cost of goods sold - operating expenses = net income 
C)  Net income + operating expenses = gross profit 
D)  Operating expenses - cost of goods sold = gross profit

Question 16

Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased.

Accepted Answer

A) True 
 B)False

Question 17

Costner's Market recorded the following events involving a recent purchase of merchandise: Received goods for $40000 terms 2/10 n/30.
Returned $800 of the shipment for credit.
Paid $200 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events the company's inventory

Accepted Answer

A)  increased by $38416. 
B)  increased by $38612. 
C)  increased by $38616. 
D)  increased by $39400. 
A)  increased by $38416. 
B)  increased by $38612. 
C)  increased by $38616. 
D)  increased by $39400.

Question 18

Income from operations appears on

Accepted Answer

A)  both a multiple-step and a single-step income statement. 
B)  neither a multiple-step nor a single-step income statement. 
C)  a single-step income statement. 
D)  a multiple-step income statement. 
A)  both a multiple-step and a single-step income statement. 
B)  neither a multiple-step nor a single-step income statement. 
C)  a single-step income statement. 
D)  a multiple-step income statement.

Question 19

A merchandising company has different types of adjusting entries than a service company.

Accepted Answer

A) True 
 B)False

Question 20

Newell Company completed the following transactions in October:   Instructions
(a) Indicate the cash received for each collection. Show your calculations.
(b) Prepare the journal entry for the
(1) Oct. 17 sale. The merchandise sold had a cost of $3500.
(2) Oct. 23 sales return. The merchandise returned had a cost of $140.
(3) Oct. 28 collection.
Newell uses a perpetual inventory system.

Accepted Answer

None

Exam 5: Accounting for Merchandising Operations

The collection of a $6000 account within the 3 percent discount period will result in a

Hoyt Company provides this information for the month of November 2014: sales on credit $170000; cash sales $70000; sales discounts $2000; and sales returns and allowances $9000. Prepare the sales revenues section of the income statement based on this information.

Sales minus operating expenses equals gross profit.

Gross profit is a measure of the overall profitability of a company.

A company shows the following balances: Sales Revenue \ 2,500,000 Sales Returns and Allowances 400,000 Sales Discounts 50,000 Cost of Goods Sold 1,353,000 What is the gross profit rate?

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Sales revenues are earned during the period cash is collected from the buyer.

A merchandising company that sells directly to consumers is a

The major difference between the balance sheets of a service company and a merchandising company is inventory.

The Inventory account is used in each of the following except the entry to record

The entry to record the receipt of payment within the discount period on a sale of $2500 with terms of 2/10 n/30 will include a credit to

Net income is gross profit less

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the

Which of the following expressions is incorrect?

Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased.

Income from operations appears on

A merchandising company has different types of adjusting entries than a service company.

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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